Confluent: Why Agentic AI and Strategic Realignments Position CFLT as a High-Conviction Buy Despite Near-Term Revenue Hiccups

In the ever-evolving landscape of enterprise technology, few companies have navigated the turbulence of market cycles as deftly as Confluent (CFLT). While its recent financial results reflect the headwinds of a broader cloud optimization environment, the company's strategic realignments and breakthroughs in agentic AI infrastructure suggest a compelling long-term value proposition. For investors willing to look beyond short-term volatility, Confluent's pivot to real-time data streaming and AI-driven use cases positions it as a high-conviction buy in the data infrastructure sector.

The Near-Term Hiccups: A Temporary Pause, Not a Collapse

Confluent's Q2 2025 results revealed a 21% year-over-year increase in subscription revenue to $271 million, with Confluent Cloud revenue growing 28% to $151 million. However, the company acknowledged a “temporary slowdown in customer spending,” particularly among large cloud customers undergoing cost-optimization cycles. This has led to a slight dip in cloud growth below the 30% threshold, with a net revenue retention rate of 114%—a figure that, while strong, reflects the current macroeconomic climate.

Critics may point to these dynamics as a sign of vulnerability, but the data tells a different story. Confluent's non-GAAP operating margin expanded to 6.3% in Q2 2025, up from 0.6% in the prior year, while adjusted free cash flow reached $11.0 million. These metrics underscore the company's ability to maintain profitability even amid softer demand. Moreover, its full-year 2025 subscription revenue guidance of $1.105–$1.11 billion—a 20% growth rate—remains intact, signaling confidence in its long-term trajectory.

The Long-Term Catalysts: Agentic AI and Strategic Realignments

The true value of Confluent lies in its strategic pivot toward agentic AI infrastructure. In August 2025, the company launched Streaming Agents, a groundbreaking capability within Confluent Cloud for Apache Flink. This platform enables enterprises to deploy AI agents that monitor, reason, and act on real-time data streams, bridging the gap between AI prototypes and production-grade systems.

Streaming Agents is not merely a product but a paradigm shift. By unifying data processing and AI workflows, Confluent addresses a critical pain point in enterprise AI adoption: the inability to integrate real-time data into autonomous decision-making. For instance, a global financial market infrastructure provider, in partnership with EY, transitioned from siloed messaging to a unified streaming strategy, processing trillions in daily transactions. Similarly, Notion leveraged Confluent Cloud to build a fully managed event-driven architecture, tripling platform team productivity and accelerating AI-powered feature development.

These use cases highlight Confluent's role as a foundational infrastructure layer for agentic AI. As IDC research notes, enterprises have struggled to move AI proofs of concept to production, with only 62% of deployed systems meeting expectations. Confluent's event-driven architecture, powered by Apache Kafka® and Apache Flink®, provides the scalability, security, and low-latency responses required for autonomous agents to thrive.

Ecosystem Partnerships: A Flywheel of Growth

Confluent's ecosystem of partners has become a critical growth driver. Collaborations with industry leaders like Infosys, Databricks, and EY have expanded its reach into sectors such as finance, public services, and scientific research. For example, a New Zealand public sector organization automated regulatory workflows using Confluent's platform, reducing response times from hours to minutes. Meanwhile, an astronomy institute leveraged real-time streaming to detect rare cosmic events, demonstrating the platform's versatility.

These partnerships are not just incremental—they are transformative. Over 20% of Confluent's business now stems from its partner ecosystem, a figure expected to grow as the market for real-time AI automation expands at a 30% CAGR through 2030. By embedding itself into the workflows of enterprise customers, Confluent is creating a flywheel effect: increased adoption of its platform drives more data, which in turn fuels more AI innovation and customer retention.

Structural Undervaluation: A Dislocation in Market Sentiment

Despite these strengths, Confluent trades at a significant discount to its intrinsic value. The company's trailing price-to-sales (P/S) ratio of 5.98 is a fraction of its 2021 peak of 60x and well below the sector median of 8.7. With a market capitalization of $7.6 billion and a total addressable market (TAM) of $60 billion, Confluent is capturing only 1.3% of its TAM—a stark mispricing relative to its growth potential.

Analysts project 23.3% revenue growth for 2025 and 20.8% for 2026, yet the stock remains undervalued. This dislocation reflects short-term concerns about cloud spending cycles, but it overlooks Confluent's structural advantages. Its hybrid deployment model (cloud, on-premises, and BYOC) provides resilience against macroeconomic shifts, while its expanding Flink ARR—now approaching $10 million—signals strong monetization of core capabilities.

Investment Thesis: A High-Conviction Buy

For investors with a long-term horizon, Confluent offers a compelling risk-reward profile. The company's strategic realignments in agentic AI, ecosystem partnerships, and cloud efficiency are creating a moat around its data streaming platform. While near-term revenue growth may moderate, the long-term TAM expansion and margin improvements position CFLT to outperform as AI adoption accelerates.

Key risks include the normalization of cloud spending cycles and the competitive landscape in data infrastructure. However, Confluent's first-mover advantage in real-time AI, coupled with its robust customer retention (90%+ gross retention rate), provides a buffer against these challenges.

Conclusion: Confluent's current valuation is a dislocation, not a warning. As the world moves toward real-time, agentic AI systems, the company is uniquely positioned to capture a significant share of the $60 billion TAM. For investors willing to look beyond short-term volatility, CFLT represents a high-conviction buy in the data streaming AI infrastructure sector.