Confluent(US:CFLT)2025-07-30 21:30Financial Data and Key Metrics Changes - Confluent reported a 21% growth in subscription revenue, reaching $270.8 million, which represented 96% of total revenue [25] - Non-GAAP operating margin increased to 6%, up approximately six percentage points year-over-year [4][28] - Adjusted free cash flow margin rose to 3.9%, reflecting operational efficiencies [28] Business Line Data and Key Metrics Changes - Confluent Cloud revenue grew 28% to $150.5 million, accounting for 56% of subscription revenue, up from 52% in the previous year [25] - Confluent Platform revenue increased by 12% to $120.3 million, driven by strong performance in financial services and OEM partnerships [25] - Flink ARR grew approximately 3x over the past two quarters, approaching $10 million [15][31] Market Data and Key Metrics Changes - Revenue from the US grew 15% to $164.3 million, while revenue from outside the US increased by 29% to $117.9 million [26] - Total customer growth remained consistent with previous quarters, with 20k+ ARR customer count growing 8% to 2,497 [29] Company Strategy and Development Direction - The company is focusing on enhancing operational efficiencies and improving coverage ratios between account executives and post-sales roles to drive customer engagement [6][7] - Confluent is doubling down on three strategic areas: replacing CSP streaming offerings, expanding the partner ecosystem, and growing the Flink business [8][12][15] - The partner ecosystem has sourced over 20% of business in the past year, indicating a strong collaborative approach to market penetration [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged near-term consumption headwinds but expressed confidence in the long-term growth trajectory, particularly in AI workloads and DSP monetization [22][35] - The company expects production AI use cases to grow 10x across a few hundred customers, indicating a significant market opportunity [19][33] - Management raised full-year growth expectations for Confluent Platform, reflecting strong pipeline visibility [31] Other Important Information - The company ended the quarter with $1.94 billion in cash, cash equivalents, and marketable securities, providing a strong financial position [29] - Non-GAAP net income per diluted share was reported at $0.09, with expectations for continued growth in the upcoming quarters [28][31] Q&A Session Summary Question: Can you elaborate on the consumption optimization trends? - Management noted that optimization efforts are similar to trends seen across the industry, with some customers focusing on maximizing value from existing purchases [40][41] Question: How do you see production AI workloads impacting subscription growth? - Management believes that the relevance of streaming in AI applications will positively influence subscription growth moving forward [43][45] Question: What is the outlook for net revenue retention (NRR)? - NRR is expected to face near-term pressure due to current consumption patterns, but management is optimistic about future tailwinds from operational improvements and customer commitments [93][94] Question: How is the go-to-market strategy evolving? - Management indicated that changes in sales compensation to focus on incremental consumption have been beneficial, and they are optimistic about driving new use cases [62][63] Question: What are the expectations for structural changes from field realignment efforts? - Management is already seeing positive momentum from recent changes and expects these adjustments to yield meaningful results in the near future [107][108]