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Confluent, Inc. (CFLT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered broad outperformance: total revenue $261.2M (+23% y/y), subscription revenue $250.6M (+24% y/y), non-GAAP operating margin 5.2%, non-GAAP diluted EPS $0.09; management stated the company “beat all guided metrics.”
  • Cloud momentum and efficiency were key: Confluent Cloud revenue reached $137.9M (+38% y/y) with subscription gross margin at 82%, driving overall gross margin outperformance.
  • Guidance for 2025 points to continued efficient growth: Q1 2025 subscription revenue $253–$254M, non-GAAP operating margin ~3%, EPS $0.06–$0.07; FY 2025 subscription revenue $1.117–$1.121B (+21–22% y/y), non-GAAP operating margin ~6%, EPS ~$0.35. Mix expected to shift toward cloud by ~1pt per quarter, exiting Q4 2025 at ~59–60%.
  • Strategic catalysts: Expanded partnership with Databricks to unify operational and analytical data via Tableflow-Delta Lake/Unity Catalog integrations, and a new multi-year partnership with Jio Platforms to bring Confluent Cloud to Jio Cloud Services—both reinforcing real-time AI use cases at scale.
  • Estimates context: S&P Global consensus data was unavailable in this session; comparisons to Wall Street estimates cannot be provided. Management’s commentary and guidance beats are used instead. (S&P Global consensus unavailable)

What Went Well and What Went Wrong

What Went Well

  • Strong topline and profitability: Q4 total revenue $261.2M (+23% y/y), subscription revenue $250.6M (+24% y/y), non-GAAP operating margin 5.2% with non-GAAP diluted EPS $0.09; free cash flow margin rose to 11.1%.
  • Cloud/DSP traction and unit economics: Confluent Cloud revenue reached $137.9M (+38% y/y), while subscription gross margin increased to 82% on scaling efficiencies; DSP consumption accounted for ~13% of cloud and grew faster than overall cloud.
  • Strategic partnerships as growth vectors: Databricks partnership expands Tableflow’s reach across analytics, integrating Delta Lake and Unity Catalog for real-time AI; Jio partnership broadens distribution in India and public sector managed services.

Management quotes:

  • “Confluent closed the year with a strong Q4, highlighted by beating all guided metrics and achieving 38% year-over-year Confluent Cloud revenue growth.” — Jay Kreps, CEO
  • “We… achieved double-digit expansion for both operating and free cash flow margins in 2024.” — Rohan Sivaram, CFO
  • “Tableflow… positions Confluent as the leading vendor for delivering data across the enterprise.” — Jay Kreps (prepared remarks)

What Went Wrong

  • GAAP losses persist: GAAP operating loss of $(105.8)M in Q4 (operating margin −40.5%); GAAP net loss per share was $(0.27). Stock-based compensation remains a large reconciling item.
  • Consumption cohort sensitivity: Management continues to monitor digital natives and consumption volatility, though noted stabilization; reliance on consumption means deferred revenue/RPO are less indicative and can be lumpy.
  • 2025 free cash flow seasonality headwind: One-time ~15pt negative impact to Q1 2025 FCF margin (3–4pt impact to FY 2025), due to timing of cash compensation.

Financial Results

Revenue and EPS (GAAP and Non-GAAP)

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($M)$234.986 $250.199 $261.220
Subscription Revenue ($M)$224.702 $239.851 $250.636
Services Revenue ($M)$10.284 $10.348 $10.584
GAAP EPS (diluted)$(0.28) $(0.23) $(0.27)
Non-GAAP EPS (diluted)$0.06 $0.10 $0.09

Margins and Cash Flow

MetricQ2 2024Q3 2024Q4 2024
GAAP Operating Margin %(46.1%) (37.4%) (40.5%)
Non-GAAP Operating Margin %0.6% 6.3% 5.2%
GAAP Total Gross Margin %72.3% 74.5% 74.1%
Non-GAAP Total Gross Margin %77.5% 79.3% 78.9%
Free Cash Flow Margin %1.2% 3.7% 11.1%

Segment Breakdown

SegmentQ3 2024Q4 2024
Confluent Cloud Revenue ($M)$129.8 $137.9
Confluent Platform Revenue ($M)$110.1 $112.7
Cloud Mix of Subscription Revenue (%)54% 55%

KPIs and Mix

KPIQ2 2024Q3 2024Q4 2024
Customers ≥$100k ARR (count)1,306 1,346 1,381
Customers ≥$1M ARR (count)—184 194
NRR (%)—117% 117%
GRR (%)—>90% >90%
Total Customers (approx.)—~5,680 ~5,800
U.S. Revenue ($M)——$153.7
International Revenue ($M)——$107.5
Ending Cash & Marketable Securities ($B)——~$1.91

Guidance vs Prior Guidance (and Actuals for Q4 2024)

MetricPeriodPrevious GuidanceActual / CurrentChange
Subscription Revenue ($M)Q4 2024$245–$246 $250.6 Beat
Non-GAAP Operating Margin %Q4 2024~2% 5.2% Beat
Non-GAAP Diluted EPS ($)Q4 2024$0.05 $0.09 Beat
Subscription Revenue ($M)Q1 2025—$253–$254 Introduced
Non-GAAP Operating Margin %Q1 2025—~3% Introduced
Non-GAAP Diluted EPS ($)Q1 2025—$0.06–$0.07 Introduced
Subscription Revenue ($B)FY 2025—$1.117–$1.121 Introduced
Non-GAAP Operating Margin %FY 2025—~6% Introduced
Non-GAAP Diluted EPS ($)FY 2025—~$0.35 Introduced
Cloud Mix (% of Subscription)FY 2025 Exit—~59–60% (Q4’25 exit) Higher Mix
FCF Margin ImpactQ1 2025—~−15pt one-time (3–4pt FY impact) One-time headwind
Subscription Seasonality1H FY 2025—~46.5% of FY at midpoint Seasonal pattern

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
AI/Technology Initiatives (RAG/Agentic, Tableflow, Flink)Q3: Heavy focus on Flink adoption and AI data pipelines; early RAG workloads and OpenAI usage expansion; AI Day and DSP roadmap highlighted. Expanded Databricks partnership integrating Tableflow with Delta Lake/Unity Catalog for real-time AI; management emphasized agentic/stream processing use cases and Tableflow excitement. Strengthening
Go-to-Market (consumption-based)Q3: Reorientation to consumption drove better land-and-expand; improved win rates; sales capacity ramp; pricing/packaging additions. Year 2 tune-ups; incentives tied to DSP components; broader use-case selling; win rates vs CSPs/small startups >90%. Maturing, effective
Product Performance & MarginsQ3: Record gross margin; Cloud unit economics improving; DSP multi-product adoption among top customers. Subscription gross margin 82%; non-GAAP op margin beat; DSP ~13% of cloud and growing faster than cloud. Efficiency gains continuing
Partnerships & EcosystemQ3: WarpStream acquisition to expand BYOC offering; positioning for digital natives. Databricks integration (Tableflow/Delta Lake/Unity Catalog) and Jio partnership to expand in India and public sector managed services. Expansion accelerates
Regional TrendsQ3: U.S. revenue +28% y/y; outside U.S. +21% y/y. U.S. $153.7M (+20% y/y); International $107.5M (+26% y/y); Jio partnership signals India growth vector. International growth accelerating
Regulatory/FedRAMPQ3: FedRAMP cited as a future growth driver. Not a focal point in Q4; still referenced as lower-priority growth driver. Stable/awaiting progress

Management Commentary

  • Platform strategy: “Our third wave of growth will come from being a complete data streaming platform… No other vendor is as intensely focused as us on building and delivering a complete data streaming platform…” — Jay Kreps (prepared remarks)
  • Cloud scale and margin expansion: “In Q4, subscription gross margin increased 90 basis points to 82%, primarily driven by the economies of scale in Confluent Cloud.” — Rohan Sivaram
  • 2025 execution focus: “Our objective is to continue soaking up the world’s Kafka and to establish 2025 as the year of DSP… focusing on efficient growth.” — Rohan Sivaram
  • Databricks partnership rationale: “This partnership… positions Confluent as the leading vendor for delivering data across the enterprise… crucial for scaling AI innovation.” — Jay Kreps

Q&A Highlights

  • AI use cases: Transition from simple chatbots/RAG to agentic workflows operating on streams; Flink enables continuous, fault-tolerant processing integrated with LLM inference.
  • Guidance context: Subscription guide above expectations; comfortable with FY 2025 cloud dollar estimates; cloud mix expected to rise ~1pt per quarter; one-time Q1 FCF timing headwind.
  • WarpStream and packaging: BYOC form factor opens cost-sensitive, high-volume digital native workloads; nearly 10x cost savings in a customer replacing Redpanda cited.
  • Sales motion: Year 2 of consumption model focuses on DSP multipliers and direct use-case selling; win rates vs CSP/small startups remain >90%.

Estimates Context

  • S&P Global consensus estimates for Q4 2024 and prior quarters were unavailable in this session; therefore, explicit “vs consensus” comparisons cannot be provided. Management indicated Q4 beat all guided metrics, and raised/introduced forward guidance for 2025. (S&P Global consensus unavailable)

Key Takeaways for Investors

  • Q4 outperformance with improving efficiency: Non-GAAP operating margin and free cash flow margin expanded meaningfully, supported by Cloud scale and subscription gross margin strength.
  • DSP flywheel building: DSP consumption (~13% of cloud) is growing faster than cloud; broader attachment across top customers supports medium-term expansion and monetization.
  • Strategic partnerships as catalysts: Databricks integration and Jio partnership should accelerate AI/data streaming adoption across analytics ecosystems and India/public sector, respectively.
  • 2025 setup: Subscription growth guided +21–22% with non-GAAP operating margin ~6%; cloud mix rising and consumption stability (NRR 117%, GRR >90%) underpin durability.
  • Watch near-term FCF: Expect a one-time Q1 2025 FCF margin headwind (~−15pt); adjust models for cash timing effects.
  • Non-GAAP vs GAAP gap: Significant stock-based compensation ($107.6M in Q4) and other adjustments drive the spread; GAAP operating loss remains large—track progress toward GAAP profitability.
  • Trading lens: Positive narrative momentum (beats, guidance, partnerships) and improving unit economics are supportive; monitor cloud consumption trends and enterprise DSP adoption as key drivers into Investor Day and FY 2025. 
Notes:
- All quantitative and qualitative claims are sourced from Confluent’s Q4 2024 press release and 8-K, Q4 2024 earnings call transcript, and related Q2/Q3 materials and partnership press releases, with citations provided inline. 
- S&P Global consensus estimates were unavailable in this session; “vs consensus” comparisons are omitted accordingly.