Executive Summary

Q3 FY2025 delivered $51.628 million revenue (+13% YoY), GAAP gross margin 87.3%, GAAP net loss per share $(0.35), and non-GAAP net loss per share $(0.05); management stated results exceeded the company’s outlook .
ARR reached $220.3 million (+17% YoY), RPO $211.3 million (+29% YoY); Capella ARR rose to 15.1% of total with one-third of customers on Capella, including the largest Capella migration in company history .
Q4 and FY2025 guidance: Q4 revenue $52.7–$53.5 million, ARR $236.5–$239.5 million, non-GAAP operating loss $(5.7)–$(4.7) million; FY2025 revenue raised to $207.2–$208.0 million and non-GAAP operating loss tightened to $(20.0)–$(19.0) million .
Near-term stock catalysts: visibility from several million dollars of precontracted ARR (roughly double typical levels), anticipated closure of large strategic deals, and new Capella AI Services expanding AI workflows on the unified platform .

What Went Well and What Went Wrong

What Went Well

Strong demand and execution: “top- and bottom-line results that exceeded our outlook,” ARR +17% YoY, 34 net new logos; Capella now 15.1% of ARR and one-third of customers .
Operating leverage: non-GAAP operating loss improved to $(3.5) million (vs $(5.0) million YoY), with Rule of 40 up 9 points YoY and disciplined OpEx across functions .
Product innovation: announced Capella AI Services (model hosting, vectorization, unstructured data preprocessing, agent catalog) to streamline agentic AI applications; management highlighted strategic differentiation and platform momentum .

What Went Wrong

Cash flow and margin pressure: operating cash flow $(16.9) million and free cash flow $(17.5) million; GAAP gross margin fell 150 bps YoY partly due to higher Capella mix .
Revenue/ARR divergence: migrations to Capella push revenue out under consumption recognition, creating near-term revenue lag vs ARR (analytics concern raised in Q&A) .
ARR per customer decline: ARR per customer dipped to $244K (from $246K in Q2) as Capella mix rises and new logos skew smaller; churn/down-sell normalized after Q2 anomaly but still a monitoring point .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$51.327	$51.589	$51.628
GAAP Net Loss per Share ($)	$(0.42)	$(0.39)	$(0.35)
Non-GAAP Net Loss per Share ($)	$(0.10)	$(0.06)	$(0.05)
GAAP Gross Margin %	88.9%	87.5%	87.3%
Non-GAAP Gross Margin %	89.9%	88.3%	88.2%
GAAP Operating Loss ($USD Millions)	$(22.540)	$(21.048)	$(19.234)
GAAP Operating Margin %	(44)%	(41)%	(37)%
Non-GAAP Operating Loss ($USD Millions)	$(6.697)	$(4.101)	$(3.479)
Non-GAAP Operating Margin %	(13)%	(8)%	(7)%

Segment revenue breakdown:

Segment	Q1 2025	Q2 2025	Q3 2025
License ($USD Millions)	$6.859	$5.242	$4.343
Support and Other ($USD Millions)	$42.179	$44.051	$44.955
Total Subscription Revenue ($USD Millions)	$49.038	$49.293	$49.298
Services ($USD Millions)	$2.289	$2.296	$2.330
Total Revenue ($USD Millions)	$51.327	$51.589	$51.628

KPIs:

KPI	Q1 2025	Q2 2025	Q3 2025
ARR ($USD Millions)	$207.7	$214.0	$220.3
RPO ($USD Millions)	$220.0	$215.8	$211.3
Capella ARR ($USD Millions)	$23.9 (11.5% of total)	$28.9 (13.5% of total)	$33.2 (15.1% of total)
Dollar-based NRR	>115%	>115%	>115%
Customers (Count)	807	869	903
Capella Customers (% of total)	29%	31%	~33%

Comparison vs Wall Street consensus (S&P Global):

Metric	Q3 2025 Actual	Consensus Estimate
Revenue ($USD Millions)	$51.628	N/A – S&P Global consensus unavailable
Primary EPS (GAAP) ($)	$(0.35)	N/A – S&P Global consensus unavailable
Note: S&P Global consensus data was unavailable at the time of analysis; values not shown would otherwise be retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($USD Millions)	FY2025	$205.1–$209.1	$207.2–$208.0	Raised at midpoint
Total ARR ($USD Millions)	FY2025	$235.5–$240.5	$236.5–$239.5	Maintained (midpoint unchanged)
Non-GAAP Operating Loss ($USD Millions)	FY2025	$(24.5)–$(19.5)	$(20.0)–$(19.0)	Improved (less loss)
Total Revenue ($USD Millions)	Q4 FY2025	N/A	$52.7–$53.5	New
Total ARR ($USD Millions)	Q4 FY2025	N/A	$236.5–$239.5	New
Non-GAAP Operating Loss ($USD Millions)	Q4 FY2025	N/A	$(5.7)–$(4.7)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Capella migrations & mix	Capella GA wins, vector search, Columnar; mix rising to 13.5% ARR; largest Capella land; Q2 churn/down-sell anomalous	Capella 15.1% of ARR; largest migration to date; growing consumption; ARR/customer moderates as mix rises	Accelerating adoption; continued migration; moderating ARR/customer mix
AI initiatives	Vector search GA; Columnar GA; developer Copilot (Capella iQ)	Capella AI Services announced (model hosting, vectorization, unstructured preprocessing, agent catalog)	Expanding AI capabilities; unifying data/model workflows
Macro & deal timing	Q1 pushed deals; cautious conservatism; renewal pool back-half weighted	Precontracted ARR “several million” (2x typical); confidence in Q4 strategic pipeline; conservatism maintained	Improving visibility; still prudent outlook
Revenue vs ARR mechanics	Migrations shift revenue to consumption; billings/FCF can be lumpy	Capella migrations push revenue out; ARR growth prioritized over revenue near-term	Near-term lag; long-term catch-up expected
Churn/down-sell	Elevated in Q2 (few large customers); no common pattern	Q3 normalized “in-range”; monitoring into Q4	Normalization post Q2 anomaly
Partners & strategic accounts	ISV-led logos; hyperscaler coopetition/partnerships	Large strategic accounts pipeline broadening; partner ecosystem with major AI players	Strengthening partner leverage and enterprise reach

Management Commentary

“We delivered top- and bottom-line results that exceeded our outlook… Capella now represents 15.1% of our ARR and one third of our customer base.” – Matt Cain, CEO .
“We again outperformed our operating loss outlook… Operating loss for the third quarter was $3.5 million or a negative 7% operating margin.” – Greg Henry, CFO .
On Capella AI Services: “Our new AI Services… include model hosting, automated vectorization, unstructured data preprocessing and AI agent catalog services.” – Management .

Q&A Highlights

Precontracted ARR magnitude: management cited several million dollars of contracted ARR starting in Q4, roughly twice typical levels, boosting visibility for back-half ARR delivery .
Revenue lag to ARR: as enterprise customers migrate to Capella, revenue recognition shifts to consumption, creating short-term divergence; management emphasized ARR growth as lead indicator .
Churn/down-sell: Q3 losses/down-sell were “in-range,” contrasting Q2’s anomalous concentration; confidence maintained heading into Q4 .
Growth ambition: long-term objective remains returning to 20%+ ARR growth with Capella as key driver, despite near-term guidance conservatism .
Q4 drivers: heavy renewal pool, strategic deals with compelling events, and potential early fiscal 2026 renewals pulled forward; guidance incorporates conservatism .

Estimates Context

Street consensus (S&P Global) for Q3 FY2025 revenue and EPS was unavailable at the time of analysis. As a result, comparisons vs consensus cannot be provided and should be revisited when S&P Global data is accessible.
The company reported results above internal outlooks; however, without consensus, external beat/miss cannot be formally assessed .

Key Takeaways for Investors

Capella inflection continues: rising ARR mix (15.1%), largest migration, and new AI Services broaden the platform’s AI value proposition; watch consumption trends and migration pace for sustained ARR growth .
Back-half ARR visibility: several million dollars of precontracted ARR and a broad pipeline of strategic deals support Q4 guidance and FY targets; execution on these will be the stock’s near-term driver .
Revenue/ARR timing: expect revenue to lag ARR as consumption ramps post migration; over time, revenue should catch up as usage scales, an important modeling consideration for near-term quarters .
Operating leverage improving: non-GAAP operating loss and margins are trending better; FY non-GAAP operating loss range tightened, evidencing cost discipline and efficiency .
Margins mix shift: gross margin declines modestly with Capella mix; margin profile should be monitored as as-a-service grows; narrative remains favorable given enterprise GM strength .
Watch KPIs: ARR growth (+17% YoY), RPO (+29% YoY), customer adds (903 total), and Capella ARR/consumption are critical trackers through Q4; ARR per customer may moderate with mix/new logos .
Trading setup: near-term catalysts include Q4 strategic wins and contracted ARR recognition; risk centers on deal timing and consumption ramp; re-check Street estimates and potential revisions once available for a clearer beat/miss framework.

Sources: Q3 FY2025 press release and 8-K (financials, guidance, KPIs) ; Q3 FY2025 earnings call transcript (prepared remarks and Q&A) ; Q2 FY2025 press release and call (prior-quarter context) ; Q1 FY2025 press release and call (prior-quarter context) ; Capella AI Services press release .

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