[Management View]
Couchbase management highlighted significant growth in Capella ARR, which increased 84% year over year. They noted ongoing customer migration activity as a revenue headwind due to changes in revenue recognition timing. The company is focused on strategic account expansion and product innovation, particularly in AI-driven applications and edge use cases.

[Outlook]
Management raised FY2026 guidance for both revenue and ARR, with expectations of continued growth driven by Capella adoption and strategic account expansion. They aim to achieve operating income profitability and positive free cash flow by FY2027.

[Financial Performance]
Couchbase reported total ARR of $252.1 million for Q1 FY2026, up 21% YoY, exceeding guidance by $7.7 million. Net new ARR was $14.2 million, up 306% YoY. Revenue was $56.5 million, up 10% YoY. Gross margin was 88.7%, down from 89.9% a year ago.

[Q&A Highlights]
Question 1: How did macroeconomic factors impact customer conversations through May?
Answer: Management noted longer sales cycles and increased deal scrutiny but emphasized a strong pipeline and strategic positioning in the market, offsetting macro challenges.

Question 2: Can you elaborate on go-to-market improvements and the new free Capella tier?
Answer: The free Capella tier and strategic account focus are enhancing top-of-funnel demand. Developer trial volume is up significantly, indicating future demand growth.

Question 3: What is driving the delta between ARR and revenue this quarter?
Answer: Capella and enterprise products have different recognition patterns. Migrations create a temporary revenue headwind due to delayed usage ramp and recognition changes.

Question 4: Are you concerned about competition from Postgres databases?
Answer: Couchbase is confident in its differentiation, focusing on critical applications requiring performance and scale. The platform's memory-first architecture and integrated data services are key advantages.

Question 5: How are strategic accounts trialing new capabilities like Vector Search?
Answer: Customers are adopting Couchbase as a platform, integrating multiple features and expanding use cases, leading to future application growth and expansions.

Question 6: What does growth with large strategic accounts look like in terms of workloads?
Answer: Strategic accounts typically involve multiple applications, with Couchbase becoming a default platform for critical workloads, leading to broad adoption across organizations.

Question 7: How did FX tailwinds impact the revised full-year ARR outlook?
Answer: The ARR guide was adjusted for FX impacts, with strong execution in strategic accounts and Capella consumption driving growth.

Question 8: What commonalities exist among churned starter pack customers, and have changes been made?
Answer: Starter packs were used for initial application build-out. The free tier now offers a better experience, with successful conversions from starter packs to higher ARR levels.

Question 9: What is causing the pattern of revenue growth throughout the year?
Answer: Migrations create a lag in revenue growth, with convergence expected in the second half of the year as Capella adoption continues.

[Sentiment Analysis]
Analysts expressed positive sentiment regarding Couchbase's strategic positioning and growth prospects, while management maintained a confident and optimistic tone about future performance and innovation.

[Quarterly Comparison]
| Metric | Q1 FY2026 | Q1 FY2025 | QoQ Change | YoY Change |
|-------------------------|-----------|-----------|------------|------------|
| Total ARR | $252.1M | $208.3M | +6% | +21% |
| Net New ARR | $14.2M | $3.5M | +306% | +306% |
| Capella ARR | $44M | $23.9M | +14% | +84% |
| Revenue | $56.5M | $51.4M | +3% | +10% |
| Gross Margin | 88.7% | 89.9% | -0.7% | -1.2% |

[Risks and Concerns]
Management acknowledged persistent lengthening of sales cycles and increased deal scrutiny. The shift to Capella from enterprise licensing creates a temporary disconnect between ARR and revenue growth due to delayed usage ramp and differing recognition patterns.

[Final Takeaway]
Couchbase's Q1 FY2026 results demonstrate strong growth in ARR and strategic account expansion, driven by Capella adoption and product innovation. Despite macroeconomic challenges, the company is well-positioned to capitalize on its strategic platform and differentiation in critical applications. Management's raised guidance reflects confidence in continued growth and profitability improvement, with a focus on leveraging AI capabilities and expanding customer relationships.