Confluent, Inc. ((CFLT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Confluent, Inc. recently held its earnings call, reflecting a positive sentiment driven by a robust quarterly performance. The company showcased significant growth in key segments such as Confluent Cloud and Flink, alongside strategic advancements in AI and partnerships. Despite facing a notable impact from a large AI customer’s transition, Confluent’s overall growth trajectory remains strong.
Strong Q3 Performance
Confluent reported a strong third quarter with subscription revenue growing by 19% to $286 million. Confluent Cloud revenue saw an impressive 24% increase, reaching $161 million. Additionally, the non-GAAP operating margin expanded by 3 percentage points to approximately 10%, underscoring the company’s efficient financial management.
Late-Stage Pipeline Growth
The company experienced more than 40% sequential growth in its late-stage pipeline, which is accelerating the pace of new use cases. This positions Confluent for durable consumption growth, indicating a promising outlook for future revenue streams.
Expansion of Large Customer Base
Confluent achieved the largest sequential net addition in its $100,000-plus ARR customer count in the past two years. There was also continued acceleration in million-dollar-plus ARR customer growth, highlighting the company’s success in expanding its large customer base.
Flink Momentum
The momentum for Flink continued with the ARR for Confluent Cloud growing more than 70% sequentially. Over 1,000 customers utilized Flink, including a dozen with $100,000-plus ARR and four with over $1 million ARR, showcasing the platform’s increasing adoption.
Partner Ecosystem Success
Confluent’s partner ecosystem has been instrumental in sourcing over 25% of new business in the last 12 months. This success has aided in expanding the company’s footprint and customer base, contributing to overall growth.
RPO Growth
The company reported a 43% growth in RPO, providing greater visibility into near-term consumption revenue and supporting longer-term growth projections.
AI Integration
Confluent’s platform is becoming a crucial context layer for enterprise AI, with over 100 AI native customers. This includes 21 customers with $100,000-plus in ARR, indicating the platform’s growing importance in the AI sector.
Impact of a Large AI Customer Transition
A large AI native customer transitioned from Confluent Cloud to on-prem, resulting in a low single-digit impact on Q4 cloud revenue. Despite this, the company’s overall growth remains unaffected.
Federal Revenue Dependency
Federal revenue remains in the low single digits, presenting both a potential growth area and a risk if federal spending decreases. This dependency highlights an area for strategic focus moving forward.
Forward-Looking Guidance
Confluent exceeded the high end of all guided metrics for the third quarter, with strong subscription and cloud revenue growth. Looking ahead to the fiscal fourth quarter of 2025, the company expects subscription revenue between $295.5 million to $296.5 million and a non-GAAP operating margin of approximately 7%. For the fiscal year 2025, Confluent projects subscription revenue of $1.1135 billion to $1.1145 billion and a non-GAAP operating margin of approximately 7%.
In summary, Confluent, Inc.’s earnings call highlighted a positive sentiment with strong quarterly performance and strategic growth in key areas. The company’s forward-looking guidance suggests continued momentum, with expectations for further revenue increases and strategic advancements in AI and partnerships. Despite challenges such as the transition of a large AI customer, Confluent’s growth trajectory remains robust.