Robert Simmons

Robert Simmons questioned the guided revenue growth pattern for the year, noting a projected dip in Q2's growth rate before an expected acceleration in the second half, and asked for the underlying cause.

Answer

Interim CFO Bill Carey and CEO Matt Cain clarified that the pattern is a direct result of customer migrations from enterprise licenses to the Capella cloud service. This shift creates a temporary lag in revenue recognition, as upfront license revenue is replaced by usage-based revenue that ramps over time. They stated that this disconnect is currently at its peak and that revenue growth will begin to converge with ARR growth in the second half of the year and beyond.

Robert Simmons requested color on business performance by geography and vertical. He also asked about the drivers for the operating income guide being raised more than the revenue guide, questioning where spending was being cut or increased.

Answer

Pete Godbole detailed performance by vertical, highlighting strength in consumer goods and education, and relative weakness in media and technology. He explained the margin improvement comes from both the revenue beat and 'no fault cost reduction,' which involves being highly thoughtful and scrutinizing all non-revenue investments and hiring decisions.