Confluent, Inc.

Confluent is a pioneer in the Data Streaming Platform category, focusing on setting data in motion to power real-time operations, analytics, and artificial intelligence (AI) ¹. The company has developed a comprehensive platform that enables organizations to stream, connect, process, and govern data in motion across their entire enterprise, aiming to serve as the intelligent connective tissue linking all applications, systems, and data layers into a single central nervous system of real-time data streams ¹. This platform is designed to unify businesses' operational and analytical estates, providing an essential data foundation for real-time decision-making, autonomous agents, and generative AI applications ¹.

The core business model revolves around generating revenue primarily from the sale of subscriptions to its Data Streaming Platform, with a lesser extent from services ¹. The company's offerings include a fully-managed, cloud-native SaaS offering called Confluent Cloud, enterprise-ready self-managed offerings known as Confluent Platform and Confluent Private Cloud, and a Bring Your Own Cloud (BYOC) offering, Confluent WarpStream, where raw data resides within the customer's cloud environment ¹. Confluent Cloud and Confluent WarpStream subscriptions can be purchased on a pay-as-you-go model without commitment or under a usage-based commitment contract of at least one year ¹. Revenue from these is recognized based on usage ¹. Confluent Platform and Confluent Private Cloud revenue includes term-based licenses recognized at a point in time upon delivery, and post-contract customer support (PCS), maintenance, and upgrades, which represent a substantial majority of the revenue and are recognized ratably over the contract term ¹. Services revenue, from professional and education services, is recognized as delivered ¹.

The Data Streaming Platform delivers four key capabilities: Stream, Connect, Process, and Govern ¹. The Stream capability includes serverless, autoscaling clusters in Confluent Cloud, tiered storage, self-balancing and multi-region clusters, Cluster and Schema Linking for geo-replication, and cost-effective networking ¹. Tableflow is also part of Stream, materializing Kafka topics directly into open table formats like Apache Iceberg and Delta Lake for analytical ecosystems ¹. The Connect capability offers over 120 pre-built connectors and the "Connect with Confluent" program for direct integration with partner systems ¹. The Process capability is powered by Confluent Cloud for Apache Flink, a serverless Flink offering, and Confluent Platform for Apache Flink for on-premises deployments ¹. This also includes Confluent Intelligence, a suite for building real-time AI systems with built-in ML functions, Streaming Agents, and a Real-Time Context Engine ¹. Finally, the Govern capability provides Stream Governance for data quality rules, lineage, and self-service data discovery, along with Schema Validation and Schema Registry for managing data structures ¹.

For the fiscal year ended December 31, 2025, total revenue was $1,166.748 million ⁴, an increase from $963.642 million ⁵ in 2024, representing a year-over-year growth of 21% ⁶. Subscription revenue accounted for $1,119.724 million ⁷, up 21% ⁸ from $922.091 million ⁹ in 2024 ¹. Services revenue was $47.024 million ¹⁰, increasing 13% ¹¹ from $41.551 million ¹² in 2024 ¹. Gross profit for 2025 was $866.839 million ¹³, yielding a total gross margin of 74% ¹⁴, compared to $706.172 million ¹⁵ and 73% ¹⁶ in 2024, respectively ¹.

Operating loss for 2025 was $380.102 million ¹⁷, an improvement from an operating loss of $419.147 million ¹⁸ in 2024 ¹. Net loss for the year ended December 31, 2025, was $295.275 million ¹⁹, compared to a net loss of $345.065 million ²⁰ in 2024 ¹. Diluted EPS was $(0.86) ²¹ in 2025, an improvement from $(1.07) ²² in 2024 ¹. Cash and cash equivalents totaled $347.210 million ²³ as of December 31, 2025, with marketable securities of $1,706.762 million ²⁴, resulting in total cash, cash equivalents, and marketable securities of $2,054.0 million ²⁵. Total liabilities were $1,816.131 million ²⁶, including convertible senior notes, net, of $1,095.988 million ^{27 1}. Net cash provided by operating activities was $64.274 million ²⁸ in 2025, up from $33.460 million ²⁹ in 2024 ¹.

The company's subscription gross margin increased to 78% ³⁰ in 2025 from 77% ³¹ in 2024, driven by subscription revenue growth outpacing cost of subscription revenue increases and efficiencies in personnel-related costs ¹. Services gross margin improved from (18)% ³² in 2024 to (16)% ³³ in 2025, primarily due to efficiencies in personnel-related costs and allocated overhead costs, partially offset by increased costs for third-party contractors ¹. Confluent Cloud and Confluent Platform contributed 56% ³⁴ and 44% ³⁵ of subscription revenue in 2025, respectively, compared to 53% ³⁶ and 47% ³⁷ in 2024, indicating a shift towards cloud offerings ¹.

During the year, Confluent acquired WarpStream Labs, Inc. in September 2024, adding its BYOC data streaming solution to the company's offerings ¹. Additionally, on December 7, 2025, Confluent entered into a Merger Agreement with International Business Machines Corporation (IBM) and Corvo Merger Sub, Inc., under which each share of Confluent's Class A and Class B common stock will be converted into the right to receive $31.00 ³⁸ per share in cash ¹. The Merger is expected to close by mid-2026 ¹. The company incurred $12.5 million ³⁹ in transaction costs related to the proposed Merger during 2025 ¹. As of December 31, 2025, Confluent had 1,521 ⁴⁰ customers with $100,000 or greater in Annual Recurring Revenue (ARR), an increase from 1,381 ⁴¹ in 2024 ¹. The dollar-based net retention rate (NRR) was 114% ⁴² as of December 31, 2025 ¹.

The company expects its future growth to depend substantially on continued customer adoption and use of its Data Streaming Platform capabilities and BYOC offering, including as it continues to introduce additional features, functionalities, and use cases ¹. This growth will be influenced by the ability to increase market acceptance, improve customer understanding of benefits and potential uses, cost-effectively manage customer adoption and usage, and ensure customers realize total cost of ownership benefits ¹. The growth rate of Confluent Cloud revenue is also expected to fluctuate over time due to its usage-based nature, customer adoption trends, and the prior shift to a consumption-oriented sales model ¹. New customers acquired beginning in 2024 tend to have lower initial consumption, which is expected to continue to impact revenue, growth rates, and consumption forecasts ¹.

Confluent plans to continue investing significantly in developing and growing Confluent Cloud as a fully-managed, cloud-native service, as well as in its Data Streaming Platform capabilities and BYOC offering ¹. The company has less experience marketing, pricing, and selling these newer offerings ¹. The sales strategy for Confluent Cloud involves landing customers at low entry points, including free trials and pay-as-you-go models with no commitments ¹. There is no assurance that these customers will enter into commitments, expand existing commitments, or ramp their usage of Confluent Cloud ¹. The company has experienced and expects to continue to experience slower than expected consumption expansion and usage ramp of Confluent Cloud, particularly from larger enterprise customers, due to factors such as customer optimization and increased scrutiny of IT spending ¹.

The company intends to take a disciplined approach in investing to grow its business, aiming to capitalize on its expansive market opportunity while also optimizing for improvements in profitability, margins, and cash flow, including by streamlining operating expenses ¹. Investments in research and development and sales and marketing organizations are expected to occur in advance of realizing benefits ¹. The revenue growth potential is dependent on the effectiveness of these investments, including new product features, enhancements, and refinement of go-to-market strategies for Data Streaming Platform products and the consumption-oriented sales model for Confluent Cloud ¹.

Confluent's purchase obligations as of December 31, 2025, were $454.3 million ⁴³, with $236.5 million ⁴⁴ expected to be paid within 12 months ¹. The company entered into an operating lease agreement for new office space in Burlingame, California, with a total minimum obligation of approximately $37.0 million ⁴⁵, excluding variable operating expenses ¹. The lease term begins in September 2026 and expires in June 2037 ¹.

The company expects its dollar-based NRR to be tempered over the near term due to the shift to a consumption-oriented sales model for Confluent Cloud and consumption volatility, resulting in reduced consumption expansion from certain customers ¹. Despite these dynamics, the company believes there are significant opportunities to partner with customers to help them realize increased value in Confluent through new use cases, which can lead to more durable consumption expansion over time ¹.

The company is subject to various covenants and agreements under the Merger Agreement with IBM, including conducting business in the ordinary course and not taking certain actions without IBM's consent, such as acquiring businesses above specified thresholds, incurring capital expenditures above specified thresholds, or repurchasing shares ¹. These restrictions are not expected to prevent the company from meeting its ongoing costs of operations, working capital needs, or capital expenditure requirements ¹.

The company faces material risks including those related to the proposed Merger with IBM, where the announcement, pendency, or failure to complete the Merger could adversely affect business, financial condition, results of operations, and stock price, potentially leading to a decrease in the market price of Class A common stock if the Merger is not completed ¹. Business uncertainties and contractual restrictions during the Merger's pendency could harm relationships with customers, suppliers, and other partners, leading to reduced purchases or delays ¹. Litigation related to the Merger has arisen and may continue, which could be costly, delay completion, and divert management's attention ¹. Employee uncertainty about their future with the company or the surviving corporation could lead to key personnel departures ¹. Macroeconomic uncertainty and unfavorable conditions, such as high inflation, geopolitical conflicts, and reductions in IT spending, have impacted and are expected to continue impacting growth, leading to longer sales cycles, reduced IT budgets, and slower customer consumption expansion ¹. Failure of offerings to satisfy customer demands or achieve market acceptance over competitors, including open source alternatives, would harm the business ¹. Significant investments in Confluent Cloud, Data Streaming Platform capabilities, and the BYOC offering may not achieve further market adoption or increased consumption, negatively impacting growth ¹. The company has a history of operating losses and may not achieve or sustain profitability, particularly given limited experience operating at current scale under high inflation or recessionary environments ¹. Cybersecurity incidents, whether affecting the company or third-party providers, could lead to reputational harm, reduced demand, regulatory actions, litigation, fines, and business disruptions ¹. The company's reliance on third-party cloud infrastructure providers for Confluent Cloud exposes it to risks of service disruptions, capacity limitations, or interference, which could adversely affect business ¹. The dual-class common stock structure concentrates voting control with pre-IPO stockholders, including executive officers and directors, limiting other stockholders' influence on corporate matters and potentially affecting the Class A common stock trading price ¹.

Management's message to shareholders emphasizes the company's pioneering role in the Data Streaming Platform category, aiming to set data in motion to power real-time operations, analytics, and AI, thereby becoming the central nervous system for modern digital enterprises ¹. They highlight the platform's comprehensive capabilities—Stream, Connect, Process, and Govern—as reinforcing elements for a unified data in motion solution ¹. Management notes the company is operating at the convergence of three major industry trends: the emergence of generative AI, the growing need for real-time reusable data assets across operational and analytical estates, and the maturity of open source technologies like Apache Kafka, Flink, and Iceberg ¹. They believe these trends represent significant opportunities for the Data Streaming Platform ¹.

Strategic priorities for the period ahead include continuing to eliminate purchasing friction by optimizing pricing and packaging for all use cases, leveraging cloud-native differentiation for easy buying motions, and driving growth through a consumption-oriented sales model ¹. Management is committed to meeting customers where they are by offering deployment flexibility and cost-effective options for every use case, including fully managed serverless, self-managed, and BYOC solutions ¹. They also plan to extend product leadership and innovation, citing re-architecting Kafka with Kora, building a fully-managed Apache Flink service, developing Stream Governance, and launching Confluent Intelligence as examples of this commitment ¹. Furthermore, management intends to continue investing in the open source community to maintain leadership and harness the partner ecosystem, including cloud providers, system integrators, and ISVs, to expand reach and adoption globally ¹. Finally, they aim to expand internationally, unite operational and analytical estates through a "Shift Left" architecture, underpin customers' generative and agentic AI transformations, and grow further use cases "up-the-stack" by leveraging their strategic position for data streaming ¹. Management has provided specific guidance regarding the proposed Merger with IBM, stating that each share of Class A and Class B common stock will be converted into the right to receive $31.00 ³⁸ in cash, and the Merger is expected to close by the middle of 2026 ¹.