Confluent - Earnings Call - Q1 2025
April 30, 2025
Transcript
Shane Xie (VP of Investor Relations)
Welcome to the Confluent Q1 2025 earnings conference call. I'm Shane Xie from Investor Relations, and I'm joined by Jay Kreps, co-founder and CEO, and Rohan Sivaram, CFO. During today's call, management will make forward-looking statements regarding our business, operations, market and product positioning, growth strategies, financial performance, and future prospects, including statements regarding our financial guidance for the fiscal Q2 of 2025 and fiscal year 2025. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Further information on risk factors that could cause actual results to differ is included in our most recent Form 10-K filed with the SEC. We assume no obligation to update these statements after today's call, except as required by law.
Unless stated otherwise, certain financial measures used on today's call are expressed on a non-GAAP basis, and all comparisons are made on a year-over-year basis. We use these non-GAAP financial measures internally to facilitate analysis of financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release and supplemental financials, which can be found on our website at investments.confluent.io. References to profitability on today's call refer to non-GAAP operating margin unless stated otherwise. With that, I'll hand the call over to Jay.
Jay Kreps (CEO)
Thanks, Shane. Good afternoon, everyone. Welcome to our Q1 earnings call. We're pleased to start the year with solid momentum. Q1 subscription revenue grew 26% to $261 million, Confluent Cloud revenue grew 34% to $143 million, and non-GAAP operating margin improved 6 percentage points to 4%. Our Q1 results demonstrate the mission-critical nature of data streaming and our significant product leadership. We remain laser-focused on enabling our customers to cost-efficiently build next-generation applications and win in the age of AI. On today's call, I'd like to walk through four key strategic drivers behind our resilience in the current environment. In fact, our resilience has been tested by multiple macro headwinds since Confluent's founding over 10 years ago, and it continues to support our path towards delivering long-term growth and profitability.
First and most critically, data streaming sits at the heart of the mission-critical use cases that our customers rely on every day. These are not lightweight experiments; they're the backbone of real production workloads. These applications play a critical role in the day-to-day business of our customers and can't be turned off without major disruption to core parts of their business. Confluent powers real-time fraud detection for financial institutions, inventory management for retailers, 5G networks for telcos, and data pipelines that power businesses in countless industries. This dynamic has helped sustain gross retention rate above 90% despite multiple points of instability in the macro environment that reduced IT spend for some of our customers. The second driver of our resilience is the scale of the opportunity we're going after. Apache Kafka has become a foundational technology for data management.
Today, it's used by more than 150,000 organizations, representing a $100 billion-plus addressable market opportunity. Soaking up the countless use cases built on Kafka has been a core engine of our growth and continues to be a powerful tailwind. This quarter, we added 340 new customers, our highest net add in three years, and we continue to see robust growth with many of our largest customers as they expand to new use cases. In Q1, we added 16 new customers to our cohort of million-plus ARR customers, our highest addition to that cohort ever. Our customer base is diversified by industry and by geography, and no single customer accounts for more than 2% of our total ARR. This diversification further strengthens the resilience and durability of our business. Odyssey and Booking.com are two great examples of customers that started with open source and then converted to Confluent.
Odyssey is a leading audio entertainment company with 200 million listeners across radio broadcasts, podcasts, and other digital content. As their audience grew and customer expectations rose, their old infrastructure began to hold them back. Developers were spending most of their time wrestling with brittle point-to-point integrations built with open-source Kafka. These were difficult to manage and even harder to scale. Delivering new features at the pace the business needed became a major challenge. That is when Odyssey turned to Confluent. Our pre-built connectors allow them to easily integrate data streaming into their existing tools and systems. Stream Governance enables them to quickly and easily enforce data consistency across dozens of different systems and applications. With our complete Data Streaming Platform, Odyssey freed up developer resources so they can focus on innovation instead of managing infrastructure.
As a result, Odyssey accelerated feature development by 40%, delivering more personalized experience that keeps their customers listening. This helps unlock new digital revenue opportunities across their platform. Booking.com is one of the world's largest online travel agencies. Its mobile app is one of the most downloaded travel agency apps in the world. Booking.com developed an in-house data streaming platform based on open-source Kafka. However, self-managing Kafka became increasingly burdensome as the company grew and introduced new use cases. Scaling clusters, handling updates, and monitoring pipelines consumed significant resources. To alleviate the operational complexities of managing Kafka, Booking.com migrated each business unit's open-source clusters to Confluent Platform. Our complete enterprise-grade solution provided enhanced reliability and out-of-the-box functionality. By spending less time managing infrastructure, Booking.com can now support various mission-critical use cases more efficiently, including marketing, payments, personalization, and core booking processes.
With a complete data streaming platform that is connected across their business, they were also able to deploy a connected trip experience. This allows customers to seamlessly book flights, accommodations, car rentals, and experiences in one visit. The third driver of our resiliency is meeting customers wherever they are, whether that's on-prem, on the edge, in any cloud, or hybrid environment. That flexibility also provides another layer of resilience to our business. It means our growth strategy is less exposed to changes in cloud investment and provides a healthy mix of routable and consumption-based revenue streams. Just as importantly, it lets us land and expand in environments where cloud isn't an option, whether for regulatory reasons, company mandates, or just customer preference. We continue to see strong momentum in this area.
Our Confluent Platform business had a particularly strong quarter, with revenue growth accelerating to 18% year-over-year, representing its strongest Q1 growth in three years. Finally, it's not just that our products are better, faster, and more reliable; they're also more cost-effective. This is a strong differentiator and provides our customers with more value for less money across a wide range of use cases. Our low TCO enables us to expand usage within our existing customer base and also drive new conversions from open-source Kafka. It's one of the key levers that helps us retain customers, grow within our installed base, and tap into the broader open-source community in a meaningful way. Key to capitalizing on this TCO advantage is offering pricing and packaging that fits the full range of Kafka use cases, from early projects to the most demanding production workloads.
With new offerings like WarpStream and Freight Clusters, we're now able to serve high-throughput, low-latency workloads at attractive price points, enabling our customers to tackle a wider range of use cases. We continue to see strong traction with both offerings in Q1, including new customers like Liftoff.io and the next wave of GenAI companies like Cursor and Thinking Machines. Here's an example of how our TCO advantage drives sustained growth with a top 20 global bank. This $5 million-plus ARR customer, who most recently increased their spend with us by over 30%, initially relied on open-source Kafka. However, the complexity and rising costs of self-managing Kafka quickly outweighed the value they received. More than five years ago, they migrated their first use case to Confluent. Since then, we've become a strategic partner as they've transitioned numerous legacy workloads to the cloud.
Today, Confluent powers hundreds of use cases across their business, like fraud detection, capital management, regulatory reporting of trade data, and more. By moving to Confluent, they've significantly reduced operational costs, turned their real-time data into a competitive advantage, and lowered their TCO. In fact, the customer believes that for every dollar they spend with Confluent, they would otherwise spend $3 managing Kafka themselves. Together, these four factors—mission-critical use cases, open-source conversion opportunities, hybrid business model, and TCO advantages—have laid the foundation and made our business more resilient through multiple shifts in the macro environment. Additionally, we see continued adoption of our DSP components, which significantly outgrew our core cloud business. Confluent unifies everything organizations need to work with real-time data: the ability to stream, connect, process, and govern continuously flowing streams of data, all in one platform.
This foundation is proving especially valuable as generative AI moves from experimentation to execution. In particular, we're seeing strong interest in adoption for Flink and TableFlow, two of the most recent additions to our DSP. Our complete platform is becoming the connective tissue that brings real-time context to our customers' GenAI applications so they can deliver trustworthy and actionable results that work in everyday operations. It's very exciting to see what our DSP enables our customers to do. For example, a leading luxury goods conglomerate with 75 brands and over 6,000 stores worldwide uses our Confluent Cloud for Apache Flink to power its real-time order management and drive e-commerce growth. The company initially turned to Confluent Cloud to stream order management data to give internal teams accurate real-time visibility into product availability.
As Confluent proved its value with this first use case, the customer consumed more of our platform, including our fully managed Flink service, to prevent inaccurate stock information caused by duplicate data. This customer uses Flink to filter out orders and inventory duplicates and to continuously analyze real-time product availability. When high-demand items come back in stock, Flink automatically triggers real-time alerts to notify waiting customers, enhancing the customer experience and driving incremental revenue. Building on the success of their initial Flink use case, they are now exploring new ways to leverage the technology to streamline and scale product inventory management. Before closing, I'm excited to share two updates. First, Ryan McBann has been promoted to Chief Revenue Officer at Confluent.
In this expanded role, Ryan will lead the global field strategy, bringing together sales, sales engineering, customer success, and sales operations to help customers activate real-time data to build the next wave of intelligent applications. Ryan joined Confluent last year as Senior Vice President, Global Head of Sales. He brings over 20 years of sales leadership experience, building and leading top-performing teams around the world. Before Confluent, Ryan was President of UiPath Americas, where he drove significant growth across their multi-product platform. He also held senior leadership roles at VMware and Cisco. Second, we're honored to be named a Google Partner of the Year for the sixth time. This recognition is a reflection of the strong partnership we have with the leading CSPs. Together, we enable organizations to deliver the next-generation applications they need to thrive in the age of AI.
In closing, we're proud of our strong start to the year. Our commitment to providing the industry's most complete data streaming platform, paired with a highly resilient business, uniquely positions Confluent to seize the $100 billion-plus data streaming market. With that, I'll turn it over to Rohan.
Rohan Sivaram (CFO)
Thanks, Jay. Good afternoon, everyone, and thanks for joining our earnings call. Our Q1 performance underscores the strength of our mission-critical data streaming platform, the strategic value of our multi-cloud, multi-data destination, and multi-deployment approach, as well as the flexibility of our well-diversified growth strategy. Turning to the results, Q1 subscription revenue grew 26% to $260.9 million, exceeding the high end of our guidance and representing 96% of total revenue. Confluent Platform revenue reached a new record of $118.2 million, with growth accelerating to 18%. This momentum was driven by early traction in our partner ecosystem, where OEM showed particular strength internationally.
Cloud revenue grew 34% to $142.7 million, representing 55% of subscription revenue. The revenue impact of lapping the leap year was approximately negative $1.6 million, as Q1 this year had one fewer day for consumption. Turning to the geographical mix of total revenue, revenue from the US grew 23% to $156.4 million. Revenue growth from outside the US grew 28% to $114.7 million. Moving on to the rest of the income statement, I'll be referring to non-GAAP results, unless stated otherwise. While driving top-line growth at scale, we continued to show significant operating leverage in our model. In Q1, subscription gross margin increased 100 basis points to 81.7%, primarily driven by continued efficiency gain in Confluent Cloud, coupled with strength in Confluent Platform. Operating margin was 4.3%, exceeding our guidance of approximately 3%, and was primarily driven by revenue and gross margin outperformance.
Adjusted free cash flow margin, which excluded the non-recurring impact of our compensation change in Q1, was 1.8%. The impact of the change to free cash flow margin in Q1 was approximately 14 percentage points. Net income per share was $0.08, using 367.8 million diluted weighted average shares outstanding. Fully diluted share count under the treasury stock method was approximately 380.9 million. We ended the Q1 with $1.92 billion in cash, cash equivalents, and marketable securities. Turning now to customer metrics, we ended Q1 with approximately 6,140 customers, representing a sequential increase of 340 customers. Our highest sequential increase since Q1 of 2022. This robust growth underscores the strong value proposition of our multi-product platform and our continued success in capturing the open-source conversion opportunity.
As mentioned at Investor Day 2025, we will report total customer count on an annual basis and begin reporting $20,000 plus ARR customers on a quarterly basis. In Q1, $20,000 plus ARR customer count increased to 2,487, up 41 customers sequentially, and represented more than 95% of our ARR. Our $100,000 plus ARR customer count increased to 1,412, up 31 customers sequentially, and accounted for greater than 90% of our ARR. Our $1 million plus ARR customer count grew to 210, up 16 customers sequentially. Our best quarter in net add for this cohort. NRR for the quarter remained stable at 117%, while GRR continued to be greater than 90%, demonstrating the mission-critical nature of our data streaming platform for our customers.
Turning to our outlook, for the fiscal Q2 of 2025, we expect subscription revenue to be in the range of $267 million-$268 million, representing growth of approximately 19%. Non-GAAP operating margin to be approximately 5%, and non-GAAP net income per diluted share to be in the range of $0.08-$0.09. For fiscal year 2025, we expect subscription revenue to be in the range of $1.1 billion-$1.11 billion, representing growth of approximately 19%-20%. Non-GAAP operating margin to be approximately 6%, and non-GAAP net income per diluted share to be approximately $0.36. Now, I'd like to provide some additional context for our guidance, along with a few modeling points. In light of the uncertainties in the current environment, we are widening our revenue guidance range and embedding a modest decline in growth rates from Q2 through Q4.
For our cloud business, some of our larger customers began slowing the pace of new use case addition and focusing on cost optimization efforts in March. In contrast, consumption activities in our smaller customer base remain stable. These trends have continued into April. Given the current macro conditions, we believe it's prudent to assume there will not be a near-term rebound in consumption. This contrasts with previous cycles, where we typically saw a subsequent expansion following a period of slower consumption. As a result, we now expect cloud subscription revenue mix to be approximately 58% for Q4 2025, with a sequential mix increase of approximately one point each quarter. Finally, we expect fiscal year 2025 adjusted free cash flow margin to be approximately 6%. This excludes, as previously discussed, a one-time headwind of 3%-4% points for the full year due to our compensation change in Q1.
We are confident that our updated guidance, coupled with multiple paths to growth, sets us up for success this year. Specifically, we see four key drivers of growth in our business. First, the core streaming conversion opportunity targeting an open-source install base of over 150,000 organizations. Second, our DSP upsell opportunities across Connect, Process, Govern, and TableFlow. Third, our highly strategic role in the age of AI. As traditional enterprises accelerate AI adoption, we believe this represents our largest monetization opportunity within AI. Fourth, the leverage we gain from our expanding partner ecosystem, including the OEMs, SIs, MSPs, and other high-impact strategic partnerships that help us extend our global reach and accelerate go-to-market efforts. It's important to note these aren't just cloud-only growth vectors. We believe they represent durable growth drivers for both Confluent Cloud and Confluent Platform.
For example, in Q1, revenue outperformance was driven by on-prem momentum with Confluent Platform and its critical role in closing large enterprise deals with our OEM partners. Our well-diversified growth strategy gives us resilience and flexibility, enabling us to continue to drive durable and profitable growth. In closing, our Q1 results are a testament to the resilience of our business and our ability to capture our market opportunity. With a large TAM, category-defining technology, and an exceptional team, we are firmly positioned to sustain long-term growth and profitability. Now, Jay and I will take your questions.
Shane Xie (VP of Investor Relations)
Thanks, Rohan. To join a Q&A, please click on the raise hand icon on your Zoom screen. When selected for Q&A, we ask that you limit yourself to one question and one follow-up. Today, our first question will come from Pinjalim Bora with JP Morgan, followed by RBC. Pinjal?
Pinjalim Bora (Executive Director of Equity Research)
Oh, great.
Thank you for taking the questions. One, obviously, macro has been top of mind for everybody. I think you said you've seen some slowdown in new use cases across large customers. I want to ask you, what about existing kind of use cases, the consumption run rate there? Because I would assume that the existing use cases probably drive a bigger portion of revenue than kind of the ramping of new use cases, right? Also, from the ACV commitment standpoint, are you seeing any difference so far in April, which makes you to kind of look at the guidance?
Jay Kreps (CEO)
Yeah, yeah, great, great question. Overall, what we said, you know, is that we did see a bit of lower consumption in our larger customers on the cloud side. Overall, good, good quarter, you know, strong growth in CP, solid growth in cloud.
You know, this was a combination of optimizations and, you know, slower addition of new use cases. I would say both. You know, that was not across the customer base. You know, in our smaller customers, we did not see that pattern. And it was not specific to a single segment, you know, either in terms of international distribution or industry. You know, I would not attribute that directly to macro. You know, I think the way I would explain it is this, right? We have seen a bit of an oscillating pattern in these larger customers where they tend to, you know, have kind of a cycle of optimization and then additional growth and optimization and growth. In times that are a bit more certain, we would probably bake in the assumption that that pattern would continue and we would see more of a rebound. Given the current environment, we do not want to do that.
We want to be a little bit more conservative in how we're looking at that and just kind of play it forward straight through the year. That is what we've done when we've constructed the guidance for this year. Rohan, you may have more to add to that.
Rohan Sivaram (CFO)
No, I think you covered it, Jay. Pinjamil Bora, I'll take the second part of your question. On the commitments, as you can see from our RPO numbers, Q1 was strong. Both on the CP side, where we saw multi-year deals, customers committing multiple multi-year deals. Also on the cloud side, where our cloud motion continues to be consumption first, but we've seen a lot of customers actually come and commit to multi-year deals on the cloud side as well. The ACV commitments in Q1 were strong. That is how I'd categorize it.
Pinjalim Bora (Executive Director of Equity Research)
Yeah, got it.
Jay, one follow-up for you, and this is more of a high level. We have seen some enthusiasm in the open-source community around this idea of a diskless Kafka. It seems like with a new KIP around there. Obviously, that's writing directly to object storage, and WarpStream has been doing that for some time now, and you own WarpStream. So I want to ask you, how do you kind of see the future of Confluent? Is Confluent overall as a whole, not just WarpStream, could it move to a diskless future at some point? Or the latency issues kind of with object storage kind of might?
Jay Kreps (CEO)
Yeah, we've actually, it's a great question. Yeah, we've actually done that in both our cloud and with WarpStream. You know, we're actually very intelligent about the use of storage. And so our Freight Clusters use kind of a pure diskless approach.
Our other clusters use a combination of storage technologies across the memory hierarchy to optimize it. There's a fair amount of sophistication in that layer, and it actually matters a lot when you think about the cost characteristics and the kind of performance trade-offs. That's definitely an area we've put, you know, a fair amount of R&D effort.
Pinjalim Bora (Executive Director of Equity Research)
Thank you so much
Shane Xie (VP of Investor Relations)
. All right, thanks, Pinjalim. We'll take our next question from Matt Hedberg with RBC, followed by Wells Fargo.
Matt Hedberg (Managing Director and Software Research Analyst)
Hey, great. Thanks, guys, for the questions. Congrats on the quarter. Not an easy environment at all. Jay, you know, it's great to hear the success in DSP. I think you called out Flink and TableFlow in particular. I'm sort of curious. I think, you know, 4Q you called out DSP was 13% of your cloud business. I'm wondering if you could sort of quantify how that improved sequentially.
And then, you know, maybe just a little bit more on Flink. It really seems to be coming up more and more in our partner checks. Wondering where you're seeing some of the earliest adoption there.
Jay Kreps (CEO)
Yeah, you know, I'll give you some characterization. You know, our intention with that kind of DSP percentage is to come back to that periodically, but not every single quarter. You know, here's what we're seeing. A ton of enthusiasm. You know, overall, like sentiment in the company is the DSP offerings are on, you know, great success trajectory, significantly outgrowing the kind of core cloud business. You know, we've kind of been through this before. As that stuff starts to get to scale, it moves the overall numbers. A lot of enthusiasm from customers. You know, we just released TableFlow as GA in AWS.
You know, great early signs for that. Flink is succeeding really nicely both in the cloud as well as in CP. We've added this to our CP offering and picked up some really sizable customers on that doing awesome use cases. You know, I think this is still the early innings for the, you know, the offerings on both sides, but great initial success. In the cloud, you know, these kind of serverless offerings, you start with kind of a broad base of simple use cases. Then you start to build to these more mission-critical large conversions where people are moving, you know, dozens or hundreds of different processing jobs over. That's, of course, when you start to see, you know, the real money move. You know, we're starting to win some of those kind of larger customer engagements.
We're putting in a ton of work to make sure we can really deliver against these big migrations. You know, that's a real focus in the team. Overall, you know, I do think that there's a significant push inside companies towards real-time in the use of data. We're seeing this pattern around, we would call it shift left, where, you know, a lot of what customers were doing with data is moving upstream into the real-time area so that it can go to multiple destinations, so that it can land in their analytics environments faster, and so that it can be part of the use of AI applications, which often need that. You know, for all those reasons, I think we have great, you know, great tailwinds in that area. You know, we ultimately don't bake a ton of that, you know, product success into our guidance.
You know, it's often hard to forecast these new things. You know, something like TableFlow that's just coming out to GA right now, you know, we would have internal goals, but when we think about our financial plan for the year, we wouldn't have something attached to that until we really see it perform. The initial signs are very promising in terms of the build of pipeline and customer conversations. That's fantastic. Maybe just one for Rohan. I think, you know, I think the reduced guidance makes a lot of sense to us just given the macro and appreciate some of the conservatism there. You know, coming off of a record quarter, at least from the past several years of new customer ads, I'm wondering how you're thinking about the, you know, the relative rate of customer ads versus NRR.
Matt Hedberg (Managing Director and Software Research Analyst)
I mean, are you assuming that that NRR comes down a little bit, new customer ads? Just kind of the components of that would be helpful.
Rohan Sivaram (CFO)
Yeah, Matt, sure thing. I mean, I'll make a couple of comments on guidance, and then I'll get to your question on NRR and customer count. I mean, you know, as you called out, our guidance philosophy has been very consistent. How we've approached it is disciplined approach and set prudent targets. Jay talked about the dynamic around consumption. On the CP side, we did see good momentum in Q1. Our visibility for Q2 remains good. That's kind of driving our outlook for Q2 and rest of the year.
If I take a step back and look at the guidance, what I'll tell you is we're looking at a guidance of 19%-20% for the year at a billion-dollar-plus scale. We're doing that with what I would call a fairly prudent setup for us. You know, we have multiple vectors of growth as we look at it, which includes streaming, which includes DSP, the AI, as well as the partner ecosystem. That's a little bit about the guidance and, you know, why we feel good with the setup that we have right now. To your question around customer count, that's right. I mean, that entire ecosystem of customer count, not only total customers on one bookend, but also million-dollar-plus customers. We had the best quarter from a million-dollar-plus customers.
Jay Kreps (CEO)
That tells you that, you know, top of the funnel, obviously we are adding a lot of customers into the Confluent ecosystem. Our 20K customer tells you the amount of, I would say, high, high intensity, high frequency customers who can spend a lot with us. That shows the core customer count. And million-dollar-plus customers is just how we are pushing them through the funnel. Overall, we feel good. NRR last couple of quarters has been, give or take, around the 117% range. You know, what supports that NRR is our consistency on the GRR side. That's callout number one. We've been greater than 90% since we've been a public company. On the expansion side, you know, the dynamics that we called out on the consumption side could have an impact.
Rohan Sivaram (CFO)
If I think about NRR, it should be in that zip code of 117% as we look ahead.
Matt Hedberg (Managing Director and Software Research Analyst)
Well done, guys.
Shane Xie (VP of Investor Relations)
Thanks, Matt. We'll take our next question from Michael Turrin with Wells Fargo, followed by Morgan Stanley.
Michael Turrin (Managing Director and Equity Research Analyst)
Hey, great. Thanks. Nice to see everyone. I appreciate you taking the questions. Jay, I want to start with something that was, I think, very top of mind at the investor day, which was just some of the AI-related use cases. You've mentioned Cursor a couple of times, investor sentiment on this topic. Certainly, it seems to ebb and flow. Can you just help add some context around what you're seeing in terms of AI-related demand?
If there are certain use cases you're finding, you'll have strong product-market fit as those evolve and just how we should start to expect some of this to evolve over a longer period of time.
Jay Kreps (CEO)
Yeah, absolutely. So, you know, we've seen success kind of in two dimensions in the AI area. I mean, first, selling to AI companies like Cursor, as you mentioned. The other is the kind of enterprise uses of AI where we're, you know, really fulfilling two roles. You know, one is this data supply chain for getting the data that fulfills the context for some of these AI applications. The second is, you know, for these agents that are actually acting on things in real time. You know, the more sophisticated use of data has often been, you know, some batch job at the end of the day.
The point of these agents is to get into the kind of real-time flow of things. We are starting to see those use cases emerge. I would say that's earlier, you know, of the two. I think it's a pattern that's quite durable. You know, we've done a fair amount of writing and kind of thought leadership in this area and really seeing kind of a community of interest forming around this in our customer base and well beyond in the larger community. I think that's very promising.
Michael Turrin (Managing Director and Equity Research Analyst)
Just as a follow-up, if I may, just beyond the consumption patterns in terms of some of the things you're contemplating with guidance, sounds like newer products are just lower assumptions in the earlier stage. Are there certain milestones we should be thinking about in terms of go live with some of the newer products?
On the go-to-market transition, maybe just help us with what you've seen from Ryan and how you're thinking about the shape of productivity you could see throughout the year.
Jay Kreps (CEO)
Yeah, yeah. I am really excited to be working with Ryan. You know, any of these executive roles, we obviously do, you know, very broad outside search and look inside as well. You know, met a lot of people in the process. You know, I felt like, hey, internally, we had somebody who had, you know, a ton of strength in execution, was a strategic thinker and understood what we were doing as a business, the space we were operating in. It would be an awesome part of the executive team and leadership of the company. I feel really good about the changes.
Obviously, also less disruptive because you have somebody who's already managing the full set of sales reps, just kind of taking on additional responsibility. And you have somebody who had kind of proven themselves on the field versus, you know, taking a shot on somebody new coming in and adjusting to our space. I feel really good about that and, you know, excited about what we can do in the year ahead. You know, obviously, less changes overall on the go-to-market side this year than last year. As you know, last year, we were doing this bigger set of consumption changes. So, you know, I think overall, that's, you know, a positive setup for us.
And then remind me of the other part of the question.
Michael Turrin (Managing Director and Equity Research Analyst)
Just on some of the new products. Are there timelines we should be thinking about where, you know, those could start to see a steeper adoption ramp just based on go-to-market?
Jay Kreps (CEO)
Yeah, yeah. The two things that I think are in our mind, you know, we've started to get this connect business to scale the business around the connectors. You know, we're now able to do much more of the kind of lift and shift of existing use of open-source Kafka Connect and bring that into our platform. We feel pretty good about that motion. Now it's kind of taken that to scale. For Flink, you know, it really is about these larger customers and use cases, you know, taking the any kind of cloud layer that does data processing is basically a programming framework where you're writing, you know, effectively complete programs in SQL or Java.
You know, the ability for customers to take things that they've done, migrate in, and really get to scale with that across big, complicated production use cases. As we start to make more of those successful more quickly, that's kind of the, you know, the motion to start bringing more and more onto the cloud offering there. CP Flink, I think, is off to a nice start with customers. You know, that's kind of an easier process of lift and shift. TableFlow is, you know, just out of the starting gates. The big milestones there are getting it across all the clouds, opening up the integration with Delta and Unity, the Databricks technologies that, you know, we've kind of promised to our customers and are working with Databricks around. Both of those are exciting milestones.
I think we'll start to see that get out to early customers and have a better sense of the trajectory, you know, in the coming quarters.
Michael Turrin (Managing Director and Equity Research Analyst)
Thanks very much.
Shane Xie (VP of Investor Relations)
All right, thanks, Michael. We'll take our next question from Sanjit Singh with Morgan Stanley, followed by Dorja.
Sanjit Singh (Executive Director)
Yeah, thank you for taking the question. As we sort of enter this period of uncertainty, it sounds like the business coming in is quite healthy and really impressive customer ad metrics, you know, across the board. One of the things I'm trying to, you know, try and get a handle on, I'm sure we're all trying to get a handle on, is that if optimization activity comes back online, how to compare it maybe to what we saw in the back half of 2022, throughout 2023, when there was, you know, kind of a more widespread optimization activity across the customer base.
In that spirit, Jay, I was wondering if you could talk about maybe the profile of the business back then in the second half of 2022 and 2023 versus what's driving growth in your customer base today. If we did see another round of optimization activity, how would you compare it versus the last cycle?
Jay Kreps (CEO)
Yeah, you know, I would say probably the biggest change in the business between those two time frames is I do think customers have done a lot of this. You know, when you think about, you know, effectively what we went through 2019, 2020, 2021, there was kind of a run-up in cloud spend and a big push on just build, build, build new stuff, new stuff, new stuff.
In that environment, you do get a lot of, you know, effectively unoptimized cloud usage in a variety of ways. You know, probably the companies with a consumption model as we have for our cloud, you know, saw the run-up of that the fastest. You know, of course, also in that consumption model, it's easier then for, you know, the customer to be able to, you know, make sure they're really getting the full value out of it. You know, that will take down the spend. I think the difference now is a lot of that has been done, right? We do see refinement in customer usage. I don't think that there's nearly as much of a, you know, I think there's a lot more tightness in the base of the cloud usage than there was at that time period.
Sanjit Singh (Executive Director)
Yeah. Maybe the range of outcomes is narrower than it was a couple of.
Jay Kreps (CEO)
I think that's probably right.
Sanjit Singh (Executive Director)
Yeah. Picking up on the strong Confluent Platform performance, the acceleration 18%, I was wondering if you sort of view that as a structural change, as some of the knock-on effects from some of the policies, the macro policies, and then the policy debate around customers toggling a little bit more to self-managed given potential actions on digital services, those type of things. Do you see sort of Confluent Platform and some of the innovation around CP Flink? Is that now more of a better grower for the product portfolio in your view?
Jay Kreps (CEO)
Yeah, I think it's too early to say, to make that call. You know, what we saw in Q1 was actually just really good performance in CP.
You know, I don't think those deals obviously have some timeline to build. It wasn't, you know, directly in relation to tariffs or anything like that. It just wouldn't happen that quickly. You know, what we have seen, I think, is probably a ton of exuberance about cloud-heavy investment. I would say maybe a more measured cloud and on-premise strategy in some of the larger enterprises. You know, what you're saying is relevant, right? Which is, hey, you know, if companies internationally are more concerned about the interaction with the US, you know, could there be more pressure on cloud usage? It's certainly possible. I mean, I don't see any kind of major pullback from the cloud, but, you know, it's certainly possible.
The one thing I would say is, you know, Confluent has intentionally built to be highly resilient, you know, across that. And so to some extent, we're not taking a hard bet on one side or the other. We've continued to invest in Confluent Platform. We've continued to add functionality. There wasn't as much growth in data center usage for a period of time. If there's a bit more, CP will probably grow a bit faster. You know, if that's not the case, cloud will grow faster. You know, we're basically happy to support customers wherever they are. I don't, you know, I wouldn't expect a large-scale pullback from the cloud just because we've, as an industry, kind of come to just rely so heavily on it. You know, I think it'd be premature to call any of that.
The key point for us is making sure we're in a great place with customers one way or the other. I will tell you that this ability to serve customers multi-cloud and hybrid has become really top of mind for a lot of these companies as they are just starting to think about the balance of investment, what they're doing, what's happening with some of the legacy stacks, et cetera. I think that's turned into a real asset in a way that maybe four years ago was more hypothetical, now is just a very concrete must-have.
Sanjit Singh (Executive Director)
Yeah, I appreciate the perspective. Thanks, Jay.
Rohan Sivaram (CFO)
Sanjit, I'll add another, I would say, slightly different lens to what Jay just shared.
You know, when you look at our million-dollar-plus customers today and we added net 16 customers, the highest we've had, the mix of that is very balanced across our portfolio. For example, like seven of those customers were driven by CP expansions or driven by CP. You know, 50% of them are currently hybrid customers. Thirteen out of those 16 customers actually had DSP in it. So fairly balanced. I think that's something that we feel good about.
Jay Kreps (CEO)
Yeah, yeah. I think another way to look at this is, you know, as we were going public, I think there was concern because our cloud revenue base was smaller. Like, hey, can these guys really be successful in the cloud? You know, can they really take a leadership position there? You know, at least personally, I think that question is kind of answered.
At this point, we, you know, really have a leadership, product leadership, I think, in the cloud, product leadership on-premise, and a really good hybrid story. We feel at this point, it's kind of, you know, the customer's choice how they want to buy.
Sanjit Singh (Executive Director)
Awesome. Thanks for the perspective.
Shane Xie (VP of Investor Relations)
All right. Thanks, Sanjit. We'll take our next question from Brad Zelnick with Deutsche Bank, followed by William Blair.
Brad Zelnick (Managing Director)
Great. Thanks so much, guys. Nice to see everybody. I wanted to follow up on Sanjit's question. I mean, such a strong CP quarter out of the gate here in Q1. I think, you know, within that term, license is up like 60% year on year. If I listen carefully to your comments, Rohan, and the prepared remarks, you mentioned OEM relationships and international.
I do not typically think of you guys as a strong OEM company, maybe not like Microsoft, but maybe I am just not listening well enough. Can you just expand a little bit more on the nature of these types of relationships, the visibility you have to these deals, the typical term length, and what is the better together story with these types of relationships?
Rohan Sivaram (CFO)
Yeah, how did you take that, Brad? You know, from an overall CP business perspective, as you rightly called out, Q1 was a strong quarter, 18% growth. I have said this before, for CP, I think looking at this business over a 12-month period is actually a much better indicator. Typically, timing of some of these larger deals, timing of these renewals, which are large, could have an impact on in-quarter revenue.
If you look at it from a 12-month lens, you'll see the consistency in the CP performance. Historically, we've called out strength from regulated industries. Over the last couple of quarters, we've been talking about our focus around the partner ecosystem. Some of these OEM deals, I think in a very simple manner, just help us amplify our message and, you know, basically sell through as well, through a lot of our OEM partners. This particular OEM deal that we called out was primarily on the international side, which was strength. It's not just from OEM. It's also from multi-year deals that we also had in Q1.
As we look at the rest of the year, I think the visibility is, you know, we'll see a good momentum in CP for the rest of the year, primarily because of the reasons that Jay just laid out.
Brad Zelnick (Managing Director)
That's very helpful. If I could just follow up, thank you for, you know, continuing to call out the impact from the change in comp on free cash flow. Anything else, Rohan, at this point in the year, as we think about the, you know, the remainder that would, you know, swing the growth and trajectory of free cash flow versus net income growth that we might want to keep in mind? Thanks so much.
Rohan Sivaram (CFO)
No, our adjusted free cash flow goals for the year is approximately 6%.
Jay Kreps (CEO)
You know, outside of this one-time impact, we do not see any kind of adjustments out of our free cash flow number for the rest of the year. Historically, what we have said outside of these timing of comp payments or timing of commission payments, generally the free cash flow tends to go in line with the operating margin. For the full year, for sure, they are pretty closely related. That is what you are going to see for the rest of the year.
Brad Zelnick (Managing Director)
Excellent. Thank you again, guys.
Rohan Sivaram (CFO)
Thanks, Brad.
Shane Xie (VP of Investor Relations)
Thank you. We will take our next question from Jason Ader with William Blair, followed by Nita.
Jason Ader (Equity Research Analyst)
Yeah, thanks, Shane. Good afternoon, guys. How do you explain the strong net ads in Q1? Is it just the go-to-market changes that you made last year, or is there anything else going on?,
Jay Kreps (CEO)
Yeah, there is a set of things.
You know, you have to look at it a little bit, as Rohan said, by the tier of customers. You know, the folks entering the million-dollar-plus is obviously a different explanation from that kind of top-of-the-funnel total customer count ads. You know, at that top-of-the-funnel side, I would say we've made a set of improvements in, you know, the product-led side of the business. And we feel like that, you know, has kind of picked up a little bit of steam. On the million-dollar-plus side, it really is just, you know, customers continuing to progress in their streaming journey and helping them along. You know, it's rare that companies start there. They usually start a bit smaller and grow into it. So that's just an evolution usually of work we've been doing with them over, you know, a year, multi-year, really depending on the case.
Jason Ader (Equity Research Analyst)
Okay. And then a quick follow-up for you, Jay. Just do you think the macro uncertainty will actually stretch out AI deployment timelines for customers?
Jay Kreps (CEO)
Yeah, you know, it's a good question. It's a hard one to answer. You know, we like, what have we actually seen so far? You know, it's not the case that we've seen a bunch of projects put on hold or some, you know, sizable change yet. It definitely is on the minds of customers. You know, we have customers who are car companies or retailers, and they're thinking about this. I think the answer is they're not sure. I haven't seen the action yet. Certainly when we're thinking about, you know, our guidance, the trajectory for the rest of the year, it makes us, you know, more cautious and conservative than what we're doing.
Jason Ader (Equity Research Analyst)
Thank you.
Jay Kreps (CEO)
All right. Thanks, Jason.
Shane Xie (VP of Investor Relations)
We'll take our next question from Mike Cikos with Needham, followed by Mizuho. Great.
Mike Cikos (Managing Director and Equity Research Analyst)
Thanks, Shane, for getting me on. And thanks for taking the questions here, guys. Jay, if I just come back to the consumption dynamics that we're talking to here, I know we've seen typical oscillations from larger customers before. With what played out in Q1, just curious, can you give us any more color on when that started to evidence itself? Was it towards the back half of March? Was it the final couple of days? And then now that April's essentially in the rearview mirror, has that in any way deteriorated further, or are we kind of stable from where we were ending March? Yeah, yeah. So, yeah, we saw this in March. You know, it wasn't just the last few days. You know, we certainly saw some impact through March.
We've seen stability, but not an immediate rebound in April. That's, you know, kind of thinking of, you know, thinking about that, thinking about just the larger environment, that's what, you know, made us more cautious overall in the cloud guidance. Got it. For the follow-up, I think it went to Rohan with the prepared comments. One of the reasons you attributed some of the strength for Confluent Platform was specifically tied to the partners in international. Is it fair to think that with your, the traction you're seeing with your partner ecosystem, CP, this is called an incremental growth vector here, just because certain geographies have a preference or a greater desire to go for CP over cloud?
Rohan Sivaram (CFO)
Yeah, Mike, I mean, when I think about the growth drivers for us, I called out four growth drivers.
The streaming opportunity, ESP, which is not only net new, but also expansion to our existing customers, AI, as well as the partner ecosystem, which includes SIs, GSIs, OEMs. These are all not only Confluent Cloud, but they're also Confluent Platform opportunities. I think that's probably one thing that I wanted to call out. I also called out in my prepared remarks. Short answer to your question is yes, it's across the board. Our strategy around being the Puerto Rico or the Switzerland, where, you know, multi-data destination, multi-cloud, and also, you know, multi-form factor is helping in the current environment.
Mike Cikos (Managing Director and Equity Research Analyst)
Thank you, guys.
Shane Xie (VP of Investor Relations)
All right. Thanks, Mike. We'll take our next question from Gregg Moskowitz with Mizuho, followed by Cowen.
Gregg Moskowitz (Managing Director and Enterprise Software)
Great. Thank you for taking the questions. Jay, wondering if you could give us an update on WarpStream.
Since acquiring the company, have you been able to close any meaningful transactions? And if so, has all of that come from the WarpStream pipe, or was some of this, you know, Confluent generated as you start to integrate it into the fold of the rest of the go-to-market, so to speak?
Jay Kreps (CEO)
Yeah, yeah. We've definitely had some really nice customer wins. I think we've shared a few of those. We'd mentioned Cursor, but there's been a set of others that we brought forward in some of the past earnings. Yeah, those are a mixture of some things that were, you know, a few that were already in the pipeline, but we're actually seeing great activity and a set of wins, you know, across the larger team. It's not surprising.
You know, this is something that was very close to home, filled a kind of natural niche in our product portfolio, and was ready to sell. We kind of knew coming in this would be one that could potentially hit the ground running. That is what we have seen.
Gregg Moskowitz (Managing Director and Enterprise Software)
All right. Fantastic. Then just for Rohan, as part of the revised 2025 guide, you mentioned you are not assuming a near-term rebound in consumption. Maybe, you know, if we were to look at the other side of the coin, I am just curious if any thought was given to assuming a further weakening of these trends, just given greater unpredictability of the macro, or, you know, from where you sit, from your perspective, does it just seem difficult to envision things degrading from here?
Rohan Sivaram (CFO)
Yeah, I think the way we thought about it was, again, make sure that we have a prudent setup for the rest of the year. You know, what are the two big assumptions behind it? We spoke about it, but I'll reiterate it because it's important. First, for our larger cloud customers, where, you know, we did see some cost optimization slowdown in net new use cases, you know, we are not assuming an immediate near-term rebound in their consumption patterns. If you compare and contrast that with history, we've seen that, you know, historically, we've seen a rebound after an optimization pattern. You know, you've heard us call out this sawtooth pattern that we see. We're not assuming that same shape. That by itself provides some prudence to our guide as we look for the rest of the year.
Jay Kreps (CEO)
For Confluent Platform, it's slightly different because, of course, as Jay mentioned, you know, these are deals that are already in the works. You have visibility into the pipeline. You have, so our guide is based on a lot of visibility in the pipeline that we have from Confluent Platform. I think the final takeaway from my perspective is if you take a step back and you look at our guide, we're calling for 19%-20% at a greater than a billion-dollar run rate. We're not assuming any form of acceleration in the back half of the year. I think that setup makes us feel good as we, you know, head into what I'd call uncertain times.
Gregg Moskowitz (Managing Director and Enterprise Software)
Yeah. Very helpful. Thanks, Rohan.
Shane Xie (VP of Investor Relations)
All right. Thanks, Greg. We'll take our next question from Derrick Wood with TD Cowen, followed by Barclays.
Derrick Wood (Managing Director)
Great. Thanks for taking my questions.
Start with Jay. Anything to share around what kind of demand reception you've seen from TableFlow since it went GA? And just curious how to think about the revenue benefits. Is there a separate charge for TableFlow, or is it more about just bringing new workloads onto the core platform?
Jay Kreps (CEO)
Yeah, it's a great question. The reception has been extremely strong. Now, you know, it's difficult, of course, for new products to figure out exactly how fast it will ramp and, you know, exactly to what size. We're always cautious when we try and, you know, forecast anything around it. I would say overall, it's about as strong as we've ever seen for any new product, and we're very excited about it.
It'll take us some time to get it across all the clouds and across all the different formats to fully open up and capitalize on the opportunity that will happen over the course of this year. It is priced separately, so there's additional charges directly for the TableFlow usage. Actually, the bigger opportunity in what we've seen with customers is, yeah, they actually start to bring new data sets on entirely, right? They'll spend some on TableFlow, but they'll spend some on Connect and Kafka and Flink along with that. The opportunity is really on both sides. I think one of the reasons we're particularly excited about it is it's a very easy product to enable for existing data. You know, you can kind of just turn it on. It doesn't require a ton of development work.
We feel like, hey, as we really crack this and, you know, learn how to take it to market, it will be something that we can, you know, ramp relatively quickly. Of course, we have to first get it to Jay and all the clouds and make it fully available over the course of this year to be able to do that.
Derrick Wood (Managing Director)
Great. Thanks. Rohan, I mean, thanks for the color on the change and guidance assumptions. I wanted to ask about the government side of things. First, could you give us a sense of kind of how big of a business public sector or US Fed is? Maybe talk about pipelines and how you may have changed your assumptions in the second half of this year, given all the new developments on the DOGE side of things.
Rohan Sivaram (CFO)
Yeah, Derrick, thanks for your question. When we think about the government opportunity, I always put the government opportunity in the category of, you know, the opportunity is ahead of us because it's fairly under-penetrated. You know, for context, our exposure to the federal government is in the low single digits. So not material. You know, the shape of the business is consistent with what you see in other companies. Q3 tends to be a stronger Fed quarter. You know, some of these data points are baked into the guidance that we've set. Short answer, it's obviously fairly under-penetrated, big opportunity. You know, we spoke about getting FedRAMP status from a technology perspective. Now we are working with our government partner to get formal FedRAMP status. That will obviously open up the cloud business for us with the government as well.
That's how we're thinking about it. Small, small.
Jay Kreps (CEO)
I think fair to say that in the current environment, you know, very modest expectations for that area this year, right?
Derrick Wood (Managing Director)
That's right. Very modest expectations.
Rohan Sivaram (CFO)
Perfect. Thank you.
Shane Xie (VP of Investor Relations)
All right. Thanks, Derrick. We'll take our next question from Raimo Lenschow with Barclays, followed by Stifel.
Raimo Lenschow (Managing Director)
Hey, thanks for squeezing me in. Two quick questions. One, Rohan, as you've thought about the guidance, you mentioned more the larger accounts had the issues. How do I think about that? Like, you know, in theory, this could play out two ways. The larger accounts just do a little bit and then it's all good again, or it kind of goes down deeper and the larger accounts are first and then SMB has a problem.
When you thought about guidance, how did you kind of thought about that, kind of reflecting that? And then one for Jay, if you think about, obviously there were kind of movements from other players in the broader ecosystem to think more about acquisitions in your space. Did you see anything in customer conversations that they realized, okay, real-time is a lot more important? You know, people are trying to beef it out. Are you seeing the benefit on that conversation that they realized, okay, you are actually the real-time company, so I should talk more with you?
Thank you.
Jay Kreps (CEO)
Yeah, to the second part of the question, you know, I do think that there's definitely been a change in the perception of streaming, but I would not say it's a step change.
I mean, you know, in our space, I feel like people always expect there to be a single event that triggers it. What we've actually seen is a real build where this went from something that was viewed as kind of niche and on the side, like what could you really do with it, to something that, of course, every company is doing, but is not necessarily part of the top line strategy. Just something that's really like a major part of data strategy. I think, you know, these kind of things always help that along. There is no one event that goes from zero to 100%. Yeah, certainly that comes up in conversations with customers. I do not think it is a huge catalyst on their side in terms of how they are thinking about things.
There's no question that just, you know, if I were to just kind of go back on two-year increments and, you know, describe what is a conversation with the average CIO seem like? You know, it kind of went from nothing, what is any of this stuff to like, okay, Apache Kafka, yes, but like, why does it matter and what is Confluent? To like really a broader appreciation of what's possible with streaming, you know, what Confluent is, what could potentially be doable in the stream processing world as they think about kind of the real-time use of data. You know, that's not universal. You know, it's not everybody has that understanding, but just more broadly across the industry, that's changing.
I think it's a really powerful thing when you think about, you know, there's a certain inevitability to the move to, you know, streaming and real-time data. You know, it's a certain just aspect of how companies are changing. I do think that that benefits us.
Rohan Sivaram (CFO)
Yeah, and Raimo, to your first part of the question, you know, for our smaller customers or not larger customers, our consumption patterns have been fairly steady. That's a good news. Also, when you look at the net new customer ads that we have, a vast majority of our top-of-the-funnel net new ads come on the cloud side. You know, there is a steady stream of consumption customers flowing in. The variation in that middle segment is a lot less.
You know, that's why we feel good with the outlook that we have for the rest of the year.
Jay Kreps (CEO)
Yeah, yeah. Kind of adding to that a little color, you know, it's like when you look behind the curtains, kind of customer by customer and the large customers, it's like, okay, is there some pattern or some big, you know, event that's taking place? Is there any reason to believe that would kind of spread? There's really not, you know, it's just kind of the normal like customer activity you would see around infrastructure and optimization. Of course, the smaller customers do just have a certain law of large numbers in terms of how they operate. So, yeah, we don't see any kind of emerging trend there. When we put the pattern together, you know, we certainly saw very strong pipe jet in the quarter.
Kind of that top of funnel of what's coming in is really good. We didn't see some kind of overall systematic softening of, you know, the demand environment or anything like that.
Raimo Lenschow (Managing Director)
Perfect. Very clear. Thank you.
Shane Xie (VP of Investor Relations)
All right. Thanks, Raimo. Our next question comes from Brad Reback with Stifel, with our final question coming from Raymond James. Brad.
Brad Reback (Managing Director)
Thanks. Just had to get the audio there. Appreciate the opportunity. You know, as you kind of look at the business going forward in the dynamic macro, have you made any changes to your OpEx plans internally? Are you cutting back on travel? Are you spending a little less? If you haven't done that yet, what potentially would cause you to do that?
Jay Kreps (CEO)
Yeah, we haven't done anything particularly aggressive, but we always manage expenses, you know, along with the top line.
You know, we would obviously watch what happens throughout the year and make adjustments. You know, we've certainly operated over the life of the company through very dynamic times and done all kinds of things around that. Yeah, there's not been any big adjustment at this point.
Brad Reback (Managing Director)
Great. Thank you.
Shane Xie (VP of Investor Relations)
All right. Thanks, Brad. Our final question today comes from Mark Cash with Raymond James.
Mark Cash (Equity Research Associate Analyst)
All right. Thanks, Shane. For Jay, you mentioned how last year a lot more go-to-market adjustments with the quota alignment. Now thinking about this year and having more products and deployment options to sell, how would you characterize sales productivity? I think in particular, can most reps and partners go out and incrementally sell DSP use cases or sell WarpStream and Freight Clusters versus selling cloud and platform previously? Thank you.
Jay Kreps (CEO)
Yeah, yeah.
You know, it's certainly the case that we feel that the addition to the product portfolio, both the other Kafka SKUs that kind of fill in gaps in DSP, you know, that over time that's a tailwind because we can, you know, land and convert more of the existing Kafka. We can turn these into a, you know, bigger use cases, bigger platforms, and bigger spend, customer by customer. You know, the new product things are still smaller. They move, you know, they move the overall numbers a little bit and grow fast on a percentage basis. As they get to scale, they move the overall numbers a lot. We have been through a few of those curves before with the ramp of our cloud product and other things. Yeah, that's kind of the way we look at it.
We watch these new things very closely to make sure that they're, you know, on the ramp that we want. You know, we would expect to see that kind of have broad impact as they get to scale.
Mark Cash (Equity Research Associate Analyst)
Great.
Shane Xie (VP of Investor Relations)
Thanks, Mark. This concludes our earnings call. Thanks again for joining us. Have a nice evening. We'll see you soon. Thanks, everyone. Thank you, everyone.