Confluent (CFLT -4.89%) stock has been on a stunning run in the past six months, rising an impressive 59% as of this writing. That red-hot run by the data-streaming platform provider is poised to continue following the release of its fourth-quarter 2024 results.

Confluent's latest quarterly report came out on Feb. 11, and its share price popped 25% the following day thanks to stronger-than-expected growth and solid guidance that bested Wall Street's expectations.

Let's take a closer look at the catalysts driving Confluent's growth and check why it may be a good idea to buy this growth stock even after the impressive gains in recent months.

Solid customer growth and spending point toward a bright future 

Confluent's cloud-based data streaming platform enables customers to bring data out from silos onto a single platform where they can store, access, and manage it in real-time. The company expects its total addressable market to grow to $100 billion this year, an indication that it is scratching the surface of a massive opportunity, since its 2024 revenue increased by 24% to $964 million.

Apart from adding new customers, Confluent's existing customer base is now spending more. The advent of generative artificial intelligence (AI) is one of the reasons it is winning a bigger share of its customers' spending. 

Management believes that the growing adoption of AI agents could increase the demand for its data streaming platform. Its customers are already using data streaming to develop customer service chatbots and to create content, among other things.

Its dollar-based net retention rate stood at an impressive 117% in the previous quarter, as measured by the trailing-12-month (TTM) annual recurring revenue (ARR) from its customers. A rate of more than 100% is an indication that Confluent's services have proved to be sticky as existing customers are spending more year over year.

Even better, the number of customers with an ARR of more than $1 million increased 23% year over year in the previous quarter, outpacing the 17% jump in its total customer base. This is driving an improvement in its margin profile and leading to outstanding earnings growth.

The company reported an almost sevenfold increase in its bottom line last year to $0.29 per share, well above its original guidance of $0.17 per share. Management remains confident that the adoption of AI is going to be a tailwind.

Chief financial officer Rohan Sivaram said on the latest earnings conference call: "By increasing consumption of our data streaming platform, we help customers realize substantial ROI [return on investment] for powering their mission-critical and real-time AI workloads. As we drive ROI-based expansions throughout our customers' data streaming journey, we expect our growth and profitability profile to strengthen over time."

It isn't too late to buy the stock

Management forecast a 21% increase in its earnings in 2025 to $0.35 per share along with a 16% spike in revenue. But the company easily exceeded its expectations in 2024, and it could do the same again this year thanks to stronger partnerships.

For instance, Confluent has struck a multiyear strategic partnership with Jio Platforms Limited, an Indian multinational technology company that's a division of Reliance Industries. It will now offer its cloud platform on JioCloud Services. This could open a potentially huge customer base since Confluent is the first data streaming services provider on Jio.

Confluent also expanded its partnership with Databricks, combining its data streaming platform with the latter's data intelligence platform to empower enterprises with real-time data for AI-driven decision-making. Databricks is a key player in big data analytics with an estimated 60% growth in ARR by the end of 2024.

Such partnerships could pave the way for Confluent to bring more customers on board and grow faster than originally forecast. Consensus estimates project a bigger jump in earnings in 2026.

Data by YCharts; EPS = earnings per share.

Confluent's price/earnings-to-growth ratio (PEG) of 0.8 based on the earnings growth that it is expected to deliver over the next five years, according to Yahoo! Finance, indicates that its stock is undervalued. A PEG ratio takes a company's potential earnings growth into account. A reading of less than 1 means that a stock is undervalued with respect to the bottom-line growth that it could deliver over the next five years.

So, it is not too late for investors to buy this high-flying growth stock. A massive addressable market, an improving customer base, and catalysts such as AI could send Confluent higher.