DocuSign vs. Confluent: Which Cloud Stock Offers Superior Growth Potential?

In the cloud software landscape, DocuSign (DOCU) and Confluent (CFLT) represent two distinct paths to growth: one anchored in mature market dominance, the other in high-risk, high-reward disruption. As investors weigh opportunities in 2025, a deep dive into their revenue trajectories, strategic positioning, and financial metrics reveals stark contrasts—and a clear edge for one stock.

Revenue Growth Trajectories: Speed vs. Stability

Confluent's torrid growth—25% YoY revenue expansion in Q1 2025—reflects its penetration into the booming real-time data streaming market. Its Confluent Cloud platform, which powers AI-driven applications like Freight Clusters and WarpStream, has added 1,412 high-value customers, fueling a 34% surge in cloud revenue. By contrast, DocuSign's 8% revenue growth, while steady, underscores the challenges of sustaining rapid expansion in its mature e-signature market.

But growth alone isn't enough.

DocuSign's billings lagged revenue growth (4% vs. 8%), hinting at softening demand for its core products. Meanwhile, Confluent's net dollar retention rate of 117% signals strong customer expansion—a critical metric for SaaS scalability.

Market Differentiation: Defensibility vs. Disruption

DocuSign's crown jewel is its near-monopoly in digital agreements. Its Intelligent Agreement Management (IAM) platform, bolstered by AI tools like Docusign Iris, aims to defend its $3.15 billion annual run rate. Yet the e-signature market is saturated, and its 29% net dollar retention rate (vs. Confluent's 117%) suggests customer stickiness is weaker.

Confluent, meanwhile, is tackling a $100+ billion opportunity in real-time data processing. Its Kafka-based platform enables enterprises to manage streams of data for AI models, IoT, and analytics—a critical infrastructure layer in the cloud-native era. While Confluent faces competition from AWS, Google, and Snowflake, its early-mover advantage and $1.10 billion fiscal 2025 revenue target signal a first-mover payoff.

Margin Dynamics: Profitability vs. Investment

Here, the divergence is stark. DocuSign's 8% non-GAAP operating margin and $227.8 million free cash flow highlight its financial maturity. The company is returning capital to shareholders aggressively, having boosted its buyback authorization by $1 billion to $1.4 billion in 2025—a clear sign of confidence.

Confluent, however, remains in “growth-at-all-costs” mode. Its GAAP operating loss of $101.2 million in Q1 2025 reflects heavy reinvestment in R&D and sales. Yet margins are improving: non-GAAP operating income turned positive to $11.6 million, up from -$3.3 million in 2024. If Confluent can scale its cloud platform further, profitability could follow.

Valuation: Paying for Stability or Potential?

DocuSign's P/S ratio of 61.4x reflects its premium as a “bond proxy” for investors seeking steady cash flows. Its 15x P/E and 53x EV/EBITDA are elevated but rational given its recurring revenue and dividend potential (though none is currently paid).

Confluent's 2.7x P/S ratio, by contrast, is a bargain relative to its growth trajectory—provided it can turn the corner on profitability. Its EV/EBITDA of 74x may seem high, but this multiple is typical for high-growth SaaS firms in early scaling phases (e.g., Snowflake's historical valuations).

Investment Thesis: Pick Your Risk Tolerance

For income-oriented investors, DocuSign's fortress balance sheet ($1.1 billion in cash) and share buybacks make it a safer bet. Its IAM platform innovations could stoke incremental growth, and a dividend launch isn't out of the question.

But for growth investors, Confluent's 25% revenue growth and mission-critical data infrastructure position it to capitalize on secular trends like AI and edge computing. The stock's 2.7x P/S multiple leaves room for upside if margins improve to its fiscal 2025 target of 6%.

Final Verdict

While DocuSign's stability is comforting, Confluent's growth profile and strategic positioning in real-time data—a pillar of the cloud and AI era—make it the more compelling long-term play. Investors should overweight Confluent for upside in a multiyear cycle, while treating DocuSign as a core holding for capital preservation.

Actionable Takeaway:
- Bullish on Confluent if you believe real-time data infrastructure will be as critical as compute power in the cloud era.
- Hold DocuSign for its cash flow and buyback discipline, but expect muted returns absent a dividend.

In a world where data velocity matters more than ever, Confluent's bet on the “streaming first” future offers the higher ceiling—even if the path to profitability remains bumpy.