Confluent posts strong Q4 results that beat expectations but its stock falls anyway

Big-data company Confluent Inc. must be wondering where it went wrong today after reporting a solid fourth quarter earnings beat, impressive revenue growth and strong guidance for the next three months, only to see its stock fall more than 10% in extended trading.

The company reported a net loss of $114.4 million, amounting to a loss before certain costs such as stock compensation of 19 cents per share. Revenue for the period came to $119.9 million, up 71% from a year ago.

The results were better than expected, with Wall Street looking for a bigger loss of 21 cents per share on sales of $109.8 million.

Confluent also reported full year revenue of $387.9 million, up 64%.

“To compete in the modern world, organizations must harness the power of data that constantly flows throughout their business,” Confluent co-founder and Chief Executive Jay Kreps (pictured) said. “Our accelerating growth throughout the year… shows that Confluent has emerged as the leader of this large and growing market as organizations build toward a central nervous system for their data.”

Confluent sees itself as a key player in the future of the big data space. It’s the primary developer of the popular open-source event streaming software Apache Kafka, which is used by enterprises to track data points such as sales, trades, orders and customer responses in real time. The data is made accessible via real-time streams, and it’s believed that as much as 80% of Fortune 500 firms have the software deployed in some capacity.

While Apache Kafka is open-source and free to use, Confluent sells a commercial version called Confluent Cloud that’s available on public cloud platforms such as Amazon Web Services, Microsoft Azure and Google Cloud, providing all of the benefits with none of the management hassles. Confluent Platform, meanwhile, is a fully managed on-premises version of the software.

Confluent Platform generates the bulk of the company’s revenue, but the Confluent Cloud platform is where its hopes for future growth lay. During the quarter, Confluent Cloud revenue grew by an impressive 211% to $34 million. For the full year, Confluent Cloud revenue rose 200% to $94 million.

The company also revealed good progress on the customer acquisition front. It said it now has 734 customers generating at least $100,000 a year in annual recurring revenue, up 43% from a year ago. Those new customers will generate a lot of revenue in the coming year. Confluent said it had remaining performance obligations of $501 million at the end of the quarter, up 91% from a year ago. RPO is a key metric that represents the total future performance obligations arising from contractual relationships. More specifically, RPO is the sum of the invoiced amount and the future amounts not yet invoiced for a contract with a customer.

Confluent’s customer growth is likely one reason for the company’s optimism about the next three-month period and full year. For the first quarter, the big data firm said it sees revenue in a range of $117 million to $119 million, ahead of Wall Street’s forecast of $111.02 million. For the full year, it offered a similarly optimistic forecast of $538 million to $546 million in sales, well ahead of the $516.09 million consensus.

Photo: Confluent