Cofifluefit E6rfiifigs Report

Q1 FY'25 | April 30th, 2025



Disclaimer

This report contains forward-looking statements including, among other things, statements regarding (i) our financial outlook, including expected subscription revenue, Confluent Cloud revenue, non-GAAP operating margin, free cash flow margin, adjusted free cash flow margin, non-GAAP net income per share, revenue mix, including Confluent Cloud subscription revenue mix, revenue run rates, Confluent Cloud and data streaming platform growth, adoption and traction, operating margins and margin improvements, targeted or anticipated gross and operating margin levels, earnings per share levels and improvements, in-product optimizations of Confluent Cloud, continued business momentum, and expected revenue, (ii) our market and category leadership position, (iii) our expectations and trends relating to growth of our Data Streaming Platform products, (iv) rates of Confluent Cloud consumption and demand for and retention of data streaming platforms like Confluent, (v) customer growth, retention and engagement, and expansion of customers into new use cases, (vi) ability for Confluent Cloud to provide cost savings for users and customers, including lower total cost of ownership, and our ability to drive return-on-investment-based expansions for our customers and capture the open-source conversion opportunity, (vii) increased adoption of our offerings and fully managed solutions for data streaming in general, including from customers building generative AI applications, (viii) dependence of businesses on data in motion, (ix) growth in and growth rate of revenue, customers, dollar-based net retention rate, and gross retention rate,

(x) our ability to increase engagement of customers for Confluent and expand customer cohorts, (xi) our market opportunity and our ability to capture our market opportunity, (xii) the resilience of our business, (xiii) our go-to-market strategy, (xiv) our product differentiation and market acceptance of our products, (xv) our strategy and expected results and market acceptance for our Flink offering, Tableflow, Freight Clusters, and our other Data Streaming Platform offerings, (xvi) our expectations for market acceptance, direction and growth of stream processing, its potential to accelerate adoption of our platform and growth of our business, and our ability and positioning to capture this market, (xvii) our expectations of meeting near-term and mid-term financial targets, (xviii) our expectations regarding the generative AI landscape and our offerings, (xix) our expectations of relevance of certain key financial and operating metrics, (xx) our ability to drive

long-term growth, (xxi) our expectations regarding the impact of our offerings, including WarpStream and Freight Clusters, (xxii) our expectations regarding our growth strategies and our partner ecosystem, including our Confluent OEM Program, (xxiii) our ability to offer pricing and packaging that fit the full range of Kafka use cases, and (xxiv) our overall future prospects. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "seek," "plan," "project," "target," "looking ahead," "look to," "move into," and similar expressions are intended to identify forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions only as of the date of this report and information contained in this report should not be relied upon as representing our estimates as of any subsequent date. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Further information on the risks that could affect Confluent's results is included in our filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2024, and our future reports that we may file from time to time with the SEC. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 that will be filed with the SEC, which should be read in conjunction with this report and the financial results included herein. Confluent assumes no obligation to, and does not currently intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This report also contains statistical data, estimates and forecasts made by independent parties and by us relating to market size and growth, as well as other data about our industry and business. These data involve a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of these data. Neither we nor any other person makes any representation as to the accuracy or completeness of such data or undertakes any obligation to update such data after the date of this report. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. The Gartner content described herein (the "Gartner Content") represents research opinions or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. The Gartner Content speaks as of its original publication date (and not as of the date of this report), and the opinions expressed in the Gartner Content are subject to change without notice.

This report includes certain non-GAAP financial measures as defined by SEC rules. Because not all companies calculate non-GAAP financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies. Further, such non-GAAP financial information of Confluent should be considered in addition to, and not as superior to or as a substitute for, the historical consolidated financial statements of Confluent prepared in accordance with GAAP. Refer to the section titled "GAAP to Non-GAAP Reconciliations" at the end of this report for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures. References to profitability in this report refer to non-GAAP operating margin unless stated otherwise. Confluent Cloud revenue includes revenue from WarpStream, which was not material for the quarter ended March 31, 2025.

A reconciliation of forward-looking non-GAAP operating margin, adjusted free cash flow margin and non-GAAP net income per diluted share to the most directly comparable GAAP measures is not available without unreasonable effort, as certain items cannot be reasonably predicted because of their high variability, complexity and low visibility. In particular, the measures and effects of our stock-based compensation-related charges, which include stock-based compensation expenses, employer payroll taxes on employee stock transactions, and amortization of stock-based compensation capitalized in internal-use software, are directly impacted by the timing of employee stock transactions and unpredictable fluctuations in our stock price, which we expect to have a significant impact on our future GAAP financial results.

Confluent Q1 FY'25 2

Total Customers +340 QoQ

Q1'25 CUSTOMER HIGHLIGHTS

~6,140

Q1'25 FINANCIAL HIGHLIGHTS

REVENUE PERFORMANCE

Subscription Revenue

$261M +26% YoY

Confluent Cloud Revenue

$143M +34% YoY

DOLLAR-BASED NET RETENTION RATE: 117%

MARGIN EXPANSION

Non-GAAP

Operating Margin1

4.3% +6 pts YoY

Adjusted

Free Cash Flow Margin1

1.8% +16 pts YoY

CEO PERSPECTIVE

Our growth at scale amid heightened macroeconomic uncertainty demonstrates the mission-critical nature of data streaming and our significant product leadership. We remain laser-focused on enabling our customers to cost-efficiently build next-generation applications and win in the age of AI.

J6y Kreps

CO-FOUNDER & CEO



$100B+

2,487

$20K+ ARR

+41 QoQ

1,412

$100K+ ARR

+31 QoQ

210

$1M+ ARR

+16 QoQ

Tot6l Address6ble M6rket2

DATA STREAMING PLATFORM INNOVATION Q1 PARTNER HIGHLIGHTS

Tableflow Iceberg (GA) Delta Lake (EA)

Connect Oracle XStream

CDC

Freight Clusters (GA)



Connect ServiceNow v2

WarpStream Schema Linking

Confluent Platform CSFL Encryption

MAJOR PARTNERSHIP EXPANSION



OEM PROGRAM



Flink Native Inference

Flink Search

Flink Built-in ML

SCCC BY STC JOINS





EY ALLIANCE ANNOUNCEMENT

Note: Financials and metrics are as of or for stated period ended March 31, 2025.

  1. Refer to the section below titled "GAAP to Non-GAAP Reconciliations" for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures.

  2. TAM calculations performed by Confluent; source: Gartner, Forecast: Enterprise Infrastructure Software, Worldwide, 2022-2028 4Q24 Update; source: Forecast: Enterprise Application Software, Worldwide, 2022-2028 4Q24 Update.

Vector Store

AI APP

and more…

LLM







Companies need to prepare for the next wave of GenAI apps. These won't be static models sitting behind APIs, they'll be autonomous agents that perceive, reason, and act across systems in real time. AI is moving beyond single LLM queries to multi-agent systems. A DSP enables real-time event-driven inter-agent communication, allowing agents to retrieve, reason, act, and adapt dynamically. The future of AI is event-driven, multi-agent, and real-time-and a DSP makes it possible.

Data Sources



What Confluent Delivers

With a complete DSP from Confluent, organizations can build a shared source of real-time truth for sophisticated model building, fine-tuning, and contextualization. It transforms static, siloed data into a dynamic, event-driven backbone that AI agents can subscribe to, interact with, and coordinate through. With an event-driven architecture, companies can de-couple multi-agent AI systems, enabling specialized agents to scalably retrieve, reason, and act independently over event streams. It's critical for making enterprise data real-time, agent-ready, and scalable across AI-driven applications.

"Organizations must build a data strategy that capitalizes on AI's potential and pivots from static storage to continuous, real-time engagement with data. Effective approaches treat data as a living asset, unify people and technology, and adopt product thinking."- Forrester, Unlock Business Value Through A Unified Data Strategy, April 7, 2025

Use Cases and Customer Adoption

Some of the popular GenAI use cases we have seen in our customer base include:

Customer Service Chatbot • Co-pilot / Content Creation • Agentic AI • Decision Support

In the digital-native customer base, we're seeing great traction. Many GenAI companies such as OpenAI, Notion, and Motive are using data streaming to build connected customer experiences and streamline their business operations to be more real-time. We're also seeing incredible traction with the GenAI incubators to build GenAI applications that are trustworthy, real-time GenAI use cases.

Confluent's Latest Innovation in Real Time AI

Organizations are in a sprint to seize the AI boom. But, the path to building real-time AI apps is complicated. New capabilities in Confluent Cloud for Apache Flink streamline and simplify the process of developing agents and real-time AI applications.

Flink Native Inference enables teams to run open source or fine-tuned AI models directly in Confluent Cloud. This offers greater flexibility and cost savings. Plus, the data never leaves the platform for inference, adding a greater level of security.

Flink Search delivers a unified interface for querying across multiple vector databases, drastically reducing time to market for AI-powered applications while ensuring that data is contextual and always up to date.

Built-In ML functions simplify complex tasks, such as forecasting, anomaly detection, and real-time visualization, directly in Flink SQL. These features make real-time AI accessible to more developers and empower businesses to make smarter decisions with greater speed and agility.

AI Needs a DSP

DSP is the key to making enterprise data real-time and AI-ready. It enables companies to integrate this data with modern AI tooling to deliver better decision making and automation.

  • Transforms static, siloed data into a real-time, event-driven asset, enabling AI to work with the freshest, most relevant info.

  • Ensures privacy, compliance, & security, with Stream Governance to make real-time AI possible without increasing data risk.

  • Decouples teams, systems, and technologies, ensuring AI agents and workflows can scale and are production-ready.

    Learn More

    Learn more about how Confluent helps customers to quickly scale and build real-time AI applications with continuously enriched and trustworthy data streams at our AI webpage.

    Cofifluefit's Role ifi M6kifig GefiAI 6 Re6lity

    Confluent pioneered the data streaming platform (DSP) category to turn the spaghetti mess of complex and rigid point-to-point connections created by traditional data management tools into a virtuous cycle of data in motion. This allows retailers to build real-time inventory systems, banks to build real-time fraud detection, and manufacturing organizations to collect real-time diagnostics for an assembly line. With Confluent, organizations can set their data in motion to win in the digital-first world.

    Cofifluefit D6t6 Stre6mifig Pl6tform

    CONNECT

    PROCESS

    GOVERN

    TABLEFLOW

    STREAM

    Key Pillars of a Complete Data Streaming Platform

    Our DSP enables a complete set of capabilities for working with data, and captures the virtuous cycle of streaming data:



    • It starts with Stream. Batch data is low-quality, which doesn't meet the needs of a real-time world.

    • Connect data from everywhere in an enterprise, and seamlessly integrate into a continuously moving whole.

    • Process: Data by itself is useful, but with stream processing, data is infinitely more valuable when combined with other data and enriched with business context.

    • Lastly, Govern. Data is worth less if it can't be trusted and secure.

DSP Product Innovation

Tableflow for Apache Iceberg is generally available, and an early access program for Delta Lake is now open. These advancements make it easier than ever to power advanced analytics, real-time AI, and next-gen applications with real-time, trustworthy, contextualized data streams that are processed and governed as they are generated.

Freight clusters are now generally available, providing up to 90% in cost savings for-throughput, relaxed-latency workloads like logging, telemetry, and feeding batch analytics pipelines.

Oracle XStream Change Data Capture (CDC) Connector unlocks vast amounts of mission-critical business data from Oracle databases and streams it everywhere while lowering overall CDC costs. An enhanced ServiceNow Source V2 Connector is also generally available, to align with evolving enterprise needs.

Flink Native Inference, Flink Search, and Built-in ML functions streamline and simplify the process of developing agents and real-time AI applications.

Client-Side Field Level Encryption for Confluent Platform safeguards sensitive data and ensures only authorized users or applications can access the data. Schema Linking for WarpStream extends native governance suite to ensure the highest quality data for Bring Your Own Cloud (BYOC) workloads.

The Cofifluefit D6t6 Stre6mifig Pl6tform

Jay Kreps

CO-FOUNDER & CEO



SUBSCRIPTION REVENUE

$261M

+26% YoY

CONFLUENT CLOUD REVENUE

$143M

+34% YoY

NON-GAAP OPERATING MARGIN

4%

+6 pts YoY

First Quarter Results

We're pleased to start the year with solid momentum. Q1 subscription revenue grew 26% to $261 million, Confluent Cloud revenue grew 34% to $143 million, and non-GAAP operating margin improved six percentage points to 4%. Our Q1 results demonstrate the mission-critical nature of data streaming and our significant product leadership. We remain laser-focused on enabling our customers to cost-efficiently build next-generation applications and win in the age of AI.

Note: Financials are for the quarter ended March 31, 2025.

Refer to the slides in the section titled "GAAP to Non-GAAP Reconciliations" in the Appendix, for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures.

Resiliency of Our Business

I'll walk through four key strategic drivers behind our resilience in the current environment. In fact, our resilience has been tested by multiple macro headwinds since Confluent's founding over 10 years ago, and it continues to support our path toward delivering long-term growth and profitability.

Mission Critical Use Cases

Open Source Opportunities

Hybrid Business

TCO Advantage



Mission Critical Use Cases

First and most critically, data streaming sits at the heart of the mission-critical use cases that our customers rely on every day. These are not lightweight experiments - they are the backbone of real production workloads. These applications play a critical role in the day-to-day business of our customers and can't be turned off without major disruption to core parts of their business.

Confluent powers real-time fraud detection for financial institutions, inventory management for retailers, 5G networks for telcos, and data pipelines that power businesses in countless industries. This dynamic has helped sustain gross retention rate above 90% despite multiple points of instability in the macro environment that reduced IT spend for some of our customers.

Open Source Opportunities

The second driver of our resilience is the scale of the opportunity we're going after. Apache Kafka has become a foundational technology for data management. Today, it is used by more than 150,000 organizations, representing a $100 billion plus addressable market opportunity.

Soaking up the countless use cases built on Kafka has been a core engine for our growth and continues to be a powerful tailwind. This quarter we added 340 new customers, our highest net add in 3 years. And we continue to see robust growth with many of our largest customers as they expand to new use cases. In Q1, we added 16 new customers to our cohort of $1M+ ARR customers, our highest addition to that cohort ever. Our customer base is diversified by industry and by geography, and no single customer accounts for more than 2% of our total ARR. This diversification further strengthens the resilience and durability of our business.

Audacy and Booking.com are two great examples of customers that started with open source and then converted to Confluent.

Audacy is a leading audio entertainment company with 200 million listeners across radio broadcasts, podcasts, and other digital content. As their audience grew and customer expectations rose, their old infrastructure began to hold them back. Developers were spending most of their time wrestling with brittle point-to-point integrations built with open-source Kafka. These were difficult to manage and even harder to scale. Delivering new features at the pace the business needed became a major challenge.

"Confluent's data streaming platform enables a scalable and performant architecture, bolstering Audacy's tech stack to better serve premium audio content to 200M+ monthly listeners."

Sarah Foss

CHIEF TECHNOLOGY OFFICER

That's when Audacy turned to Confluent. Our pre-built connectors allow them to easily integrate data streaming into their existing tools and systems. Stream Governance enables them to quickly and easily enforce data consistency across dozens of different systems and applications.

With our complete data streaming platform, Audacy freed up developer resources so they can focus on innovation instead of managing infrastructure. As a result, Audacy accelerated feature development by 40%, delivering more personalized experiences that keep customers listening. This helps unlock new digital revenue opportunities across their platform.

Booking.com is one of the world's largest online travel agencies. Its mobile app is one of the most downloaded travel agency apps in the world. Booking.com developed an in-house data streaming platform based on open-source Kafka. However, self-managing Kafka became increasingly burdensome as the company grew and introduced new use cases. Scaling clusters, handling updates, and monitoring pipelines consumed significant resources.

"Confluent's data streaming platform increases our software engineering velocity. It helps us develop better products faster and more efficiently."

Maxim Foursa

SENIOR ENGINEERING MANAGER, SITE RELIABILITY

To alleviate the operational complexities of managing Kafka, Booking.com migrated each business unit's open-source clusters to Confluent Platform. Our complete, enterprise-grade solution provided enhanced reliability and out-of-the-box functionality. By spending less time managing infrastructure, Booking.com can now support various mission-critical use cases more efficiently, including marketing, payments, personalization, and core booking processes.

With a complete data streaming platform that is connected across their business, they were also able to deploy a "connected trip" experience. This allows customers to seamlessly book flights, accommodations, car rentals, and experiences in one visit.

Mission Critical Use Cases

Open Source Opportunities

Hybrid Business

TCO Advantage



Hybrid Business

The third driver of our resiliency is meeting customers wherever they are, whether that's on-prem, on the edge, in any cloud, or hybrid environment. That flexibility also provides another layer of resilience to our business. It means our growth strategy is less exposed to changes in cloud investment and provides a healthy mix of ratable and consumption-based revenue streams.

Just as importantly, it lets us land and expand in environments where cloud isn't an option, whether for regulatory reasons, company mandates, or just customer preference. We continue to see strong momentum in this area. Our Confluent Platform business had a particularly strong quarter, with revenue growth accelerating to 18% year over year, representing its strongest Q1 growth in three years.

TCO Advantage

And finally, it's not just that our products are better, faster, and more reliable, they are also more cost-effective. This is a strong differentiator and provides our customers with more value for less money across a wide range of use cases.

Our low TCO enables us to expand usage within our existing customer base, and also drive new conversions from open source Kafka. It's one of the key levers that helps us retain customers, grow within our installed base, and tap into the broader open source community in a meaningful way.

Key to capitalizing on this TCO advantage is offering pricing and packaging that fit the full range of Kafka use cases, from early projects to the most demanding production workloads.

With new offerings like WarpStream and Freight clusters, we're now able to serve

high-throughput, low-latency workloads at attractive price points, enabling our customers to tackle a wider range of use cases.

We continued to see strong traction with both offerings in Q1, including new customers like Liftoff.io and the next wave of GenAI companies like Cursor and Thinking Machines.



Here's an example of how our TCO advantage drives sustained growth with a top 20 global bank.

This $5M+ ARR customer, who most recently increased their spend with us by over 30%, initially relied on open-source Kafka. However, the complexity and rising costs of self-managing Kafka quickly outweighed the value they received. More than five years ago, they migrated their first use case to Confluent. Since then, we've become a strategic partner as they transitioned numerous legacy workloads to the cloud.

Today, Confluent powers hundreds of use cases across their business like fraud detection, capital management, regulatory reporting of trade data, and more. By moving to Confluent, they've significantly reduced operational costs, turned their real-time data into a competitive advantage, and lowered their TCO. In fact, the customer believes that for every dollar they spend with Confluent, they would otherwise spend three dollars managing Kafka themselves.

TOP 20 GLOBAL BANK

3X better TCO with Confluent





Together, these four factors - mission-critical use cases, open source conversion opportunities, hybrid business model, and TCO advantages - have laid the foundation and made our business more resilient through multiple shifts in the macro environment.

Re6l-time Ifivefitory

Re6l-time Fr6ud Detectiofi

Re6l-time Customer 360

GefiAI Applic6tiofis

Agefitic AI

M6fiy more...

Cofifluefit D6t6 Stre6mifig Pl6tform

CONNECT

120+ Pre-built Cofifiectors Cofifiect with Cofifluefit Custom Cofifiectors

PROCESS

Flifik ofi-prem 6fid ifi Cloud Multi-l6figu6ge Support

AI Model Ififerefice

GOVERN

Stre6m C6t6log, Stre6m Qu6lity, Stre6m Lifie6ge D6t6 Port6l

TABLEFLOW

Delt6 | Iceberg | Ufiity C6t6log

STREAM

B6sic | St6fid6rd | Efiterprise | Freight | W6rpStre6m | Cofifluefit Server | Dedic6ted

Additionally, we see continued adoption of our DSP components, which significantly outgrew our core cloud business. Confluent unifies everything organizations need to work with real-time data

- the ability to Stream, Connect, Process, and Govern continuously flowing streams of data all in one platform. This foundation is proving especially valuable as generative AI moves from experimentation to execution.

In particular, we are seeing strong interest and adoption for Flink and Tableflow, two of the most recent additions to our DSP. Our complete platform is becoming the connective tissue that brings real-time context to our customers' GenAI applications, so they can deliver trustworthy and actionable results that work in everyday operations.

It's very exciting to see what our DSP enables our customers to do, for example:

A leading luxury goods conglomerate with 75 brands and over 6,000 stores worldwide uses our Confluent Cloud for Apache Flink to power its real-time order management and drive

e-commerce growth.

The company initially turned to Confluent Cloud to stream order management data to give internal teams accurate, real-time visibility into product availability. As Confluent proved its value with this first use case, the customer consumed more of our platform, including our fully managed Flink service to prevent inaccurate stock information caused by duplicate data. This customer uses Flink to filter out order and inventory duplicates and to continuously analyze

real-time product availability. When high-demand items come back in stock, Flink automatically triggers real-time alerts to notify waiting customers, enhancing the customer experience and driving incremental revenue.

Building on the success of their initial Flink use cases, they're now exploring new ways to leverage the technology to streamline and scale product inventory management.

LEADING LUXURY GOODS CONGLOMERATE



We're excited to share two updates.

First, Ryan Mac Ban has been promoted to Chief Revenue Officer at Confluent. In this expanded role, Ryan will lead the global field strategy, bringing together sales, sales engineering, customer success, and sales operations to help customers activate real-time data to build the next wave of intelligent applications.

Ryan joined Confluent last year as Senior Vice President, Global Head of Sales. He brings over 20 years of sales leadership experience, building and leading top-performing teams around the world. Before Confluent, Ryan was President, UiPath Americas, where he drove significant growth across their multi-product platform. He's also held senior leadership roles at VMware and Cisco.

LEADERSHIP UPDATE

Ryan Mac Ban

CHIEF REVENUE OFFICER



Second, we're honored to be named a Google Partner of the Year for the sixth time. This recognition is a reflection of the strong partnerships we have with the leading CSPs. Together, we enable organizations to deliver the next generation applications they need to thrive in the age of AI.

"In closing, we're proud of our strong start to the year. Our commitment to providing the industry's most complete data streaming platform, paired with a highly resilient business, uniquely positions Confluent to seize the $100 billion plus data streaming market."

Jay Kreps

CO-FOUNDER & CEO



Rohan Sivaram

CHIEF FINANCIAL OFFICER



Our first quarter performance underscores the strength of our mission-critical data streaming platform, the strategic value of our multi-cloud, multi-data destination, and multi-deployment approach, as well as the flexibility of our well-diversified growth strategy.

SUBSCRIPTION REVENUE

$260.9M

+26% YoY

96% of Total Revenue

CONFLUENT PLATFORM REVENUE

$118.2M

+18% YoY

45% of Subscription Revenue

CONFLUENT CLOUD REVENUE

$142.7

+34% YoY

55% of Subscription Revenue

Q1 subscription revenue grew 26% to $260.9 million, exceeding the high end of our guidance and representing 96% of total revenue.

Confluent Platform revenue reached a new record of $118.2 million, with growth accelerating to 18%. This momentum was driven by the early traction in our partner ecosystem, where OEM showed particular strength internationally.

Cloud revenue grew 34% to $142.7 million, representing 55% of subscription revenue. The revenue impact of lapping the leap year was approximately negative $1.6M, as Q1 this year had one fewer day for consumption.

Note: Financials are for the quarter ended ended March 31, 2025.

Revenue from the U.S. grew 23% to $156.4 million. Revenue growth from outside the U.S. grew 28% to

$114.7 million.

For the rest of the income statement, results refer to non-GAAP results unless stated otherwise.

While driving top-line growth at scale, we continued to show significant operating leverage in our model. Subscription gross margin increased 100 basis points to 81.7%, primarily driven by continued efficiency gain in Confluent Cloud coupled with strength in Confluent Platform.

Operating margin was 4.3%, exceeding our guidance of approximately 3%, and was primarily driven by revenue and gross margin outperformance.

Adjusted free cash flow margin which excluded the non-recurring impact of our compensation change in Q1 was 1.8%. The impact of the change to free cash flow margin in Q1 was approximately 14 percentage points.

Net income per share was $0.08, using 367.8 million diluted weighted-average shares outstanding. Fully-diluted share count under the treasury stock method was approximately 380.9 million. We ended the first quarter with $1.92 billion in cash, cash equivalents and marketable securities.

Q1'25

Non-GAAP Subscription Gross Margin

81.7%

Non-GAAP Operating Margin

4.3%

Adjusted Free Cash Flow Margin1

1.8%

Non-GAAP Net Income Per Diluted Share

$0.08

Diluted Weighted-Average Shares Outstanding

367.8M

Fully Diluted Shares Outstanding

380.9M

Cash, Cash Equivalents, and Marketable Securities

$1.92B

Note: Financials are for the quarter ended March 31, 2025.

Refer to the slides in the section titled "GAAP to Non-GAAP Reconciliations" in the Appendix, for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures.

1. Adjusted free cash flow margin includes an adjustment to reflect the non-recurring impact in the first quarter of 2025 from the change to timing of cash compensation payments for most of our non go-to-market employees implemented at the start of 2025.

Free cash flow margin for Q1'25 was (12.2%)

TOTAL CUSTOMERS

CUSTOMERS WITH

≥$20K IN ARR

CUSTOMERS WITH

≥$100K IN ARR

CUSTOMERS WITH

≥$1M IN ARR

~6,140

2,487

1,412

210

+340 QoQ

+41 QoQ

+31 QoQ

+16 QoQ

We ended Q1 with approximately 6,140 customers, representing a sequential increase of 340 customers, our highest sequential increase since Q1'22. This robust growth underscores the strong value proposition of our multi-product platform and our continued success in capturing the open-source conversion opportunity.

As mentioned at Investor Day 2025, we will report total customer count on an annual basis and begin reporting $20K+ ARR customers on a quarterly basis. In Q1, $20K+ ARR customer count increased to 2,487, up 41 customers sequentially, and represented more than 95% of our ARR. Our

$100K+ ARR customer count increased to 1,412, up 31 customers sequentially, and accounted for greater than 90% of our ARR. Our $1M+ ARR customer count grew to 210, up 16 customers sequentially, our best quarter in net add for this cohort.

NRR

117%

GRR

>90%

NRR for the quarter remained stable at 117%, while GRR continued to be greater than 90%, demonstrating the mission-critical nature of our data streaming platform for our customers.

Note: Metrics are for the quarter ended March 31, 2025.

NRR represents Dollar-Based Net Retention Rate. GRR represents Dollar-Based Gross Retention Rate. Refer to the slide in the section titled "Definitions" in the Appendix, for the definitions of "Total Customers", "Customers with $20,000 or greater in ARR", "Customers with $100,000 or greater in ARR", "Customers with $1,000,000 or greater in ARR", "Dollar-Based Net Retention Rate" and "Dollar-Based Gross Retention Rate"

Guidance

Q2'25

FY'25

Subscription Revenue

$267M-$268M

$1.10B-$1.11B

YoY Change

~19%

~19%-20%

Non-GAAP Operating Margin

~5%

~6%

YoY Change

+4 pts

+3 pts

Non-GAAP Net Income Per Diluted Share

$0.08-$0.09

~$0.36

YoY Change

+$0.02 to $0.03

+$0.07

Now, I'd like to provide some additional context for our guidance, along with a few modeling points.

In light of the uncertainties in the current environment, we are widening our revenue guidance range and embedding a modest decline in growth rates from Q2 through Q4.

For our cloud business, some of our larger customers began slowing the pace of new use case addition and focusing on cost optimization efforts in March. In contrast, consumption activities in our smaller customer base remained stable. These trends have continued into April. Given the current macro conditions, we believe it's prudent to assume there will not be a near-term rebound in consumption. This contrasts with previous cycles, where we typically saw a subsequent expansion following a period of slower consumption. As a result, we now expect cloud subscription revenue mix to be approximately 58% for Q4'25, with a sequential mix increase of approximately 1 point each quarter.

Finally, we expect FY'25 adjusted free cash flow margin to be approximately 6%. This excludes, as previously discussed, a one-time headwind of 3 to 4 percentage points for the full year due to our compensation change in Q1.

Our Multiple Paths to Growth

We're confident that our updated guidance, coupled with multiple paths to growth, set us up for success this year. Specifically, we see four key drivers of growth in our business:

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First, the core streaming conversion opportunity - targeting an open-source installed base of over 150,000 organizations.

Second, our DSP upsell opportunities across Connect, Process, Govern, and Tableflow.

Third, our highly strategic role in the age of AI. As traditional enterprises accelerate AI adoption, we believe this represents our largest monetization opportunity within AI.

And fourth, the leverage we gain from our expanding partner ecosystem - including OEMs, SIs, MSPs, and other high-impact strategic partnerships that help us extend our global reach and accelerate go-to-market efforts.

It's important to note these aren't just cloud-only growth vectors. We believe they represent durable growth drivers for both Confluent Cloud and Confluent Platform. For example, in Q1, revenue outperformance was driven by on-prem momentum with Confluent Platform, and its critical role in closing large enterprise deals with our OEM partners. Our well-diversified growth strategy gives us resilience and flexibility, enabling us to continue driving durable, profitable growth.

"In closing, our first quarter results are a testament to the resilience of our business and our ability to capture our market opportunity.

With a large TAM, category-defining technology, and an exceptional team, we are firmly positioned to sustain long-term growth and profitability."

Rohan Sivaram

CHIEF FINANCIAL OFFICER



Definitions

Annual Recurring Revenue (ARR): We define ARR as (1) with respect to Confluent Platform customers, the amount of revenue to which our customers are contractually committed over the following 12 months assuming no increases or reductions in their subscriptions, and (2) with respect to Confluent Cloud and WarpStream customers, the amount of revenue that we expect to recognize from such customers over the following 12 months, calculated by annualizing actual consumption of Confluent Cloud and WarpStream in the last three months of the applicable period, assuming no increases or reductions in usage rate. Services arrangements are excluded from the calculation of ARR.

Dollar-Based Net Retention Rate: We calculate our dollar-based net retention rate (NRR) as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period Value"). We then calculate the ARR from these same customers as of the current period end ("Current Period Value"), and divide the Current Period Value by the Prior Period Value to arrive at our dollar-based NRR. The dollar-based NRR includes the effect, on a dollar-weighted value basis, of our Confluent Platform subscriptions that expand, renew, contract, or attrit. The dollar-based NRR also includes the effect of annualizing actual consumption of Confluent Cloud and WarpStream in the last three months of the applicable period, but excludes ARR from new customers in the current period. Our dollar-based NRR is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

Dollar-Based Gross Retention Rate:

We calculate our dollar-based gross retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period Value"). We then calculate the ARR from these same customers, which includes contract contraction and attrition but excludes contract expansion, as of the current period end ("Current Period Value").

We divide the Current Period Value by the Prior Period Value to arrive at a dollar-based gross retention rate.

Total Customers: Represents the total number of customers at the end of each period. For purposes of determining our customer count, we treat all affiliated entities with the same parent organization as a single customer and include pay-as-you-go customers. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

Customers with $20,000 or greater in ARR: Represents the number of customers that contributed $20,000 or more in ARR as of period end.

Customers with $100,000 or greater in ARR: Represents the number of customers that contributed $100,000 or more in ARR as of period end.

Customers with $1,000,000 or greater in ARR: Represents the number of customers that contributed $1,000,000 or more in ARR as of period end.

Fully Diluted Shares Outstanding: Represents the total number of common shares outstanding adjusted for the impact of stock options, restricted stock units, and options to purchase shares under the employee stock purchase plan determined under the treasury stock method, and excludes shares issuable upon conversion of outstanding convertible senior notes.

GAAP to Non-GAAP Reconciliations

(in thousands, except percentages)

Q1'24

Q1'25

Subscription revenue

$206,902

$260,910

Subscription gross profit on a GAAP basis

$158,547

$204,063

Subscription gross margin on a GAAP basis

76.6%

78.2%

Add: Stock-based compensation-related charges

7,905

8,708

Add: Amortization of acquired intangibles

502

461

Non-GAAP subscription gross profit

$166,954

$213,232

Non-GAAP subscription gross margin

80.7%

81.7%

Q1'24

Q1'25

Total revenue

$217,237

$271,120

Operating loss on a GAAP basis

($111,351)

($101,178)

GAAP operating margin

(51.3%)

(37.3%)

Add: Stock-based compensation-related charges

102,985

101,577

Add: Amortization of acquired intangibles

502

461

Add: Acquisition-related expenses

4,587

10,731

Non-GAAP operating (loss) income

($3,277)

$11,591

Non-GAAP operating margin

(1.5%)

4.3%

GAAP to Non-GAAP Reconciliations

(in thousands, except percentages, share and per share data)

Q1'24 Q1'25

Net loss on a GAAP basis ($92,967) ($67,574)

Add: Stock-based compensation-related charges

102,985

101,577

Add: Amortization of acquired intangibles

502

461

Add: Acquisition-related expenses

4,587

10,731

Add: Amortization of debt issuance costs

953

945

Add: Income tax effects and adjustments(1)

(260)

(17,156)

Non-GAAP net income

$15,800

$28,984

Non-GAAP net income per share, basic

$0.05

$0.09

Non-GAAP net income per share, diluted

$0.05

$0.08

Weighted-average shares used to compute net income per share, basic

314,203,181

335,755,902

Weighted-average shares used to compute net income per share, diluted

350,195,868

367,802,218

Q1'24

Q1'25

Total revenue

$217,237

$271,120

Net cash used in operating activities

($25,954)

($26,754)

Add: Capitalized internal-use software costs

(5,539)

(4,806)

Add: Capital expenditures

(186)

(1,429)

Free cash flow

($31,679)

($32,989)

Add: Impact from compensation payments adjustment(2)

-

37,930

Adjusted free cash flow

($31,679)

$4,941

Net cash used in operating activities as a % of total revenue

(11.9%)

(9.9%)

Free cash flow margin

(14.6%)

(12.2%)

Adjusted free cash flow margin

(14.6%)

1.8%

  1. Income tax effects and adjustments for the three months ended March 31, 2025 includes an adjustment for the income tax benefit from the release of a valuation allowance on certain deferred tax assets.

  2. Represents an adjustment to reflect the non-recurring impact in the first quarter of 2025 from the change to timing of cash compensation payments for most of our non go-to-market employees implemented at the start of 2025.

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Confluent Inc. published this content on April 30, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 30, 2025 at 21:13 UTC.