Q1 2025 Earnings Summary
- Innovative Product Expansion: Strong early traction for new DSP products—Tableflow received an extremely positive market reception with additional charges defined for usage, while WarpStream is driving notable customer wins. This innovation not only broadens Confluent’s product portfolio but also creates opportunities to expand wallet share with both new and existing customers.
- Robust Customer Metrics: The Q&A highlighted that Confluent continues adding high-quality customers, including record net adds in the $1 million-plus ARR cohort, and maintains a stable NRR of approximately 117%. These metrics underscore consistent demand and healthy customer retention despite macro uncertainties.
- Balanced and Diversified Business Model: The company’s dual growth across its Confluent Cloud and Confluent Platform segments—bolstered by strategic OEM and partner relationships internationally—provides revenue diversification and resiliency against market volatility, ensuring stable long-term growth prospects.
- Slowing Consumption from Larger Customers: Executives noted a decline in new use case additions and a lower consumption run rate specifically among large cloud customers, with no immediate rebound observed in April, which could indicate sustained pressure on revenue growth. ** **
- Cautious Guidance Amid Macro Uncertainty: Management explicitly adjusted guidance assumptions to be more conservative, not expecting a near-term rebound for large customers. This caution suggests that persistent macro uncertainty could adversely affect both cloud and overall revenue growth. ** **
- Uncertainty Around New Product Adoption: While innovative products (such as Tableflow and CP Flink) show early promise, their newness and the challenge of scaling across all clouds raise concerns that they may underperform or delay revenue expansion if market adoption lags. ** **
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Increased from $217.24M to $271.12M (~25% increase) | Revenue growth was driven by strong sales to both existing and new customers, reflecting scaling subscription revenue. This growth follows the robust momentum seen in previous periods where subscription revenue increases fueled overall revenue expansion. |
Operating Loss | Improved from ($111.35)M to ($101.18)M (approx. 9% improvement) | The operating loss narrowed as revenue growth helped offset high expenses. Although operating expenses increased (detailed below), the increased scale of revenue led to modest improvements in operating efficiency relative to Q1 2024. |
Net Loss | Reduced from ($92.97)M to ($67.57)M (27% reduction) | A significant reduction in net loss was achieved due to a combination of strong revenue growth and improved operating efficiency, which, along with better cost management and non-cash adjustments, contributed to reducing the net loss compared to the previous period. |
Net Loss per Share | Improved from ($0.30) to ($0.20) | The net loss per share improvement reflects the lower net loss alongside an increase in weighted-average shares outstanding. The improved operational performance combined with dilution effects helped lower the loss per share compared to Q1 2024. |
Total Operating Expenses | Increased from $267.37M to $303.18M (approx. 13% increase) | The increase in expenses was primarily due to higher investments in R&D, Sales & Marketing, and General & Administrative functions to support growth. This higher spending is consistent with prior periods where the company invested heavily to capture market share, though revenue growth was sufficient to produce better overall profitability metrics. |
Total Assets | Grew from $2,439.63M to $2,698.67M (approx. 10.6% increase) | Asset growth primarily resulted from increased marketable securities and other working capital components. This follows the trend of prior periods where strong revenue and operational performance led to expanded asset bases, supporting future growth and providing additional liquidity. |
Total Stockholders’ Equity | Increased from $845.22M to $1,025.33M (approx. 21% increase) | Equity growth was driven by significant increases in additional paid-in capital from stock-based compensation and common stock issuances (including ESPP activity), alongside other comprehensive income gains. Despite an ongoing net loss, the financing activities helped bolster overall equity compared to Q1 2024. |
Cash and Cash Equivalents | Declined from $336.37M to $278.56M (approx. 17% decline) | The decline in cash was primarily due to substantial cash outflows in investing activities (see next metric) combined with operating cash usage. While previous periods saw improved operating cash flows, the recent heavy investment in marketable securities and related outflows resulted in lower cash balances in Q1 2025. |
Net Cash Used in Investing Activities | Increased from ($16.77)M to ($112.00)M (widened by approx. $95M) | The net investing outflow widened dramatically mainly due to a significant increase in purchases of marketable securities ($405.2M) which was only partially offset by higher maturities ($299.5M). This change contrasts sharply with Q1 2024, where inflows and outflows nearly balanced, reflecting a more aggressive investment approach in Q1 2025. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Subscription Revenue | Q1 2025 | $253 million to $254 million | no current guidance | no current guidance |
Non-GAAP Operating Margin | Q1 2025 | Approximately 3% | no current guidance | no current guidance |
Non-GAAP Net Income per Diluted Share | Q1 2025 | $0.06 to $0.07 | no current guidance | no current guidance |
Subscription Revenue | Q2 2025 | no prior guidance | $267 million to $268 million | no prior guidance |
Non-GAAP Operating Margin | Q2 2025 | no prior guidance | 5% | no prior guidance |
Non-GAAP Income per Diluted Share | Q2 2025 | no prior guidance | $0.08 to $0.09 | no prior guidance |
Subscription Revenue | FY 2025 | $1.117 billion to $1.121 billion | $1.1 billion to $1.11 billion | lowered |
Non-GAAP Operating Margin | FY 2025 | Approximately 6% | Approximately 6% | no change |
Non-GAAP Net Income per Diluted Share | FY 2025 | Approximately $0.35 | Approximately $0.36 | raised |
Free Cash Flow Margin | FY 2025 | Approximately 6% | Approximately 6% | no change |
Cloud Subscription Revenue Mix | FY 2025 | Expected to see ~1 point increase each quarter, with a Q4 '25 exit of ~59% to 60% | no current guidance | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Subscription Revenue | Q1 2025 | $253 million to $254 million | $260.91 million | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Recurring DSP Product Innovation and Expansion | In Q2 2024 the focus was mainly on Flink adoption with limited mention of other products; Q3 2024 broadened discussion to include Tableflow and WarpStream with early innovation signals; Q4 2024 provided detailed product updates and integration plans for Tableflow, WarpStream, and Flink | Q1 2025 emphasized Tableflow’s GA on AWS with strong early customer traction, highlighted meaningful customer wins for WarpStream, and underlined robust, mission‑critical adoption for Flink | The narrative has evolved from an initial emphasis on Flink to mature, multi‑product momentum with consistently positive customer response and accelerated innovation. |
Consistent Robust Customer Acquisition and Metrics | Q2 2024 and Q3 2024 discussions showcased steady increases in customer counts and high‑quality ARR growth, with strong new logo additions and stable NRR; Q4 2024 highlighted significant year‑over‑year customer growth and a 23% increase in high‑quality $1M+ ARR accounts | Q1 2025 marked the highest net addition in three years with record increases in both new customers and premium cohorts, maintaining robust NRR and GRR | The customer acquisition story remains consistently strong throughout, with improvements in high‑quality customer metrics and increased overall counts, reflecting a sustained positive sentiment. |
Evolving Financial Performance and Revenue Growth Guidance | Q2 2024 reported strong subscription growth and margin improvements with evolving guidance; Q3 2024 noted substantial revenue gains with improving operating margins and a positive outlook; Q4 2024 highlighted profitability milestones and robust cloud revenue growth | Q1 2025 delivered impressive subscription and platform revenue growth along with improved margins, yet adopted a conservative outlook due to observable macro headwinds affecting larger cloud customer consumption | While financial performance consistently improves across periods, the guidance has become more conservative in Q1 2025 amid subtle macro uncertainties, blending strong top‑line results with caution. |
Strategic Partnerships Shift and Evolving Alliance Focus | Q2 and Q3 2024 had little to no discussion on evolving alliances; however, Q4 2024 introduced major strategic partnerships such as the expanded Databricks collaboration and a multiyear deal with Jio Platforms, emphasizing integration and go‑to‑market benefits | Q1 2025 did not feature specific commentary on strategic partnerships, with the focus shifting toward product execution and customer metrics rather than new alliance updates | The topic emerged strongly in Q4 2024 as a new strategic focus; its absence in Q1 2025 suggests that future periods may determine if these alliances deliver material impact or evolve further. |
Go‑to‑Market Transformation and Consumption‑Based Sales Model | Q2 2024 described a major shift toward a consumption‑oriented model with notable changes in customer acquisition and sales incentives; Q3 2024 detailed targeted sales plays and pipeline changes; Q4 2024 emphasized refined organizational adjustments and improved sales and marketing efficiency | Q1 2025 reported fewer disruptive changes compared to the previous year, with continuity in consumption‑based sales strategy and incremental product portfolio improvements underpinning steady sales productivity | The transformation has matured over time – moving from disruptive, large‑scale changes toward a more stabilized, fine‑tuned consumption‑based model that is now seen as an engine for steady growth. |
Digital Native Customer Segment Stabilization and Growth | Q2 2024 noted volatility with a focus on cost efficiency and optimization in digital native customers; Q3 2024 showed stabilization as larger digital native accounts finished optimization and began new use case investments; Q4 2024 highlighted steady growth and strong DSP adoption in this segment | Not specifically mentioned in Q1 2025 earnings, although earlier periods indicated a positive trend in stabilization and growth among digital native customers | Earlier periods show a clear shift from volatility toward stabilization and growth, even though the topic was not front‑and‑center in Q1 2025, suggesting its importance remains embedded in the overall customer narrative. |
Consumption Volatility and Slowed Uptake Among Larger Cloud/Digital Native Customers | Q2 2024 discussions detailed notable consumption volatility due to cost optimization among large digital native customers; Q3 2024 then noted a partial stabilization with renewed investments and moderate growth in DSP adoption | Q1 2025 reported continued slowed uptake and lower consumption among larger cloud customers with no immediate rebound, reflecting ongoing caution despite some operational stability | After a period of volatility and initial stabilization in Q3, the issue persists in Q1 2025 – larger customers continue to optimize costs, keeping cautious consumption levels despite stable overall performance. |
Macro Uncertainty and Its Impact on Conservative Guidance | Q2 2024 clearly integrated macro uncertainty into guidance due to observed consumption volatility; Q3 2024 largely maintained a positive tone with minimal reference; Q4 2024 noted overall market stability and strong budgets | Q1 2025 explicitly attributed conservative revenue guidance to macro uncertainty, especially tied to cost optimization and slower new use case adoption among larger customers | The cautious tone induced by macro uncertainty was evident in Q2 and re‑emerged strongly in Q1 2025, even after a relatively positive Q4 2024, indicating that external economic conditions continue to influence guidance prudence. |
Emerging AI and Generative AI Opportunities Driving Future Innovation | Q2 2024 positioned data streaming as critical to generative AI with strong survey data and customer examples; Q3 2024 emphasized AI use cases through flagship events and partnerships like OpenAI; Q4 2024 showcased advanced integrations and strategic partnerships (e.g., with Databricks and Jio Platforms) | Q1 2025 reaffirmed the importance of generative AI by highlighting DSP’s role in real‑time context for AI, citing production use cases and strategic AI deployments across industries | AI and generative AI themes have remained consistently upbeat over successive periods, with increasing integration and strategic focus, reinforcing their emerging role as major future growth drivers. |
Changing Sentiment on New Product Adoption | Q2 2024 communicated early optimism for products like Flink with modest traction; Q3 2024 demonstrated increased customer enthusiasm and multiproduct adoption across DSP components; Q4 2024 further validated this with strong traction for WarpStream, Flink, and Tableflow | Q1 2025 maintained positive sentiment, reporting strong early traction for new products and successful migration of existing use cases, confirming a shift from earlier uncertainty to positive momentum | Sentiment towards new product adoption has shifted from early cautious optimism in Q2 2024 to robust, positive momentum by Q1 2025, reflecting successful product progression and increasing customer confidence. |
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Customer Consumption
Q: How's consumption run rate?
A: Management noted that larger cloud customers exhibited lower consumption driven by optimization, while smaller customers remained steady, and strong multiyear ACV commitments were maintained. -
Guidance Assumptions
Q: Further consumption decline expected?
A: They expect no near-term rebound in consumption among large customers, leading to a cautious guidance setup that relies on robust Confluent Platform performance and solid pipeline visibility. -
Customer Growth & NRR
Q: Customer add vs. NRR?
A: The team highlighted impressive customer growth with the best net adds in the $1M+ cohort and maintained stable NRR around 117%, underscoring a resilient expansion strategy. -
Partner & OEM Dynamics
Q: How are OEM deals progressing?
A: Strong Confluent Platform performance is being driven by multiyear OEM deals, especially internationally, which bolsters a reliable and growing revenue base. -
AI Demand Trends
Q: What’s the state of AI demand?
A: Management sees promising, though early-stage, AI use cases that improve both the data supply chain and real-time processing, indicating balanced opportunities alongside existing projects. -
DSP/New Product Momentum
Q: Any DSP sequential improvements?
A: DSP offerings, including Flink and Tableflow, are gaining traction relative to core cloud services, suggesting strong early momentum in these emerging verticals. -
Tableflow Adoption
Q: How’s Tableflow reception?
A: Tableflow has received extremely positive initial feedback, with separate pricing and expectations to drive broader multi-product adoption throughout the year. -
Consumption Timing Trends
Q: When did consumption slow?
A: The slowdown in consumption among larger accounts began in March and persisted into April without an immediate uptick, reflecting current macro challenges. -
Streaming Technology Perception
Q: Is streaming viewed as essential now?
A: Management believes the market now regards streaming as a core element of data strategy, with customer mindsets shifting to embrace its long-term benefits. -
Expense Management
Q: Any cost-cutting measures planned?
A: No aggressive expense reductions are underway; instead, operating costs are being managed prudently alongside revenue growth to sustain overall margin performance. -
Sales Productivity
Q: Can reps sell new products effectively?
A: Sales teams are successfully integrating DSP and other new product offerings into their portfolio, maintaining strong productivity relative to legacy cloud and platform sales. -
Government Business Opportunity
Q: How significant is Gov business?
A: Government exposure remains modest—low single digits—with current efforts aimed at modest, yet underpenetrated, opportunities expected to grow gradually. -
Discless Kafka Technology
Q: What’s the vision for discless Kafka?
A: The approach leverages discless storage strategies in both cloud services and WarpStream, balancing cost efficiency with performance through advanced storage technologies. -
New Product Go-Live Timelines
Q: When will new products ramp?
A: Timelines for products like Flink and Tableflow are being refined, with clearer adoption expected in upcoming quarters as they expand across all clouds.