Confluent (CFLT) is heading into 2026 with a more favorable outlook than a year earlier, supported by "encouraging" Q3 trends, Morgan Stanley said Tuesday in a report.

The firm cited improving consensus expectations for Confluent Cloud and subscription revenue growth. If Q4 trends mirror Q3, Morgan Stanley sees potential for year-end growth rates to reach 22% for Confluent Cloud and 20% for subscription revenue.

Confluent's Q4 subscription revenue guidance of $295.5 million to $296.5 million came in 1% ahead of consensus, the report said. Morgan Stanley is modeling Confluent Cloud revenue at $165 million in the quarter, up 20% from a year earlier.

On Monday, Confluent reported Q3 adjusted earnings and revenue that beat analyst estimates. Morgan Stanley cited stronger month-over-month consumption trends and a pickup in bookings, with remaining performance obligations growing 27% from a year earlier.

The firm raised its price target on Confluent stock to $27 from $25 and maintained its equal weight rating, "but look to turn more positive on signs that improved execution can support durable stabilization, and eventual acceleration, in Cloud growth."

Confluent shares rose 10% in Tuesday trading.

Price: 24.29, Change: +2.21, Percent Change: +10.01