Confluent (CFLT): Can Strong Earnings Momentum Carry This Stock to New Heights Before the Q2 Report?

The data streaming giant, Confluent (CFLT), is primed for its next earnings report on July 30, 2025, and investors are buzzing about whether its recent earnings surprises can continue. With a Zacks Earnings ESP score of +10.20% and a Zacks Rank #2 (Buy), the company's stock could see a pop—if it delivers again. But with a history of volatile post-earnings swings, is now the time to buy? Let's dive into the numbers.

The Zacks Earnings ESP: A Bullish Signal?

The Zacks Earnings ESP measures how much analysts have revised their earnings estimates upward or downward. A score of +10.20% means analysts are increasingly optimistic about Confluent's upcoming Q2 2025 results. This is critical because stocks with a positive ESP and a Zacks Rank #3 or better beat estimates 70% of the time, according to Zacks research. For Confluent, which has averaged a 47.14% earnings surprise over the past two quarters, the odds of another beat are strong.

A History of Beats, But a Volatile Market Response

Confluent's recent earnings surprises have been impressive, but the stock's reaction has been inconsistent. For example:- Q1 2025: Reported an 8% EPS beat (14.29% surprise) and $271.1M in revenue, exceeding expectations. Yet, the stock plunged 18% post-earnings due to concerns about macroeconomic headwinds and a slowdown in cloud adoption by large clients.- Q4 2024: Delivered a 50% EPS surprise and strong revenue growth, leading to a 25% surge in shares the next day.- Q3 2024: A 100% EPS beat pushed the stock 13% higher, but Q2 2024's 20% beat was followed by a 17.5% drop, underscoring how guidance and broader market sentiment can override positive results.

The takeaway? Earnings beats matter, but guidance and macro outlook matter more. Confluent's Q1 2025 report highlighted caution around enterprise spending, which spooked investors—despite strong fundamentals like 34% year-over-year growth in Confluent Cloud revenue and 340 new customers added (a three-year high).

What to Expect from the Q2 2025 Report?

Analysts currently expect $0.08 EPS for Q2, up from $0.06 in the same period last year. With the +10.20% ESP, the company is poised to exceed this, especially given its momentum:- Customer Growth: The Q1 net additions of 340 customers set a record, signaling strong demand.- Cloud Dominance: Confluent Cloud revenue is expected to remain a key driver, with 19%–20% full-year growth guidance for 2025.- Margin Improvements: Non-GAAP operating margins rose to 5% in Q1, up from 3% in Q4 2024, indicating cost discipline.

However, the $19.44 post-Q1 low (down from $23.81 pre-earnings) shows how macro fears can overshadow good news. For the stock to rally, management must address concerns about enterprise spending while reaffirming its growth trajectory.

Is CFLT a Buy Ahead of Earnings?

The Case FOR Buying Now:- Technical Setup: The stock is near its 52-week low ($19.44), offering a potential rebound if earnings beat expectations and guidance improves.- ESP Power: The 70% historical beat rate for stocks with positive ESP and Zacks Rank #2/3 gives confidence in another surprise.- Valuation: At ~$21.50 as of July 7, 2025, CFLT trades at a P/S ratio of 5.7x, below its five-year average of 6.8x, suggesting it's undervalued if growth continues.

The Risks:- Macroeconomic Uncertainty: If management repeats Q1's caution on cloud spending, investors may panic again.- Stock Volatility: As seen in Q1 and Q2 2024 reports, the stock can swing wildly based on guidance tone.

Action Items for Investors

1. Buy the Dip: If the stock slips further ahead of earnings, use the $19–$20 range as a buying opportunity.
2. Focus on Guidance: Look beyond EPS numbers. Are they raising full-year revenue targets? Are non-GAAP margins expanding?
3. Set a Stop-Loss: Given volatility, set a $18.50 stop to protect gains if the report disappoints.

Final Take

Confluent's Zacks ESP and historical beat streak make it a compelling near-term trade, but investors must remember: this stock thrives on execution and narrative. If the Q2 report includes stronger guidance or macro reassurance, the $25–$28 price target becomes realistic. However, if management remains cautious, the $19–$21 range could linger.

For now, with the ESP and Zacks Rank #2 in its favor, CFLT is a speculative buy for those willing to ride the volatility. This is a stock to own if you believe in data streaming's growth—and that Confluent can outperform despite the macro fog.