• Q1 Subscription Revenue: Grew 26% to $260.9 million, representing 96% of total revenue.
• Confluent Cloud Revenue: Increased 34% to $142.7 million, making up 55% of subscription revenue.
• Confluent Platform Revenue: Reached a record $118.2 million, with growth accelerating to 18%.
• Subscription Gross Margin: Increased 100 basis points to 81.7%.
• Operating Margin: Achieved 4.3%, exceeding guidance of approximately 3%.
• Adjusted Free Cash Flow Margin: 1.8%, excluding a nonrecurring compensation change impact.
• Net Income Per Share: $0.08 with 367.8 million diluted weighted average shares outstanding.
• Cash and Marketable Securities: Ended the quarter with $1.92 billion.
• Total Customers: Approximately 6,140, with a sequential increase of 340 customers.
• $1 Million-Plus ARR Customers: Grew to 210, up 16 customers sequentially.
• Net Revenue Retention (NRR): Stable at 117%.
• Gross Retention Rate (GRR): Continued to be greater than 90%.
• Q2 2025 Subscription Revenue Guidance: Expected to be $267 million to $268 million, representing 19% growth.
• Fiscal Year 2025 Subscription Revenue Guidance: Expected to be $1.1 billion to $1.11 billion, representing 19% to 20% growth.
• Fiscal Year 2025 Adjusted Free Cash Flow Margin Guidance: Approximately 6%, excluding a onetime headwind.

• Warning! GuruFocus has detected 4 Warning Sign with CFLT.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Confluent Inc (NASDAQ:CFLT) reported a 26% growth in Q1 subscription revenue, reaching $261 million, exceeding the high end of their guidance.
• Confluent Cloud revenue grew by 34% to $143 million, demonstrating strong demand for their cloud offerings.
• The company added 340 new customers in Q1, marking the highest net addition in three years.
• Confluent Inc (NASDAQ:CFLT) achieved a non-GAAP operating margin improvement of 6 percentage points to 4%, indicating better operational efficiency.
• The company continues to see strong traction with new offerings like WarpStream and Freight Clusters, which are enabling high-throughput, low-latency workloads at attractive price points.

Negative Points

• Confluent Inc (NASDAQ:CFLT) observed a slowdown in new use case additions among larger customers, impacting cloud consumption growth.
• The company has widened its revenue guidance range due to uncertainties in the current macroeconomic environment.
• There is a noted pattern of optimization and slower growth cycles among larger customers, leading to a more conservative outlook.
• Despite strong Q1 results, Confluent Inc (NASDAQ:CFLT) is not assuming a near-term rebound in consumption patterns for larger cloud customers.
• The company faces challenges in maintaining growth momentum amid macroeconomic headwinds and customer cost optimization efforts.

Q & A Highlights

Q: Can you elaborate on the slowdown in new use cases among large customers and its impact on existing use cases and revenue? A: Jay Kreps, CEO, explained that there was a slight decrease in consumption among larger cloud customers due to optimizations and slower addition of new use cases. However, this pattern was not observed among smaller customers. The company is taking a conservative approach in its guidance, not assuming a rebound in consumption given the current environment. Rohan Sivaram, CFO, added that Q1 saw strong ACV commitments, with multiyear deals on both the Confluent Platform and cloud side.

Q: How does Confluent view the future of a discless Kafka, and could Confluent move to a discless future? A: Jay Kreps, CEO, stated that Confluent has already implemented a discless approach in both its cloud and WarpStream offerings. The company uses a combination of storage technologies to optimize cost and performance, and this area has received significant R&D investment.

Q: Can you provide more details on the success of DSP offerings like Flink and Tableflow? A: Jay Kreps, CEO, noted that DSP offerings are significantly outgrowing the core cloud business, with strong customer enthusiasm. Flink is succeeding in both cloud and Confluent Platform, and Tableflow has shown great early signs since its GA release on AWS. The company is focusing on scaling these offerings and winning larger customer engagements.

Q: How is Confluent addressing AI-related demand, and what are the key use cases? A: Jay Kreps, CEO, highlighted success in selling to AI companies and enterprise AI use cases. Confluent plays a role in the data supply chain for AI applications and real-time agent actions. The company sees a durable pattern in AI adoption and is building a community of interest around these use cases.

Q: What are the expectations for new products like Tableflow, and how do they impact revenue? A: Jay Kreps, CEO, expressed strong reception for Tableflow, which is priced separately and brings new data sets onto the platform. The company expects to ramp Tableflow across all clouds this year, with additional charges for its usage. The opportunity lies in both direct Tableflow revenue and increased usage of other Confluent products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.