Confluent Inc. - CFLT

Trims guidance amid declining Cloud growth

Back on February 26th I introduced the third short idea for my so-called “Founding Members” group of subscribers, and that idea was on Confluent (CFLT). The shares had recently spiked higher on what was perceived to be better than expected Q4 results, and their analysts appeared to be happy with where FY2025 guidance was headed. Analysts for the most part reacted positively, raising their price targets from the $30 range to $40, and investors appeared to applaud the move.

I, however, pointed out some troubling signs, from their slowing overall customer acquisition rate, the slowing gains in so-called $100K ARR customers, both of which appeared to result in the slowing of their “cloud” product revenues. They also were not disclosing how much of their guidance was based on a recent acquisition, nor how many customers or subscribers that acquisition would bring them. Then of course there were quickly rising DSO’s which appeared to confirm the slowdown, at least in my eyes. I further pointed out that their:

“competitive landscape was getting a bit more difficult and that potential customers were becoming more cautious in spending”

And you know what? That’s exactly what happened.