CFLT: Sale Exploration And Cloud Stabilization Will Shape Future Share Performance

Analysts have nudged their fair value estimate for Confluent higher from approximately $27.87 to $30.77 per share, reflecting increased confidence in stabilizing cloud consumption, stronger than expected subscription and cloud growth, and improved execution that has driven a series of upward price target revisions across the Street.

Analyst Commentary

Recent Street research has skewed clearly positive, with multiple firms lifting price targets in response to Confluent's improving cloud trends, stronger than expected subscription performance, and a more constructive demand backdrop. Still, some commentary underscores the need for sustained execution before the stock can fully re-rate toward higher valuation multiples.

Bullish Takeaways

• Bullish analysts highlight that cloud consumption and customer optimization activity appear to be stabilizing, supporting more durable revenue growth and justifying higher price targets in the high 20 dollar range.
• Upside in the latest quarter, particularly from Confluent Cloud and subscription revenue, is viewed as evidence that go to market initiatives are driving broader adoption, strengthening the case for upward revisions to full year revenue outlooks.
• Commentary around new use cases moving into production, traction in the Data Stream Platform and Flink, and early momentum in newer products reinforces confidence that Confluent can expand its addressable market and support a premium growth valuation.
• The view of Confluent as a de facto standard for data streaming, coupled with the complexity of building similar infrastructure in house, underpins the thesis that the company can sustain above peer growth and progress toward 1 billion dollars in recurring revenue.

Bearish Takeaways

• More cautious analysts acknowledge the strong quarter but remain hesitant to move beyond neutral stances, emphasizing the need for more consistent execution before assigning a higher multiple.
• While recent results are seen as solid, some note that prior weak quarters and only moderate sales upside temper enthusiasm, suggesting that the growth recovery still needs to prove its durability.
• Even with improving trends and raised targets, there is a view that the setup into future years could become more challenging if optimization activity re accelerates or new product momentum slows, limiting further valuation expansion.
• Ongoing expectations for a takeover premium, while supportive in the near term, also reflect underlying uncertainty about the optimal long term path to unlock full value as a standalone public company.

What's in the News

• IBM entered into a definitive agreement to acquire Confluent for $11.5 billion in cash, or $31 per share. The deal is expected to close by mid 2026 pending shareholder and regulatory approvals.
• Confluent is exploring a potential sale after receiving acquisition interest from private equity firms and other technology companies, and has engaged an investment bank to run an early stage process (Reuters).
• Reports indicate IBM has been in advanced talks to acquire Confluent for about $11 billion in a bid to strengthen its cloud and AI data infrastructure capabilities (Wall Street Journal).
• Confluent launched Confluent Intelligence, Real Time Context Engine, Streaming Agents enhancements, and Confluent Private Cloud, expanding its managed data streaming and AI offerings across public and private infrastructure.
• The company issued guidance calling for 18% subscription revenue growth in the fourth quarter of 2025 and approximately 21% growth for full year 2025.

Valuation Changes

• The fair value estimate has risen moderately from approximately $27.87 to $30.77 per share, reflecting a higher assessed intrinsic value.
• The discount rate has edged down slightly from about 8.80 percent to 8.78 percent, implying a marginally lower perceived risk profile.
• The revenue growth forecast is essentially unchanged, moving fractionally from roughly 16.75 percent to 16.75 percent, indicating a stable top line outlook.
• The net profit margin expectation has increased slightly from about 12.38 percent to 12.42 percent, signaling a modest improvement in anticipated profitability.
• The future P/E multiple has risen meaningfully from approximately 65.6x to 72.2x, suggesting a higher valuation being assigned to forward earnings.