Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Confluent Inc (CFLT, Financial) reported a 25% increase in total revenue, reaching $250 million, surpassing a $1 billion revenue run rate.
- Confluent Cloud revenue grew by 42% to $130 million, now accounting for more than 50% of total revenue.
- The company hosted successful events like Current 2024 and Confluent AI Day, showcasing its leadership in data streaming and AI integration.
- Confluent Inc (CFLT) launched the Confluent for Startups AI Accelerator program, supporting early-stage AI companies with tools and mentorship.
- The company achieved a record non-GAAP operating margin of 6.3% and a free cash flow margin of 3.7%, demonstrating efficient growth.
Negative Points
- Despite strong revenue growth, Confluent Inc (CFLT) faces challenges with digital native customers, who remain cost-conscious.
- The company's net revenue retention (NRR) slightly decreased from 118% to 117%, indicating potential challenges in customer expansion.
- Confluent Inc (CFLT) experienced a one-time revenue benefit in Q3, which may not be sustainable in future quarters.
- The federal vertical remains limited to Confluent Platform, with Confluent Cloud yet to make a significant impact in this sector.
- The company's guidance for Q4 implies a sequential growth rate below typical seasonal patterns, raising concerns about future growth momentum.
Q & A Highlights
Q: Are you seeing more confidence from your digital native customers in terms of bringing on new use cases, or is it still touch and go quarter-by-quarter?
A: Jay Kreps, Co-founder & CEO: We feel that the largest set of customers have done the bulk of what they need to do in terms of larger changes in their environment. We saw better growth this quarter, which puts us on a good trajectory going forward. We feel pretty confident about that segment as we approach year-end.
Q: Can you talk about the go-to-market changes and the level of consumption you're seeing?
A: Jay Kreps, Co-founder & CEO: We aimed to broaden our reach into the large set of open source Kafka users and land more customers quickly. We've made significant progress this year and continue to work on this. We focus on targeting high-potential accounts and ensuring high ROI customers. We are on a better trajectory in terms of landing more customers at a faster pace.
Q: How is the early Gen AI demand showing up in customer conversations?
A: Jay Kreps, Co-founder & CEO: There are two impacts: growth in AI providers like OpenAI and new use cases in the wider enterprise customer base. It's about delivering data to AI applications. There's a larger push towards investment in data infrastructure, which takes time. We see a rise in new use cases, which is positive for us.
Q: Is WarpStream starting to bring you into conversations, especially regarding migration of open source Kafka?
A: Jay Kreps, Co-founder & CEO: WarpStream offers a deployment model that is beneficial for large users of open source Kafka who find it challenging to migrate to a fully managed cloud. It helps us open up large digital native companies that have been on open source for a while and start to bring them into the fold.
Q: How should we think about margin progression as newer efforts layer on?
A: Rohan Sivaram, CFO: Our philosophy of efficient growth is part of the company's DNA. We focus on ROI-based thinking, which will continue into 2025 and beyond. The investment in new products and training is happening now, and as DSP becomes a larger contributor, those investments will be a natural part of the business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
