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Exam Number : P8060-017
Exam Name : IBM B2B Integration SaaS Technical Mastery Test v1
Vendor Name : IBM
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Confluent: Shareholder price Is based On Wider Adoption | P8060-017 PDF Dumps and Dumps

Cloud computing

iambuff/iStock by the use of Getty photos

Confluent (NASDAQ:CFLT) offers a leading platform for the streaming of information. Their business is transforming into rapidly and they have a robust competitive position, however like many increase stocks they've been forced in fresh months on valuation concerns. Confluent at present has a small consumer base, which is slightly atypical for an open-source utility business for the reason that they typically depend on bottom-up adoption for growth. If Confluent can continue to grow their consumer base and get a more robust handle on prices, the stock may reward investors handsomely in the end. The stock is now more fairly valued than it has been, however remains far from low cost and will probably continue to be incredibly based on the macro atmosphere in the short term.

adventure Streaming

The quantity and range of information being generated globally is becoming rapidly as a result of functions like IoT and related sensors. in keeping with IDC, there will be fifty five.7 billion related devices international by 2025, 75% of which should be connected to an IoT platform. records generated from connected IoT contraptions is projected to be seventy three.1 zettabytes via 2025, a 4x increase for the reason that 2019.

taking pictures the value of this data is fitting more and more problematic with existing statistics infrastructure even though, as databases are quite simply too gradual to fulfill the needs of real-time purposes. apart from expanding volumes of facts, the upward thrust of microservices is making applications greater modular, which increases the complexity of records flows and in flip the capabilities for delays.

common database technologies have been architected for kept records and despite enormous developments in scalability and pace, they cannot harness statistics-in-movement. Querying ordinary databases results in a point in time snapshot that may also effortlessly become out of date. A equipment developed from these databases also requires separate element-to-element connections between each part, an n-squared difficulty, which can also force a corporation to inn to periodic information dumps and batch processing. statistics-in-movement makes use of what's in reality an experience log to continually move facts to the place it is needed within the corporation.


determine 1: data-in-motion (source: Confluent)

Disconnected corporations built around facts silos have become out of date and modern organizations want information to be built-in across the organization and available in real-time. Confluent envision their utility as offering the records infrastructure that acts as the significant frightened equipment of the company, connecting disparate software programs (functions, programs and statistics layers) and enabling them to react intelligently in real-time.

Event Streaming as the Central Nervous System of the Modern Enterprise

determine 2: experience Streaming as the valuable fearful gadget of the modern business (source: Confluent)

besides changing statistics necessities, agencies are relocating against multi-cloud and hybrid cloud infrastructure. in response to a accurate survey, more than 75% of corporations are pursuing a multi-cloud model. The world public cloud functions market is expected to be price 628 billion USD in 2024, growing to be approximately 21% annually between 2020 and 2024. regardless of this increase, over the past 5 years simplest 17% of gadget infrastructure software spend has been directed towards public cloud services and many groups continue to operate giant on-premises deployments. This capability that cloud functions nonetheless have room to expand and that the want for information stream across public clouds and on-premises is increasing.

Apache Kafka

Apache Kafka is a primary open-supply software which Confluent is commercializing. Confluent’s founders developed Kafka at LinkedIn in 2011, and seeing that then it has turn into a essential technical ability in the trade, with an estimated 70% of the Fortune 500 having used it.

Job Openings Mentioning Kafka in the Job Requirements

determine three: Job Openings citing Kafka in the Job requirements (supply:

Kafka also has a sturdy developer group, with more than 60,000 meet-up individuals across over 200 world meet-up organizations. A thriving community is critical for an open-source venture as it can add to the performance of the software and for Confluent it gives a base of competencies future customers.

Kafka is a data streaming application as opposed to a database and it is used to connect accessories of a company’s IT structure (databases, purposes, analytic tools, and so forth.). It is like a centralized information pipeline that controls the movement of facts within the corporation. Kafka isn't a alternative for centralized data stores notwithstanding as they are less difficult to interface with and to question. Kafka effectively fulfills a distinct need. A database passively outlets facts and waits for a question, whereas Kafka methods records in true-time according to activities that ensue in the enterprise. This helps to assist a modular architecture in response to microservices and serverless functions by supporting the move of suggestions between add-ons. Kafka use situations consist of:

  • provider bus – messaging spine between microservices
  • Logging and telemetry – sending messages asynchronously
  • Transaction processing
  • statistics archival – sending statistics to exterior storage
  • event streams – monitoring prompted activities or information changes
  • adventure processing – true-time question and analytics
  • Kafka is differentiated by means of aspects that make logs quick, low-priced and scalable sufficient for use at big scale. one of the hints that Kafka utilizes in support of this consist of:

  • Partitioning the log
  • Optimizing throughput with the aid of batching reads and writes
  • fending off unnecessary records copies
  • Connectors allow the exchange of records with a number of sources:

  • File-primarily based sources
  • information messaging codecs
  • Object shops
  • Databases
  • Serverless structures
  • Observability systems
  • SaaS functions
  • ksqlDB is a database that unifies the processing of stored and streaming records by using translating the SQL interface of traditional databases to facts streaming. This minimizes the researching curve for developers and allows for purposes to effectively utilize records streams. KSQL turned into created to allow the querying of facts streams in real-time the usage of a database pleasant SQL language. information runs through the KSQL query even though in preference to the query operating on the database.


    Confluent’s mission is to set facts-in-movement, a reference to their use of Kafka to enrich the circulation of records inside businesses. Confluent believes that their utility can make information-in-motion the relevant anxious gadget of each business in the world, which positions them to extend into adjacent categories. gigantic milestones in Confluent's historical past consist of:

  • September 2014: founded by means of Jay Kreps, Jun Rao, and Neha Narkhede
  • January 2015: announced Confluent Platform 1.0
  • November 2017: generic availability of Confluent Cloud
  • December 2017: First client over 1 million USD in ARR
  • March 2018: prevalent availability of ksqlDB
  • April 2019: surpassed one hundred million USD in ARR
  • September 2019: 50% of all shoppers on Confluent Cloud
  • November 2019: Confluent Cloud obtainable on AWS, GCP, and Microsoft Azure
  • March 2020: passed 1,000 consumers
  • March 2021: surpassed 2,500 consumers
  • Confluent’s software is a complete answer for working with statistics-in-motion (read, write, store, capture, validate, secure, and method continual streams of records). it is a contemporary dispensed system constructed to be at ease, fault tolerant, and elastically scalable for cloud deployment. Confluent's application is probably going to be constructive in any software the place a big quantity of events are created that should be actioned in precise-time, including:

  • economic services - funds and fraud detection
  • Retail and ecommerce - transactions
  • Manufacturing
  • Media and leisure
  • Confluent’s software may also be deployed each within the cloud and on-premises. whereas Confluent Server is in line with Kafka, it was re-architected to operate at cloud-scale at the same time as final interoperable with Kafka. The cloud-native providing works across multi-cloud and hybrid infrastructures, offering scalability, elasticity and protection.

    Google Search Interest for Apache Kafka and Confluent

    determine 4: Google Search activity for Apache Kafka and Confluent (supply: Created by means of creator the use of information from Google developments)

    Confluent's solution has three aspects:

  • Cloud-Native - entirely-managed carrier it really is scalable and relaxed.
  • complete - platform leveraging capabilities from Kafka, combined with Confluent’s proprietary capabilities.
  • in every single place - hybrid and multi-cloud providing.
  • Confluent also offers a neighborhood License that makes many of the aspects developed at Confluent purchasable. developers can modify the supply code for such aspects but cannot use them to supply competing SaaS offerings, an method corresponding to Elastic (ESTC) and MongoDB (MDB). This provides Confluent with a user base which is established with the utility and may potentially be transformed to paying customers.

    Confluent has delivered giant functionality to their application to differentiate it from Kafka. Proprietary aspects which add price consist of Confluent control middle, Confluent operator, self-balancing clusters, tiered storage, structured audit logs, RBAC, schema validation, and multi-location clusters. each one of these aspects are geared toward making Kafka extra secure and easing the burden of managing complicated deployments. Confluent also now has over 100 Pre-built Connectors and that they proceed to boost and work with partners who advance business-ready connectors. The extent to which Confluent can differentiate their software from Kafka is a vital contributor to the success of an open-source enterprise mannequin.


    Confluent trust their product roadmap targets here markets:

  • utility Infrastructure & Middleware
  • Database administration programs
  • statistics Integration equipment and information fine tools
  • Analytics and business Intelligence
  • The combination total addressable marketplace for these 4 markets is approximately 149 billion USD according to Gartner’s 2021 estimates. These are very broad markets though and as a issuer of distinctly area of interest products, Confluent is simply ever likely to catch a small portion of this total.

    Confluent estimate that they currently tackle about 50 billion USD of this complete:

  • software Infrastructure & Middleware - 31 billion USD
  • Database management programs - 7 billion USD
  • Analytics and business Intelligence - 7 billion USD
  • data Integration tools and statistics first-rate equipment - 4 billion USD
  • Confluent believes their addressable market will grow to approximately 91 billion USD by 2024. Given the estimated addressable markets of alternative information infrastructure agencies, Confluent’s estimates look like positive.

    economic analysis

    Confluent's salary boom has remained extraordinarily effective, even because the company has scaled. they're guiding for a big slowdown in 2022 although (40% increase). here is doubtless conservative, but the query is how conservative.

    Confluent Revenue Growth

    determine 5: Confluent income growth (source: Created by using creator the use of facts from Confluent)

    approximately ninety% of Confluent’s income comes from subscriptions, with the other 10% from functions. Most of Confluent’s subscriptions have one-year phrases and are billed yearly in advance per software illustration. A utility example is a element of the platform working on either a physical or virtual desktop. in consequence, Confluent should have reasonably priced visibility into close-term growth.

    Cloud is a tremendous boom driver for Confluent and may continue to be so going forward. international geographies most effective make a contribution about one third of Confluent’s salary, which is generally in accordance with many SaaS friends, and provides one other boom avenue.

    Confluent cloud revenue

    table 1: Confluent's Cloud salary (supply: Created by means of author the use of facts from Confluent)

    Confluent nonetheless has a relatively small consumer base but a large component of those are big customers. there's a big opportunity for persisted boom via expansion of the customer base, however here is based on how widely adopted adventure streaming utility turns into and the cost of the proprietary application over the open-supply version.

    Confluent customers

    table 2: Confluent's consumers (source: Created by using creator the usage of data from Confluent)

    Hiring data indicates that adoption of Confluent's application continues to develop ceaselessly and assuming Confluent can proceed increasing inside their current customer base, they're prone to handily beat projected salary boom.

    Job Openings Mentioning Confluent in the Requirements

    determine 6: Job Openings bringing up Confluent within the requirements (source:

    Confluent has a varied customer base, with no single customer contributing a material percentage of earnings. huge shoppers are crucial even though, with Confluent’s 136 Fortune 500 customers contributing approximately 35% of income in the three months ended March 31, 2021. there's a substantial hole between Fortune 500 agencies who utilize Kafka and those that are paying Confluent clients even though, which calls into the query the price of Confluent's proprietary features.

    Confluent’s go-to-market approach aims to take purchasers from initial experimentation through to business-broad adoption, which appears to be a reasonably high-contact strategy. This makes sense given that Confluent agree with they're a mission essential platform and have excessive commonplace salary per customer. it will additionally cause effective internet retention quotes.

    Confluent’s net retention fee declined vastly between 2018 and 2020, a truth they have attributed to latest customers contributing a bigger component of earnings and larger initial deal sizes. regardless of this, Confluent’s web retention rate continues to be rather potent and in accordance with their long run goal of about 130%.


    table 3: Confluent's net Retention cost (supply: Created by creator using data from Confluent)

    Confluent ARR by Cohort

    determine 7: Confluent ARR by Cohort (source: Confluent)

    Confluent has approximately 2,000 personnel and is continuing to employ aggressively, with much of this boost in headcount directed against revenue and advertising. income and advertising headcount accelerated from 415 personnel at the end of 2019 to 579 personnel in 2020 and 684 personnel as of March 2021.

    Confluent Hiring Trend

    determine eight: Confluent Hiring trend (supply:

    Confluent's margins are one of the crucial regarding features of the company. Their subscription gross margins are exceptionally low and declining, might be driven via multiplied adoption of their cloud hosted answer. Gross margins are trending against what can be expected from an infrastructure enterprise as opposed to a provider of differentiated utility. Confluent's capacity to extend into better value adjacent alternatives can be a crucial determinant of lengthy-term gross margins.

    services are also dragging on margins as they're performed at about breakeven and are in basic terms a method to guide the subscription business instead of create price of their own appropriate. The value of features will continue to say no though because the subscription business grows.

    Confluent Gross Profit Margins

    figure 9: Confluent Gross earnings Margins (supply: Created by using author using information from Confluent)

    Confluent is additionally incurring significant working losses, driven in giant half by way of extreme stock based compensation. Confluent have to get operating expenses beneath handle whereas preserving increase, specifically in the present ambiance where organizations generating losses are punished via the market.

    Confluent Operating Profit Margins

    figure 10: Confluent working income Margins (supply: Created with the aid of author using statistics from business reports)

    A contribution margin evaluation shows that Confluent's margins at scale may still be fairly powerful, youngsters this can sooner or later be decided by their aggressive place. Contribution margin is described as the subscription earnings from the consumer cohort much less the linked cost of subscription salary and estimated allocated sales and advertising and marketing costs. Contribution margin percent is described as the contribution margin divided through the subscription profits associated with a cohort in a given duration.

    Confluent Contribution Margin Analysis

    figure eleven: Confluent Contribution Margin evaluation (source: Confluent)


    Confluent trust that on-premise competition primarily comes from interior IT teams setting up their own records infrastructure the use of open-source utility (Apache Kafka). There are also legacy products which have launched similar functionality including TIBCO Streaming, Cloudera Dataflow, purple Hat (IBM), AMQ Streams, and Oracle (ORCL) Cloud Infrastructure Streaming.

    Cloud competitors comes basically from hyperscalers (Amazon (AMZN), Microsoft (MSFT), Google (GOOG)). they have developed information ingestion and streaming products like Azure adventure Hubs (Microsoft), Amazon Kinesis and Amazon DynamoDB Streams (AWS), and Cloud Pub/Sub and Cloud Dataflow (Google).

    Apache Pulsar is a competing open-supply statistics pipeline platform. It has in move processing corresponding to Kafka Streams and is utilized by corporations like Tencent (OTCPK:TCEHY), Overstock (OSTK), Verizon (VZ), MercadoLibre (MELI), Nutanix (NTNX), and Splunk (SPLK). StreamNative was formed by means of the normal builders and presents a hosted SaaS edition of the utility.


    If Confluent can handle charges whereas retaining effective increase in coming years, the inventory possible gives economical price at latest expenditures. according to a discounted money move evaluation I estimate that Confluent’s inventory has an intrinsic value of approximately 60 USD per share.

    On a relative basis I consider there are stronger priced stocks though. compared to open-supply friends, MongoDB and Elastic, I agree with Confluent has an improved business than Elastic but a significantly weaker business than MongoDB. As such, it could make feel for Confluent to exchange on multiples nearer to Elastic than MongoDB.

    Confluent Relative Valuation

    figure 12: Confluent Relative Valuation (supply: Created by way of creator using data from Yahoo Finance)


    Confluent has a clear imaginative and prescient to sell traders and their monetary performance has been potent in contemporary years. The effectivity of their boom is a little concerning even though, due in large half to excessive inventory-based mostly compensation. whereas I agree with Confluent is low in cost for long-time period traders, there are large brief-term risks due to the macro environment. supply chain considerations may leave inflation improved for longer than anticipated, leading to lower valuations for increase shares. there's additionally expanding risk of a recession within the subsequent 1-2 years, which can be hazardous to the valuation of growth stocks.

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