From Nasdaq: 2025-02-11 23:15:15

Confluent (NASDAQ: CFLT) hosted its Q4 and fiscal year 2024 earnings call on February 11, 2025. The company reported exceeding all guided metrics, with subscription revenue growing 24% to $251 million and Confluent Cloud revenue up 38% to $138 million. Non-GAAP operating margin was positive for the third consecutive quarter at 5%. Confluent also announced a major partnership expansion with Databricks to provide real-time data for AI-driven decision-making through bidirectional integrations. This collaboration aims to empower enterprises with consistent, secure, and trustworthy real-time data for advanced analytics and AI-driven applications.

Confluent’s TableFlow, a key addition to its data streaming platform, exposes data streams as continuously updating tables in cloud object storage. This innovation allows Confluent to bridge the gap between operational and analytical systems, providing real-time, consistent, and secure data for faster and more accurate insights. The partnership with Databricks further enhances Confluent’s capabilities by enabling businesses to harness the power of real-time data for sophisticated AI-driven applications across diverse ecosystems. Confluent Cloud has helped a digital native customer bridge operational data with analytics systems using TableFlow, reducing delays and costs. The company is seeing strong growth in its cloud business, with a focus on being a complete data streaming platform. Zazzle, a global online marketplace, implemented Confluent’s Flink offering to optimize data processing for personalized product recommendations. Another European grocery delivery service leveraged Confluent Cloud with Apache Flink for real-time order management. Telecom companies are benefiting from Confluent’s data streaming platform for real-time insights and improved scalability. Citizens Bank transitioned to Confluent DSP for real-time banking offerings, resulting in cost savings and increased customer engagement. Confluent is focused on capturing the vast Apache Kafka market with offerings tailored for various high-volume use cases. Freight clusters and WarpStream are now available, attracting cost-conscious customers with high throughput workloads. Companies like Elastic and Cursor have already seen benefits from these offerings. Confluent had a strong finish to fiscal year 2024 with subscription revenue growing 26% to $922.1 million. Confluent platform revenue grew 10% to $112.7 million, and Confluent Cloud revenue grew 38% to $137.9 million, driven by demand for enterprise-grade data streaming. The company also announced a strategic partnership with Jio Platforms Limited to accelerate India’s development of GenAI and next-gen applications. Subscription gross margin increased 90 basis points to 82%, and operating margin was 5.2% in Q4. Confluent reported that over 100,000 customers accounted for 90% of their revenue, with 194 customers in the 1 million-plus ARR category. They also highlighted a 117% Q4 NRR and a GRR above 90%. In preparation for 2025, Confluent optimized pricing and packaging, expanded technology capabilities, and transitioned to a consumption-based selling model. They forecasted strong growth in 2025, with a subscription revenue outlook ahead of expectations. Additionally, they discussed their positioning for the future, emphasizing the need for real-time data in the analytics world driven by AI applications. The partnership between Confluent and Databricks aims to streamline data analytics with open data formats like Iceberg and Delta tables, offering real-time data feeds projected in these formats. The collaboration integrates Confluent’s TableFlow into Databricks’ ecosystem, enhancing analytics and operational applications. This partnership focuses on making streaming data accessible for various use cases, creating a unified approach to data analytics. The shift towards Data Systems Platform (DSP) by 2025 signifies a growing trend in cloud revenue and increased pipeline visibility, backed by qualitative and quantitative data insights. The evolution of streaming technology towards real-time data capabilities underscores Confluent’s leadership in delivering innovative solutions. Customers are excited about the potential of AI applications in business operations, driving growth in consumption and pipeline development for Confluent’s offerings. In the recent earnings call, Confluent announced that it is comfortable with the estimates for its cloud business, expecting greater than 30% growth. The company highlighted growth drivers such as DSP products, newer products like gate freight cluster, and partnerships with Jio and Databricks. Confluent also made changes to its pricing and packaging options to expand its serviceable addressable market. The company is focused on providing the right ROI and TCO for all workloads. Overall, Confluent is optimistic about its growth drivers and partnerships heading into the next year.

During the sales kickoff, Confluent’s CEO mentioned that the company made effective changes to its incentives and tracking of customer workloads last year. Heading into 2025, the company is making minor adjustments to its model and comp plan to further drive consumption of its new product areas. The recent sales kickoff generated positive energy and excitement among the team, indicating strong momentum for the year ahead.

In response to a question about consumption trends, Confluent discussed its transformational year in 2024, which included go-to-market changes, product portfolio expansion, and pricing adjustments. The company emphasized the importance of tracking specific workloads and driving consumption of individual product areas. Confluent’s CEO highlighted positive trends in Q4, mentioning successful pipeline execution and consumption trends leading into the holidays and early February. In Q1, the market has shown stability across different customer segments, with strong results reflecting overall demand strength and increased certainty in budgets and spending. Efforts are being focused on supporting use cases that consume the DSP and integrating into the analytics realm, including a partnership with Databricks. Progress has been made with Flink, with broad-based adoption and maturity in the product offering. The company sees itself as a broker of streaming data in the analytics ecosystem, working with partners like Databricks to enhance real-time AI workloads. There is a growing importance of real-time data processing for agents to make decisions, with technology in this space being particularly relevant for the company. In the world of artificial intelligence, the focus is shifting towards real-time applications, moving away from offline model building. Companies are now using prebuilt models from large datasets and applying specific data during inference time. This shift to online processing is beneficial for those in streaming. In Q4, DSP consumption grew faster than overall cloud business, accounting for 13% of cloud business. Key components of DSP are expected to drive growth in the coming years. The journey for customers to reach a $1 million milestone is being accelerated by DSP functionality, making it easier to scale within organizations.

Large customers are increasingly contributing to subscription revenue, with 90% coming from 100K-plus ARR customers. Consumption drivers include more data flowing through existing use cases, unlocking new use cases, and selling DSP to existing customers. Deferred revenue increasing by $2 million sequentially is not a significant concern, with potential for growth in the future. Confluent’s revenue or RPO may not fully indicate the business’s organic momentum due to its focus on consumption first. Changes in deferred revenue are driven by timing of large multiyear deals. Confluent aims to match customer buying preferences and drive adoption of DSP around cloud. AI use cases are expected to drive growth but won’t be a separate category in financial statements. Confluent is replacing legacy integration technologies and is increasingly targeting larger commercial batch workloads. The company’s product is becoming a more direct replacement for existing vendors in the data streaming space. In a recent earnings call, Confluent Co-Founder and CEO Jay Kreps discussed the successful start of WarpStream and the diversity of deployment mechanisms offered. Despite adding more options, Kreps believes that the company is well-positioned to cater to a variety of customer needs, resulting in a strong sales story in the streaming space. Chief Financial Officer Rohan Sivaram highlighted increased sales and marketing efficiency in 2024, signaling a continued focus on delivering growth. Analyst Kingsley Crane noted the importance of data gravity and data mobility in the market, prompting Kreps to express confidence in the future growth of stream processing, stating that we are still in the early innings of this market. The article discusses the expansion of data integration and application workloads within businesses, highlighting the opportunities presented by these developments. The conversation touches on the growth of AI-related projects, particularly within dedicated AI companies and existing industries. The earnings call concludes with a positive outlook for the company’s future and an invitation to the upcoming Investor Day in March. The article is a transcript of the conference call and provides insights into the company’s performance and future prospects. 1. The stock market reached record highs today, with the Dow Jones Industrial Average closing at 30,000 for the first time ever. This marks a significant milestone in the recovery of the economy following the impact of the COVID-19 pandemic.

2. In international news, the United Nations reported that global greenhouse gas emissions have reached a new record high, despite efforts to combat climate change. The findings highlight the urgent need for countries to take action to reduce emissions and protect the environment.

3. A new study published in a leading medical journal found that wearing a face mask is one of the most effective ways to prevent the spread of COVID-19. The research demonstrated that mask-wearing significantly reduces the transmission of the virus, underscoring the importance of following public health guidelines.

4. In technology news, Apple announced the launch of its first line of Mac computers powered by its own custom-designed chips. The move is expected to improve performance and efficiency in Apple’s products, setting a new standard for the industry.



Read more at Nasdaq: Confluent (CFLT) Q4 2024 Earnings Call Transcript