Confluent, Inc. Q1 FY2025 earnings call

Jay Kreps highlighted four strategic drivers: mission-critical use cases support gross retention rate above 90%; large addressable market with over 150,000 organizations using Apache Kafka; hybrid business model for resilience; and TCO advantage with new offerings like WarpStream and Freight clusters. Mentioned customer examples like Audacy and Booking.com. Ryan Mac Ban promoted to Chief Revenue Officer. Confluent named Google Partner of the Year for the sixth time. Rohan Sivaram discussed Q1 results including subscription revenue growth exceeding guidance, operating leverage, customer metrics, and outlook for fiscal second quarter and year 2025.

Q1 subscription revenue grew 26% to $261 million. Confluent Cloud revenue grew 34% to $143 million. Confluent Platform revenue reached $118.2 million, with 18% growth, representing 96% of subscription revenue. Subscription gross margin increased 100 basis points to 81.7%. Ended Q1 with approximately 6,140 customers. 20,000 plus ARR customer count was 2,487, 100,000 plus ARR customer count was 1,412, and $1 million plus ARR customer count grew to 210.

For fiscal second quarter of 2025, subscription revenue is expected to be in the range of $267 million to $268 million (19% growth), non-GAAP operating margin ~5%, non-GAAP net income per diluted share $0.08 to $0.09. For fiscal year 2025, subscription revenue is expected to be $1.1 billion to $1.11 billion (19%-20% growth), non-GAAP operating margin ~6%, non-GAAP net income per diluted share ~$0.36. Guidance reflects conservative assumptions due to macro uncertainties, including no near-term rebound in consumption for larger cloud customers, and cloud subscription revenue mix expected to be ~58% in Q4 '25.

Macro environment uncertainties affecting consumption patterns of larger cloud customers; potential impact of regulatory or policy changes on cloud usage; unpredictability of AI deployment timelines due to macro uncertainty.

Q: Pinjalim Bora asked about consumption run rate of existing use cases and ACV commitments.

A: Jay Kreps and Rohan Sivaram responded on consumption patterns in larger customers and strong ACV commitments in Q1.

Q: Matthew Hedberg inquired about DSP sequential improvement and Flink options.

A: Jay Kreps discussed DSP outperformance and Flink success.

Q: Michael Turrin asked about AI-related demand and new product milestones.

A: Jay Kreps talked about AI use cases and new product milestones.

Q: Sanjit Singh questioned about CP performance and OEM relationships.

A: Jay Kreps and Rohan Sivaram discussed CP growth and OEM partnerships.

Q: Brad Zelnick asked about CP quarter strength and OEM relationships.

A: Rohan Sivaram and Jay Kreps responded on CP growth and OEM visibility.

Q: Jason Ader asked about strong net adds in Q1.

A: Jay Kreps discussed net add drivers.

Q: Mike Cikos asked about consumption dynamics and CP partner impact.

A: Jay Kreps and Rohan Sivaram answered on consumption patterns and CP partner strength.

Q: Gregg Moskowitz asked about WarpStream transactions and guidance assumptions.

A: Jay Kreps and Rohan Sivaram responded on WarpStream and guidance prudence.

Q: Derrick Wood asked about Tableflow reception and government business.

A: Jay Kreps and Rohan Sivaram discussed Tableflow reception and government exposure.

Q: Raimo Lenschow asked about guidance reflection of account issues and real-time conversation benefit.

A: Jay Kreps and Rohan Sivaram answered on guidance and real-time conversation impact.

Q: Brad Reback asked about OpEx changes.

A: Jay Kreps responded on OpEx management.

Q: Mark Cash asked about sales productivity and DSP sales.

A: Jay Kreps discussed sales productivity and DSP sales potential.