Confluent(US:CFLT)2025-10-27 21:32Financial Data and Key Metrics Changes - Q3 subscription revenue grew 19% to $286.3 million, with Confluent Cloud revenue increasing 24% to $161 million, representing 56% of subscription revenue compared to 54% in the previous year [21][24] - Non-GAAP operating margin expanded 3 percentage points to approximately 10%, with subscription gross margin at 81.8% [4][22] - Adjusted free cash flow margin increased 450 basis points to 8.2%, and net income per share was $0.13 [22] Business Line Data and Key Metrics Changes - Confluent Platform revenue grew 14% to $125.4 million, driven by demand in financial services [21] - Flink ARR for Confluent Cloud grew more than 70% sequentially, with over 1,000 customers using Flink [27][28] - The count of $100K+ ARR customers increased to 1,487, marking the largest sequential increase in two years [23] Market Data and Key Metrics Changes - Revenue from the U.S. grew 13% to $172.1 million, while revenue from outside the U.S. grew 29% to $126.4 million [22] - The net retention rate stabilized at 114%, with gross retention rate remaining close to 90% [23] Company Strategy and Development Direction - The company is focused on tightening field alignment to drive more use cases into production and expanding its Data Streaming Platform (DSP) specialist team for multi-product selling [5][6] - The partner ecosystem sourced over 25% of new business in the last 12 months, indicating strong growth potential [9][29] - The company aims to position its Data Streaming Platform as the context layer for enterprise AI, enhancing real-time data capabilities [19][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong cloud consumption growth and the traction of the Data Streaming Platform, particularly with Flink [19][30] - The outlook for Q4 2025 includes expected subscription revenue in the range of $295.5 million to $296.5 million, representing growth of approximately 18% [24] - For fiscal year 2025, subscription revenue is expected to be in the range of $1.1135 billion to $1.1145 billion, representing growth of approximately 21% [25] Other Important Information - The company reported a record operating margin of 9.7%, exceeding guidance by 270 basis points [22] - The WarpStream acquisition has seen 8x growth in consumption over the past year, indicating successful integration and market demand [12][30] Q&A Session Summary Question: Insights on go-to-market changes and pipeline conversion trends - Management highlighted the successful implementation of a specialization model for DSP and the importance of field execution in driving consumption pipeline [33] Question: RPO as a leading indicator for growth - RPO is considered a key leading indicator for Confluent Platform, while for Confluent Cloud, the focus is on the momentum of new use cases moving into production [37] Question: Growth stabilization and cannibalization effects - Management noted that new offerings have proven to be a substantial tailwind, leading to larger deal sizes and increased customer engagement [43] Question: Flink's growth and future potential - The company expressed excitement about Flink's growth trajectory and its potential to capture a significant market opportunity in real-time data processing [57] Question: Impact of U.S. Federal shutdown on guidance - Management indicated that the federal performance in Q3 was in line with expectations, and the impact of the shutdown is accounted for in Q4 guidance [80]