Confluent Reports $1.1B Subscription Revenue Surge in FY 2025, Riding High on Robust DSP Growth

By Joglo Lawasan July 06, 2025 Post a Comment

Insights from the Earnings Call: Confluent, Inc. (CFLT) First Quarter 2025

Management View

CEO Jay Kreps highlighted Confluent’s strong performance at the beginning of 2025, noting a substantial rise in subscription revenue by 26%, totaling $261 million, along with an impressive surge in Confluent Cloud revenues climbing 34% to hit $143 million. He stressed how crucial data streaming has become, especially driving real-time capabilities across multiple sectors like banking and retail.
In the first quarter, Confluent saw its most significant increase in net new customers in three years with 340 additional clients. Additionally, they welcomed 16 more enterprises that achieved over $1 million in annual recurring revenue (ARR), highlighting robust growth among major accounts.
Kreps outlined new strategic moves, which involve promoting Ryan Mac Ban to Chief Revenue Officer and being honored as a Google Partner of the Year for an unprecedented six times.
Chief Financial Officer Rohan Sivaram stated that Confluent Platform saw an uptick in revenues, achieving an impressive 18% growth rate during the first quarter. This marks their best financial start in the last three years, bolstered by original equipment manufacturer collaborations and robust overseas markets.

Outlook

The management offered their forecast for Q2 2025, projecting subscription revenues ranging from $267 million to $268 million, which marks around a 19% increase. They also anticipate a non-GAAP operating margin of about 5%, along with an estimated net income per diluted share falling within the range of $0.08 to $0.09.
In the fiscal year 2025, the projected subscription revenue is anticipated to be between $1.1 billion and $1.11 billion, sustaining a growth rate of 19% to 20%. The non-GAAP operating margin is estimated at around 6%, with an expected net income per diluted share of $0.36.
Sivaram emphasized a cautious approach, incorporating slight decreases in growth rates from Q2 to Q4 because of uncertainties surrounding major consumers' spending behaviors.

Financial Results

In Q1, subscription revenue amounted to $260.9 million, representing 96% of the total revenue. The Confluent Cloud generated $142.7 million, which constitutes 55% of the subscription income, whereas the Confluent Platform brought in $118.2 million.
The firm reached a 4% non-GAAP operating margin, exceeding its forecast of 3%. The adjusted free cash flow margin stood at 1.8%, after adjusting for an exceptional expense related to compensation.
The number of customers increased to around 6,140, including 2,487 clients who generated at least $20,000 in Annual Recurring Revenue (ARR) and 210 clients surpassing $1 million in ARR.

Q&A

Pinjalim Bora from JPMorgan inquired about how macroeconomic difficulties affect consumer behavior. The CEO, Kreps, responded that major clients experienced reduced consumption growth because they were focusing on cutting costs and adopting cautious forecasts. However, he highlighted that smaller clients maintained steady demand.
Matthew Hedberg from RBC asked about the expansion of DSP services. Kreps highlighted substantial customer interest and notable growth in various DSP elements such as Flink and Tableflow, indicating these areas were growing faster than their main cloud operations.
Sanjit Singh from Morgan Stanley inquired about the performance of Confluent Platform along with its recent structural shifts. Both Kreps and Sivaram pointed out robust demand within heavily-regulated sectors as well as various global markets, bolstered by their strategic original equipment manufacturer (OEM) collaborations.
Michael Turrin from Wells Fargo discussed the AI-driven demand. Kreps highlighted Confluent’s part in AI implementations as providing real-time data and facilitating decisions related to operations.

Sentiment Analysis

While analysts showed some reservation concerning the broader economic effects on major clients, they maintained an upbeat outlook on Confluent's varied growth factors and increasing product usage.
During their prepared statements, management conveyed an assured demeanor, stressing resilience and strategic advancements. Kreps and Sivaram reaffirmed their dedication to achieving growth and profit goals.
The analysts expressed a mildly positive outlook, showing faith in Confluent's guidance and strategic moves. The management maintained the same tone as the prior quarter, conveying a sense of steadiness and hopefulness.

Quarter-over-Quarter Comparison

In Q1 2025, we saw an increase in customer acquisitions compared to Q4 2024, adding 340 new customers as opposed to the 840 gained throughout all of 2024.
The subscription revenue growth picked up marginally, increasing from 24% in Q4 2024 to 26% in Q1 2025. However, the expansion of Confluent Cloud revenues slowed down from 38% to 34%.
The company's projected operating margin for fiscal 2025 stayed consistent with the forecasts from Q4 2024, keeping the goals for profit levels steady.

Risks and Concerns

The management recognized the broad economic uncertainties impacting the spending behaviors of major clients, specifically in the realm of cloud services.
Experts voiced worries over possible postponements in adopting artificial intelligence because of current economic circumstances; however, the leadership showed faith in the enduring benefits of Confluent's DSP.

Final Takeaway

In the first quarter of 2025, Confluent showcased both strength and forward momentum, experiencing robust increases in customers along with steady growth in subscription revenues. Their emphasis on their DSP platform, bolstered by new product developments and alliances, puts them in an advantageous position within the expansive $100 billion data streaming sector. Even amidst challenging economic conditions, Confluent’s varied approach to expanding business operations and their careful forecasts reflect their assurance in attaining sustained profits and industry dominance over time.

Review the complete earnings call transcript here.

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