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Confluent, Inc. (CFLT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid top-line growth and material margin expansion: total revenue $282.3M (+20% YoY), non-GAAP operating margin 6.3% (+570 bps YoY), and non-GAAP diluted EPS $0.09. Subscription revenue was $270.8M (+21% YoY), and Confluent Cloud revenue reached $151.0M (+28% YoY) .
  • Against S&P Global consensus, Confluent posted a revenue beat ($282.3M actual vs $278.4M consensus*) and an EPS beat ($0.09 actual vs $0.082*), continuing a recent pattern of beats in Q1 and Q4 as well. The company guided Q3 subscription revenue to $281–$282M and maintained FY 2025 EPS at ~$0.36, while raising the FY 2025 subscription revenue low-end by $5M .
  • Management highlighted ongoing cloud consumption optimization by large customers and a specific AI-native customer’s move to self-manage, which will dampen Q4 cloud revenue growth rates by low single digits; nevertheless, Platform pipeline strength, 31% RPO growth, and DSP/Flink traction underpin confidence in mid-term growth .
  • The stock fell 32.8% the day after results (to $17.73 on 7/31/25) as investors focused on the continued consumption headwinds and the Q4 cloud growth impact disclosure—creating a near-term sentiment overhang despite durable platform and partner ecosystem momentum .

What Went Well and What Went Wrong

What Went Well

  • Strong revenue and profitability: Total revenue grew 20% YoY to $282.3M; non-GAAP operating margin reached 6.3% vs 0.6% a year ago; non-GAAP diluted EPS was $0.09 vs $0.06 a year ago .
  • Confluent Cloud strength and DSP traction: Cloud revenue rose 28% YoY to $151.0M; CEO: “Flink ARR growing approximately 3x over the past two quarters,” and DSP monetization “continues to gain traction” .
  • Partner ecosystem expansion: Company announced a $200M investment across its global partner ecosystem to accelerate AI/data streaming use cases and co-develop joint solutions—supporting future demand capture .

What Went Wrong

  • Persistent consumption optimization by large customers and slower new use case adoption, prompting management to assume MoM cloud growth notably below prior-year patterns for the rest of 2025 .
  • An AI-native customer is broadly moving to self-managed internal data platforms, reducing Confluent Cloud usage; Confluent closed a Platform deal, but management expects this to dampen Q4 cloud revenue growth by low single digits .
  • KPIs reflect near-term pressure: NRR was 114% (cloud headwinds), and GRR was marginally below 90%; core streaming cloud growth is outpaced by DSP components, implying slower core streaming growth amid optimization .

Financial Results

P&L and EPS vs prior periods

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$261.2 $271.1 $282.3
Subscription Revenue ($USD Millions)$250.6 $260.9 $270.8
Services Revenue ($USD Millions)$10.6 $10.2 $11.5
GAAP Operating Margin (%)(40.5%) (37.3%) (34.2%)
Non-GAAP Operating Margin (%)5.2% 4.3% 6.3%
GAAP Net Loss Per Share ($)$(0.27) $(0.20) $(0.24)
Non-GAAP Diluted EPS ($)$0.09 $0.08 $0.09

Actual vs S&P Global Consensus

MetricQ4 2024Q1 2025Q2 2025
Revenue Actual ($USD Millions)$261.2 $271.1 $282.3
Revenue Consensus Mean ($USD Millions)*257.0*264.4*278.4*
EPS Actual (Non-GAAP, $)$0.09 $0.08 $0.09
Primary EPS Consensus Mean ($)*0.057*0.068*0.082*

Values retrieved from S&P Global.
Notes: Q4 2024 consensus revenue ≈ $256.98M*, EPS ≈ $0.057*; Q1 2025 consensus revenue ≈ $264.39M*, EPS ≈ $0.0676*; Q2 2025 consensus revenue ≈ $278.41M*, EPS ≈ $0.0823*.

Segment and Mix

Segment/Mix MetricQ4 2024Q1 2025Q2 2025
Confluent Cloud Revenue ($USD Millions)$138.0 $143.0 $151.0
Confluent Platform Revenue ($USD Millions)N/AN/A$120.3
Cloud as % of Subscription Revenue (%)N/AN/A56%
Subscription Revenue ($USD Millions)$250.6 $260.9 $270.8

Note: CFO also disclosed Cloud revenue of $150.5M (rounding difference vs press release’s $151.0M) .

KPIs

KPIQ4 2024Q1 2025Q2 2025
Customers ≥$100K ARR (Count)1,381 1,412 1,439
Customers ≥$1M ARR (Count)N/AN/A219
Customers ≥$20K ARR (Count)N/AN/A2,497
Dollar-Based NRR (%)N/AN/A114%
Gross Revenue Retention (GRR, %)N/AN/A“marginally below 90%”
Remaining Performance Obligations (RPO) Growth YoY (%)N/AN/A31%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue ($USD Billions)FY 2025$1.10–$1.11B $1.105–$1.11B Raised low-end by $0.005B
Non-GAAP Operating Margin (%)FY 2025~6% ~6% Maintained
Non-GAAP Diluted EPS ($)FY 2025~$0.36 ~$0.36 Maintained
Adjusted Free Cash Flow Margin (%)FY 2025N/A~6% New/Explicit
Subscription Revenue ($USD Millions)Q3 2025N/A$281–$282M New
Non-GAAP Operating Margin (%)Q3 2025N/A~7% New
Non-GAAP Diluted EPS ($)Q3 2025N/A$0.09–$0.10 New
Cloud Mix of Subscription Revenue (%)Q3 2025N/A~56% New
Cloud Mix of Subscription Revenue (%)Q4 2025N/A~55% New

Additional qualitative guidance: management expects Q4 cloud revenue growth rates to be dampened by low single digits due to an AI-native customer’s move to self-managed platforms .

Earnings Call Themes & Trends

TopicQ4 2024 MentionsQ1 2025 MentionsQ2 2025 Current PeriodTrend
AI/Technology Initiatives“Power mission-critical and real-time AI applications”; partnerships and product innovations put CFLT in strong position “Win in the age of AI”; platform leadership and mission-critical nature of streaming Agentic real-time AI; AI production use cases expected to grow 10x; Notion, public sector, astronomy, power co. examples Accelerating enterprise AI adoption and agentic workflows
DSP/Flink MonetizationPositive momentum; WarpStream acquisition referenced Early Flink traction and stream processing strategy emphasized Flink ARR grew ~3x in H1, approaching $10M; even split between Cloud/Platform; 3 customers >$1M Flink ARR Rapid growth; core strategic pillar
Consumption/OptimizationCloud strong in Q4; less emphasis on optimization Caution on consumption patterns; non-GAAP OM guide conservative Larger customers’ optimization continues; MoM growth assumed notably below prior-year patterns Persistent headwind near term
CSP DisplacementsPlatform momentum and category leadership Cost-efficient builds; lower TCO narrative “Win rates well above 90%” vs CSP offerings; >2 dozen displacements in Q2 Broadening competitive wins
Partner EcosystemStrategic alliances (Databricks, Jio), OEM Program Multi-cloud/multi-destination approach highlighted $200M partner investment; deeper integrations; >20% partner-sourced business Expanding investment and co-innovation
Regional TrendsNot specifiedNot specifiedU.S. +15% YoY to $164.3M; International +29% YoY to $117.9M International outgrowing U.S.
Regulatory/LegalNot specifiedNot specifiedPost-earnings legal/investor alerts reflected stock drop reaction Heightened litigation chatter post-guide commentary

Management Commentary

  • CEO: “Confluent delivered a solid quarter, led by 28% year-over-year growth in Confluent Cloud revenue…Flink ARR growing approximately 3x over the past two quarters…strong positioning for a future shaped by agentic, real-time AI.”
  • CEO on consumption: “Our larger customers continue their optimization efforts…our outlook for the second half assumes consumption growth notably below what we've seen in the same period of prior years.”
  • CFO: “Cloud revenue grew 28% to $150.5 million…Operating margin increased 570 basis points to 6.3%, exceeding our guidance…We are raising our full-year growth expectations for Confluent Platform” .
  • CEO on CSP wins: “We’ve had success displacing these CSP offerings with win rates well above 90%…more than two dozen displacements against a single CSP offering” .

Q&A Highlights

  • Consumption/Optimization: Management reiterated continued optimization among larger customers; MoM cloud growth assumptions are set notably below historical levels, with NRR and GRR under near-term pressure (NRR 114%, GRR marginally below 90%) .
  • AI-Native Customer Shift: One AI-native customer is moving to self-managed internal data platforms—Confluent closed a Platform deal, but expects Q4 cloud revenue growth dampening by low single digits from this shift .
  • Go-to-Market Realignment: New CRO initiatives (AE/SE coverage ratios, DSP specialist team) drove >40% sequential increase in late-stage pipeline for consumption workloads; management expects these to translate to improved land-and-expand over time .
  • DSP vs Core Streaming: DSP (e.g., Flink) outgrowing core streaming cloud; optimization weighs on legacy streaming installs while DSP adds net-new workloads; management sees optimization as finite versus sustained DSP growth .
  • Competitive Landscape: No major competitive/pricing shift; strengthened hand vs CSP streaming offerings and expanding packaging (e.g., Basic/Enterprise Clusters) broaden workloads addressable by Confluent Cloud .

Estimates Context

  • Q2 2025: Actual revenue $282.3M vs S&P Global consensus $278.4M*; EPS (non-GAAP diluted) $0.09 vs $0.082*—both beats. Q1 2025 and Q4 2024 also showed beats vs S&P consensus (see table above) .
  • FY 2025: Street EPS consensus ~$0.399*, above company’s guide of ~$0.36, suggesting potential downward estimate revisions if management’s cautious cloud consumption outlook persists; company raised FY subscription revenue low-end to $1.105B .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term stock pressure centers on cloud consumption optimization and an AI-native customer’s platform shift; expect Q4 cloud growth to be dampened by low single digits and NRR/GRR to remain pressured short term .
  • Despite headwinds, trajectory of profitability is improving (Q2 non-GAAP OM 6.3% vs 0.6% YoY), and FY 2025 non-GAAP EPS guide (~$0.36) appears achievable given tight OpEx control—watch for continued margin discipline .
  • DSP/Flink is becoming a meaningful growth driver: ~3x ARR increase in H1, approaching $10M, evenly split Cloud/Platform; this should increasingly offset optimization impacts as deployments scale .
  • Competitive stance vs CSPs is strengthening with high win rates and targeted displacement plays; expect incremental migration wins to feed both cloud and platform revenue streams .
  • Partner ecosystem is a durable catalyst: $200M multi-year investment and >20% partner-sourced business broaden distribution and solution attach, especially for enterprise AI/data streaming programs .
  • International growth outpacing U.S. (+29% vs +15% YoY), indicating diversified demand and potential continued mix shift—monitor currency and regional procurement dynamics .
  • Trading setup: The 32.8% post-earnings drop on guide caution creates a reset—near-term volatile tape likely until cloud consumption trends re-accelerate; medium-term thesis rests on DSP monetization, partner channel leverage, and sustained margin expansion .

Sources

  • Q2 2025 8-K and Exhibit 99.1 press release (financials, guidance, reconciliations): and press release: .
  • Q2 2025 earnings call transcript (prepared remarks and Q&A): .
  • Prior quarters press releases for trend analysis: Q1 2025 ; Q4 2024 .
  • Additional Q2 2025 press releases: $200M partner ecosystem investment ; AWS Marketplace AI Agents category availability .
  • Post-earnings investor alert and stock reaction: .

S&P Global consensus estimates used in tables and discussion are marked with asterisks and were retrieved via S&P Global.