Q2 2024 Confluent Inc Earnings Call

Hello, everyone. Welcome to the Confluent second quarter 2024 earnings conference call. I'm Shane Xie from Investor Relations, and I'm joined by Jake Kress, co-founder and CEO , and Rohan Sivaram, CFO .

Shane Xie: Second Quarter 2024 Earnings Conference Call. I'm Shane Xie from Investor Relations, and I'm joined by Jay Kress, Co-Founder and CEO, and Rohan Sivaram, CFO.

Shane Zee: Second quarter, 2024, Ernest conference call. I'm Shane Zee, for Invest Relations, and I'm joined by Jay Kress, Co-founder and CEO, and Rohan Sivaram, CFO. During today's call, management will make four-looking statements regarding our business, operations, sales strategy, market and product positioning, financial performance, and future prospects, including statements regarding our financial guidance for the fiscal third quarter of 2024 and fiscal year 2024. These folding statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Further information on risk factors that could cause actual results to differ is included in our most recent form, thank you, file the SEC.

Unknown Executive: During today's call, management will make four statements regarding our business, operations, sales strategy, market and product positioning, financial performance, and future prospects, including statements regarding our financial guidance for the fiscal third quarter of 2024 and fiscal year 2024. These following statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Further information on risk factors that could cause actual results to differ is included in our most recent Form 10-Q filed with the SEC.

Speaker Change: During today's call, management will make following statements regarding our business, operations, sales strategy, market and product positioning, financial performance, and future prospects, including statements regarding our financial guidance for the fiscal third quarter of 2024 and fiscal year 2024.

Speaker Change: These following statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated by these statements.

Speaker Change: Further information on risk factors that could cause actual results to differ is included in our most recent Form 10-Q file with the SEC. We assume no obligation to update these statements after today's call except as required by law.

Shane Zee: We assume no application to update these statements after today's call, except as required by law.

Unknown Executive: We assume no application to update these statements after today's call except as required. Unnecessary to analyze, certain financial measures used on today's call are expressed on a non-GAAP basis, and all comparisons are made on a yield-year basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. However, these non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

Shane Zee: On this state of otherwise, certain financial measures used on today's call are expressed on a non-GAAP basis, and all comparisons are made on a year-over-year basis. We use these non-GAAP financial measures internally to facilitate the analysis of our financial and business trends and for internal planning, forecasting purposes. These non-GAAP financial measures have limitations and should not be considered in isolation form, or as a substitute for financial information prepared in accordance with GAAP.

Speaker Change: Unnecessary to otherwise, certain financial measures used on today's call are expressed on a non-GAAP basis, and all comparisons are made on a yield-year basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes.

Speaker Change: These non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

Shane Zee: A reconciliation between these gap and non-gap financial measures is included in our earnings press release, and simple amount of financials, which can be found on a higher website at www.investestontconfluent.io.

Speaker Change: A reconciliation between these GAAP and non-GAAP financial measures is included in the earnings price release and supplemental financials, which can be found on our IR website at investors.confluent.io.

Shane Zee: And finally, once we've concluded our prepared remarks, we will pose the Confluent earnings report to our website. And with that, I'll turn it over to Jay.

Speaker Change: And finally, once we have concluded our prepared remarks, we will post the Confluent Earnings Report to our website.

Shane Xie: Reconciliation between these GAAP and non-GAAP financial measures is included in the earnings price release, and Supplemental Financial Materials can be found on our Iowa website at investors.confluent.io. And finally, once we have concluded our prepared remarks, we will post the Confluent Earnings Report to ROI. And with that, I'll turn it over. Thanks, Shane. Good afternoon, everyone, and welcome to our second quarter earnings call. I'm pleased to report a solid second quarter, once again exceeding our revenue and margin guidance despite a continuing volatile macro. Subscription revenue grew 27% to $225 million, Confluent Cloud revenue grew 40% to $117 million, and non-GAAP operating margin was positive, representing approximately 10%. These results underscore the power of our data streaming platform and our relentless focus on delivering success for our customers. Today, I'll start with providing an update on I'm pleased to share that we increased our total customer count by 320.

Speaker Change: And with that, I'll turn the call over to Jay. Thanks, Shane. Good afternoon, everyone, and welcome to our second quarter earnings call. I'm pleased to report a solid second quarter, once again, exceeding our revenue and margin guidance despite a continually volatile macro environment.

Jay Kress: Thanks, Shane.

Unknown Attendee: double from the previous quarter and representing our largest sequential increase. In addition to landing a higher volume of customers, we believe we have increased the quality. A strong focus on our target counts has increased the percentage of high-quality customers.

Jay Kress: Good afternoon, everyone, and welcome to our second quarter earnings call. I'm pleased to report a solid second quarter, once again exceeding our revenue and margin guidance, despite a continuing volatile macro-environment. Subscription revenue grew 27% to 225 million, Confluent Cloud revenue grew 40% to 117 million, and non-GAAP operating margin was positive, representing approximately 10 percentage points in improvement. These results underscore the power of our data streaming platform and our relentless focus on delivering success for our customers.

Speaker Change: Subscription revenue grew 27% to $225 million. Confluent cloud revenue grew 40% to $117 million. And non-GAAP operating margin was positive, representing approximately 10 percentage points in improvement.

Speaker Change: These results underscore the power of our data streaming platform and our relentless focus on delivering success for our customers.

Jay Kress: Today, I'll start with providing an update on our consumption transformation. Overall, the vast majority of our rollout towards our transformation to becoming consumption oriented is complete, a step change in how we run our cloud business. One success indicator for our transformation is new logo growth. I'm pleased to share that we increased our total customer count by 320 in Q2, double from the previous quarter, and representing our largest sequential increase in two years. In addition to landing a higher volume of customers, we believe we have increased the quality. A strong focus on our target counts has increased the percentage of high propensity customer lands.

Speaker Change: Today I'll start with providing an update on our consumption transformation. Overall, the vast majority of our rollout towards our transformation to becoming consumption oriented is complete, a step change in how we run our cloud business.

Speaker Change: One success indicator for our transformation is new logo growth. I'm pleased to share that we increased our total customer count by 320 in Q2, double from the previous quarter and representing our largest sequential increase in two years.

Speaker Change: In addition to landing a higher volume of customers, we believe we have increased the quality. A strong focus on our target counts has increased the percentage of high propensity customer lands.

Jay Kress: Though this new consumption motion lands them earlier on their journey, we believe over time many of these customers will represent the next wave of high consumption accounts for us.

Unknown Attendee: Though this new consumption motion lands them earlier in their journey, we believe over time, many of these customers will represent the next wave of high consumption. We remain as confident as ever in the strategic position of the company and the prospects for durable long-term growth. We have industry-leading technology, an increasingly critical and relevant category that we believe will be as important as... Over the past year, we've made a series of innovations to build out the full set of capabilities of a data streaming platform, enabling us to capture the full life cycle of data.

Speaker Change: Though this new consumption motion lands them earlier on their journey, we believe over time many of these customers will represent the next wave of high consumption accounts for us.

Jay Kress: We remain as confident as ever in the strategic position of the company and the prospects for durable long-term growth. We have the industry-leading technology and increasingly critical and relevant category that we believe will be as important as databases. Over the past year, we've made a series of innovations to build out the full sets of capabilities of a data streaming platform, enabling us to capture the full life cycle of Data and Motion. And as we progress along our consumption transformation, we will be better equipped than ever to rapidly acquire new customers when new workloads and fuel the adoption of our full set of product capabilities.

Speaker Change: We remain as confident as ever in the strategic position of the company and the prospects for durable long-term growth. We have the industry-leading technology in an increasingly critical and relevant category that we believe will be as important as databases.

Speaker Change: Over the past year, we've made a series of innovations to build out the full set of capabilities of a data streaming platform, enabling us to capture the full life cycle of data in motion.

Unknown Attendee: As we progress along our consumption transformation, we will be better equipped than ever to rapidly acquire new customers, win new workloads, and fuel the adoption of our full set of products. Our rapid pace of innovation and ability to land high-quality customers who have the potential to consume more of our products leaves me more excited than ever about the long-term opportunity to capture the lion's share of data. Vimeo, a leading SaaS video platform with over 260 million users, is a great example of a customer using our complete data streaming. Success for video platforms like Vimeo largely depends on delivering stellar user experiences, but traditional data warehousing and batch ETL processes limited their ability to see real-time customer usage, hindering timely decisions, quick pivots on products and campaigns, and adaptive user experiences without delay.

Speaker Change: And as we progress along our consumption transformation, we will be better equipped than ever to rapidly acquire new customers, win new workloads, and fuel the adoption of our full set of product capabilities.

Jay Kress: Our rapid pace of innovation and abilities to land high quality customers who have the potential to consume more of our product leaves me more excited than ever about the long term opportunity to capture the lion's share of the data streaming market.

Speaker Change: Our rapid pace of innovation and ability to land high-quality customers who have the potential to consume more of our product leaves me more excited than ever about the long-term opportunity to capture the lion's share of the data streaming market.

Jay Kress: Vimeo, a leading SaaS video platform with over 260 million users, is a great example of a customer using our complete data streaming platform. Success for video platforms like Vimeo largely depend on delivering stellar user experiences, but traditional data warehousing and batch ETL processes limited their ability to see real-time customer usage, hindering timely decisions, quick pivots on products and campaigns, and adaptive user experiences without buffering. So they tuned to Confluent to enable real-time data flows that provided the visibility they lacked. Fully managed connectors to Snowflake, S3, and others make it easy to instantly connect data through their business without the hassle of building and self-managing connectors.

Speaker Change: Vimeo, a leading SaaS video platform with over 260 million users, is a great example of a customer using our complete data streaming platform.

Speaker Change: Success for video platforms like Vimeo largely depend on delivering stellar user experiences, but traditional data warehousing and batch ETL processes limited their ability to see real-time customer usage, hindering timely decisions, quick pivots on products and campaigns, and adaptive user experiences without buffering.

Unknown Attendee: So they turned to Confluent to enable real-time data flows that provided the visibility they lacked. Fully managed connectors to Snowflake, S3, and others make it easy to instantly connect data across their business without the hassle of building and self-managing.

Speaker Change: So they tuned to Confluent to enable real-time data flows that provided the visibility they lacked.

Speaker Change: Fully managed connectors to Snowflake, S3, and others make it easy to instantly connect data through their business without the hassle of building and self-managing connectors. Stream governance ensures data quality and security and allows Vimeo to safely scale and share data streams.

Jay Kress: Stream governance ensures data quality and security and allows Vimeo to safely scale and share data streams. And the team is looking towards length to enhance their streaming use cases while freeing up bandwidth across the team. With Confluent and real-time data flows, Vimeo can make quick decisions and deliver top-quality personalized experiences that drive growth and profitability.

Unknown Attendee: Stream Governance ensures data quality and security and allows Vimeo to safely scale and share data, and the team is looking towards Flink to enhance their streaming use cases while freeing up bandwidth. With Confluent and real-time data flows, Vimeo can make quick decisions and deliver top-quality personalized experiences that drive growth and productivity. Next, I'd like to discuss the critical role our partners play in our business. Partners are essential to our strategy to expand our reach into new markets, improve sales efficiency, and complement our data streaming platform.

Speaker Change: and the team is looking towards Flink to enhance their streaming use cases while freeing up bandwidth across the team. With Confluent and real-time data flows, Vimeo can make quick decisions and deliver top-quality personalized experiences that drive growth and profitability.

Jay Kress: Next, I'd like to discuss the critical role our partners play in our business and some exciting announcements in this area. Partners are essential to our strategy to expand our reach into new markets, improve sales efficiency, and complement our data streaming platform. We're pleased to share a number of notable achievements in milestones across all three pillars of our partner ecosystem. In QT, we announced Build With Confluent and Accelerate With Confluent, which makes it easier for our global SI partners like KPMG, Accenture, and EY to build specialized offerings as they embed data streaming into their core business.

Speaker Change: Next, I'd like to discuss the critical role our partners play in our business and some exciting announcements in this area.

Unknown Attendee: We're pleased to share a number of notable achievements and milestones across all three pillars of our, In Q2, we announced Build with Confluent and Accelerate with Confluent, which makes it easier for our global SI partners like KPMG, Accenture, and EY to build specialized offerings as they embed data streaming into their, A wide range of use cases have already been established through the Build with Confluent program, including a Gen-AI bot for airline customer support, fraud detection against AI-powered voice phishing, automated limit increases for credit card users, and real-time telemetry analysis for freight. We're also seeing great traction with Connect with Confluent, a technology partner program that makes it easier for partners to build native integration.

Speaker Change: Partners are essential to our strategy to expand our reach into new markets, improve sales efficiency, and complement our data streaming platform. We're pleased to share a number of notable achievements and milestones across all three pillars of our partner ecosystem.

Speaker Change: In Q2, we announced Build with Confluent and Accelerate with Confluent, which makes it easier for our global SI partners like KPMG, Accenture, and EY to build specialized offerings as they embed data streaming into their core business.

Jay Kress: A wide range of use cases have already been established through the Build With Confluent program, including a GNI I bought for airline customer support, fraud detection against AI powered voice phishing, automated limit increases for credit card users, and real-time telemetry analysis for freight optimization. We're also seeing great traction with Connect With Confluent, a technology partner program that makes it easier for partners to build data integrations with Confluent class. In Q2, we cross more than 40 technology partner built integrations, including SAP, MongoDB, Employee, and Services at Google Cloud and AWS, giving us coverage across the major segments of the modern data and AI stack to help us drive consumption of Confluent.

Speaker Change: A wide range of use cases have already been established through the Build with Confluent program, including a Gen AI bot for airline customer support, fraud detection against AI-powered voice phishing, automated limit increases for credit card users, and real-time telemetry analysis for freight optimization.

Speaker Change: We're also seeing great traction with Connect with Confluent, a technology partner program that makes it easier for partners to build native integrations with Confluent Class.

Unknown Attendee: In Q2, we crossed more than 40 technology partner-built integrations, including SAP, MongoDB, Imply, and services at Google Cloud and AWS, giving us coverage across the major segments of the modern data and AI stack to help us drive consumption. Success of Connect with Confluent has tripled the amount of data traffic from our partner integration since the start of the year, and finally on the CSP. We were pleased to be recognized as partners of the year by both Google and Microsoft.

Speaker Change: In Q2, we crossed more than 40 technology partner-built integrations, including SAP, MongoDB, Imply, and services at Google Cloud and AWS, giving us coverage across the major segments of the modern data and AI stack to help us drive consumption of Confluent.

Jay Kress: The success of Connect With Confluent has tripled the amount of data traffic from our partner integration since the start of the year.

Speaker Change: The success of Connect with Confluent has tripled the amount of data traffic from our partner integration since the start of the year.

Jay Kress: And finally, on the CSP front, we were pleased to be recognized as Partners of the Year by both Google and Microsoft. This marks the third year in a row that Confluent won this award from Microsoft, and the fifth year that we've been recognized by Google. Together, these recognitions underscore our highly valuable and symbiotic relationship with our cloud partners.

Speaker Change: And finally, on the CSP front, we were pleased to be recognized as partners of the year by both Google and Microsoft. This marks the third year in a row that Confluent won this award from Microsoft and the fifth year that we've been recognized by Google. Together, these recognitions underscore our highly valuable and symbiotic relationship with our cloud partners.

Unknown Attendee: This marks the third year in a row that Confluent won this award from Microsoft, and the fifth year that we've been recognized by Google. Together, these recognitions underscore our highly valuable and symbiotic relationship with our customers. As we discussed last quarter, data streaming plays a critical role in fueling GENI-I applications. Contextual and Trustworthy Streams of Real-Time Data.

Jay Kress: As we discussed last quarter, data streaming plays a critical role in fueling Gen AI applications with contextual and trustworthy streams of real-time data. This was underscored by our 2024 Data Streaming Report. 90% of the 4,000 plus IT leaders we surveyed said data streaming platforms can lead to more product and service innovation in AI and ML development, with 63% saying data streaming platforms significantly fuel AI progress by building a real-time data. Foundation.

Speaker Change: As we discussed last quarter, data streaming plays a critical role in fueling Gen AI applications with contextual and trustworthy streams of real-time data. This was underscored by our 2024 Data Streaming Report.

Unknown Attendee: This was underscored by our 2024 Data Streaming, 90% of the 4,000 plus IT leaders we surveyed say data streaming platforms can lead to more product and service innovation in AI and ML development, with 63% saying data streaming platforms significantly fuel AI progress by building a real-time data foundation. I'm pleased to share a couple of them. The Top 5 Mortgage Lenders in the United States are turning to Confluent and GenAI to reimagine the home buying market.

Speaker Change: 90% of the 4,000 plus IT leaders we surveyed said data streaming platforms can lead to more product and service innovation in AI and ML development, with 63% saying data streaming platforms significantly fuel AI progress by building a real-time data foundation. I'm pleased to share a couple of examples of this.

Jay Kress: I'm pleased to share a couple of examples of this. A top five mortgage lender in the United States is turning to Confluent and Genai to reimagine the home buying experience. This company uses generative AI to listen to client calls, transcribe them, analyze sentiment, and record client patterns and preferences to create personalized experiences for millions of customers and prospects. They turn to Confluent as a key part of their rag-enabled architecture to quickly build and scale GenAI use cases by tapping into readily usable trustworthy data streams. Connectors allow them to connect data and systems from across lines of business, while stream governance and stream processing enable the team to create reusable data products that are easy to find, understand, and use.

Speaker Change: A top five mortgage lender in the United States is turning to Confluent and Gen AI to reimagine the home buying experience.

Unknown Attendee: This company uses generative AI to listen to client calls, transcribe them, analyze sentiment, and record client patterns and preferences to create personalized experiences for millions of customers. They turn to Confluent as a key part of their RAG-enabled architecture. Quickly Build and Scale GenAI Use Cases by Tapping into Readily Usable, Trustworthy Connectors allow them to connect data and systems from across lines of business, while stream governance and stream processing enable the team to create reusable data products that are easy to find, understand, and use. As a result of their Gen-AI initiatives, approximately 70% of servicing calls can be fully self-served without the need for full team member intervention.

Speaker Change: This company uses generative AI to listen to client calls, transcribe them, analyze sentiment, and record client patterns and preferences to create personalized experiences for millions of customers and prospects.

Speaker Change: They turn to Confluent as a key part of their RAG-enabled architecture to quickly build and scale Gen AI use cases by tapping into readily usable trustworthy data streams.

Speaker Change: Connectors allow them to connect data and systems from across lines of business, while stream governance and stream processing enable the team to create reusable data products that are easy to find, understand, and use.

Jay Kress: As a result of their GenAI initiatives, approximately 70% of servicing calls can be fully self-served without the need for full team member intervention. By saving the client servicing team 40,000 hours annually, team members can concentrate on cultivating strong, meaningful client relationships, while AI manages the mundane tasks.

Speaker Change: As a result of their Gen AI initiatives, approximately 70% of servicing calls can be fully self-served without the need for full team member intervention.

Unknown Attendee: By saving the client servicing team 40,000 hours annually, team members can concentrate on cultivating strong, meaningful client relationships. Well, AI manages the mundane. But this is just the start. In the future, their Gen AI platform will learn homeowners' preferences and communication habits so team members can anticipate and solve problems. An international e-commerce company in Germany with 16 billion euros in annual sales is another example of companies turning to Confluent to play a key role in their Gen AI platform.

Speaker Change: By saving the client servicing team 40,000 hours annually, team members can concentrate on cultivating strong, meaningful client relationships, while AI manages the mundane tasks.

Jay Kress: But this is just the start. In the future, their GenAI platform will learn homeowners' preferences and communication habits so team members can anticipate and solve clients' needs.

Speaker Change: But this is just the start. In the future, their Gen AI platform will learn homeowners' preferences and communication habits so team members can anticipate and solve clients' needs.

Jay Kress: An international e-commerce company in Germany with 16 billion euros in annual sales is another example of companies turning to Confluent to play a key role in their Genai stack. When e-commerce products from this company's iconic brands are promoted, their call centers receive massive spikes in call volume. But with only 100 call center reps, customers are often left in long-weight keys, leading to failed conversions and unhappy customers. So they turn to Confluent to help power GenAI applications like voice bots that can scale up in seconds and answer a thousand calls in parallel. As customers interact with these voice bots, an AI order entry bot enables the order completion process and communicates with ERP systems in real time via Confluent, streaming transactional data such as product, order, customer, payment, and billing information.

Speaker Change: An international e-commerce company in Germany with 16 billion euros in annual sales is another example of companies turning to Confluent to play a key role in their Gen AI stack. When e-commerce products from this company's iconic brands are promoted, their call centers receive massive spikes in call volume.

Unknown Attendee: When e-commerce products from this company's iconic brands are promoted, their call centers receive massive spikes in call volume. But with only 100 call center reps, customers are often left in long wait queues, leading to failed conversions and unhappiness. So they turned to Confluent to help power Gen-AI applications like VoiceBots that can scale up in seconds and answer a thousand calls in real time. As customers interact with these voice bots, an AI order entry bot enables the order completion process and communicates with ERP systems in real time via streaming transactional data such as Product, Order, Customer, Payment, and Billing.

Speaker Change: But with only 100 call centre reps, customers are often left in long wait queues, leading to failed conversions and unhappy customers.

Speaker Change: So they turned to Confluent to help power Gen AI applications like VoiceBots that can scale up in seconds and answer a thousand calls in parallel.

Speaker Change: As customers interact with these voicebots, an AI order entry bot enables the order completion process and communicates with ERP systems in real time via Confluent, streaming transactional data such as product, order, customer, payment, and billing information.

Jay Kress: A key part of this workflow is Confluent streaming KPIs from bots in the operational domain to their analytical systems, capturing data like real-time orders, call metrics, sentiment analysis, and how many AI tokens were used to analyze and measure the efficacy of calls to continuously make their bots smarter and more effective. Powered by enriched trusted data streams from Confluent, this e-commerce company can now handle unexpected traffic spikes to increase call center capacity on demand to reduce customer wait times and improve order completion rate.

Unknown Attendee: A key part of this workflow is Confluent streaming KPIs from bots in the operational domain to their analytical systems, capturing data like real-time orders, call metrics, sentiment analysis, and how many AI tokens were used to analyze and measure the efficacy of calls to continuously make their bots smarter and more efficient. Powered by enriched, trusted data streams from Confluent, this e-commerce company can now handle unexpected traffic spikes to increase call center capacity on demand to reduce customer wait times and improve order completion.

Speaker Change: A key part of this workflow is Confluent's streaming KPIs from bots in the operational domain to their analytical systems, capturing data like real-time orders, call metrics, sentiment analysis, and how many AI tokens were used to analyze and measure the efficacy of calls to continuously make their bots smarter and more effective.

Speaker Change: Powered by enriched, trusted data streams from Confluent, this e-commerce company can now handle unexpected traffic spikes to increase call center capacity on demand to reduce customer wait times and improve order completion rate.

Jay Kress: In closing, we're excited about the trajectory we're on. With our complete data streaming platform and our transition to a consumption-oriented business, we're well positioned to attract more customers who can drive even more value from Confluent as they capture the full lifecycle of streaming data from our platform. The future of Confluent is incredibly bright.

Unknown Attendee: In closing, we're excited about the trajectory we're on. With our complete data streaming platform and our transition to a consumption-oriented business, we're well positioned to attract more customers who can drive even more value from Confluent as they capture the full lifecycle of streaming data from our. The future of Confluence is incredibly bright. With that, I'll turn it over to Ro. Thanks, Shae. Good afternoon, everyone.

Speaker Change: In closing, we're excited about the trajectory we're on. With our complete data streaming platform and our transition to a consumption-oriented business, we're well-positioned to attract more customers who can derive even more value from Confluent as they capture the full lifecycle of streaming data from our platform.

Speaker Change: The future of Confluent is incredibly bright. With that, I'll turn it over to Rohan.

Rohan Sivaram: With that, I'll turn it over to Rohan. Thanks, Jay. Good afternoon, everyone. In Q2, we delivered solid subscription revenue growth and substantial margin expansions, ending the quarter with positive non-GAAP operating margin and free cash flow margin. These results, coupled with continued adoption of our data streaming platform, demonstrate a relentless focus on driving long-term efficient growth in a volatile macro environment. Turning to the Q2 results, subscription revenue grew 27% to 224.7 million, exceeding the high end of our guidance and representing 96% of total revenue. Revenue. Confluent Platform revenue growth accelerated to 16%, ending the quarter at 107.3 million and accounting for 48% of subscription revenue.

Rohan Sivaram: In Q2, we delivered solid subscription revenue growth and substantial margin expansion, ending the quarter with positive non-gap operating margin and free cash flow. These results, coupled with continued adoption of our data streaming platform, demonstrate a relentless focus on driving long-term efficient growth in a volatile macro environment. Turning to the Q2 results, subscription revenue grew 27% to $224.7 million, exceeding the high end of our guidance and representing 96% of total revenue.

Rohan Sivaram: Thanks, Jay. Good afternoon, everyone. In Q2, we delivered solid subscription revenue growth and substantial margin expansions, ending the quarter with positive non-GAAP operating margin and free cash flow margin.

Rohan Sivaram: These results, coupled with continued adoption of our data streaming platform, demonstrate our relentless focus on driving long-term, efficient growth in a volatile macroenvironment.

Rohan Sivaram: Turning to the Q2 results, subscription revenue grew 27% to $224.7 million, exceeding the high end of our guidance and representing 96% of total revenue.

Rohan Sivaram: Platform revenue growth accelerated to 16%, ending the quarter at $107.3 million and accounting for 48% of subscription revenue. We closed two eight-figure multi-year deals consisting of renewal and expansion with existing customers in the financial services industry.

Rohan Sivaram: Platform revenue growth accelerated to 16%, ending the quarter at $107.3 million and accounting for 48% of subscription revenue.

Rohan Sivaram: We closed two eighth-fither multi-year deals consisting of renewal and expansion with existing customers in the financial services industry. This underscores Confluent as the platform of choice for data streaming among the world's most established enterprises. Confluent Cloud revenue grew 40% to 117.4 million and accounted for 52% of subscription revenue compared to 47% in the year-to-go quarter. We are pleased with delivering high growth at scale and continuing to improve the margin profile for our cloud business. Turning to the geographic mix of total revenue, revenue from the US grew 26% to 143.2 million; revenue from outside the US grew 22% to 91.7 million.

Rohan Sivaram: We closed two eight-figure multi-year deals consisting of renewal and expansion with existing customers in the financial services industry. This underscores Confluent as the platform of choice for data streaming among the world's most established enterprises.

Rohan Sivaram: This underscores Confluent as the platform of choice for data streaming among the world's most established enterprises. Cloud revenue grew 40% to $117.4 million and accounted for 52% of subscription revenue compared to 47% in the year-ago quarter. We are pleased with delivering high growth at scale and continuing to improve the margin profile for our cloud. Turning to the geographic mix of total revenue, revenue from the U.S. grew 26% to $143.2 million, and revenue from outside the U.S. grew 22% to $91.7 million.

Rohan Sivaram: Confluent's cloud revenue grew 40% to $117.4 million and accounted for 52% of subscription revenue, compared to 47% in the year-ago quarter. We are pleased with delivering high growth at scale and continuing to improve the margin profile for our cloud business.

Rohan Sivaram: Turning to the geographic mix of total revenue, revenue from the US grew 26% to 143.2 million, revenue from outside the US grew 22% to 91.7 million.

Rohan Sivaram: Moving on to the rest of the income statement, I'll be referring to non-GAAP results unless data otherwise. Subscription gross margin was 80.8%, up 170 basis points. Gross margin performance was driven by strong Confluent Platform margin and improving unit economics of our Confluent Cloud offering. Turning to profitability and cash flow, operating margin expanded 9.7 percentage points to 0.6%, representing our eighth consecutive quarter of nine points or more in margin improvement. Operating margin performance was driven by our gross margin performance and our continued focus on driving efficient growth across the company. Net income per share was 6 cents for Q2 using 354.2 million diluted weighted average shares outstanding.

Rohan Sivaram: Moving on to the rest of the income statement, I'll be referring to non-GAAP results unless stated otherwise. Description Gross Margin was 80.8%, up 170 basis points. Gross margin performance was driven by strong Confluent platform margin and improving unit economics of our Confluent Cloud App. Turning to profitability and cash, Operating Margin Expanded 9.7% to 0.6% Representing our eighth consecutive quarter of nine points or more in margin improvement. Operating Margin performance was driven by our Gross Margin Performance and our continued focus on driving efficient growth across. Net income per share was $0.06 for Q2 using 354.2 million diluted weighted average shares outstanding. The fully diluted share count under the treasury stock method was approximately 362.9%.

Speaker Change: Moving on to rest of the income statement, I'll be referring to non-GAAP results unless stated otherwise.

Rohan Sivaram: Subscription gross margin was 80.8% up 170 basis points. Gross margin performance was driven by strong Confluent platform margin and improving unit economics of our Confluent cloud offering.

Rohan Sivaram: Turning to profitability and cash flow. Operating margin expanded 9.7 percentage points to 0.6%, representing our 8th consecutive quarter of 9 points or more in margin improvement.

Rohan Sivaram: Operating margin performance was driven by our gross margin performance and our continued focus on driving efficient growth across the company.

Rohan Sivaram: Net income per share was $0.06 for Q2 using 354.2 million diluted weighted average shares outstanding. Fully diluted share count under the treasury stock method was approximately 362.9 million.

Rohan Sivaram: Fully diluted share count under the Treasury Stock Method was approximately 362.9 million. Free cash flow margin turned positive and improved approximately 20% points to 1.2%. And we ended the second quarter with 1.93 billion in cash, cash equivalents, and marketable securities. Turning now to other business metrics, total customer count was approximately 5,440. Up 320 customers sequentially are largest sequential growth in two years. We are pleased with accelerating growth in total customer count and the quality of customers we have acquired. Additionally, we added 46 customers with 100k plus in ARR and 9 customers in million dollar plus in ARR, bringing the total to 1,306 and 177 respectively.

Rohan Sivaram: Free Cash Flow Margin turned positive and improved approximately 20 percentage points to 1.2%. We ended the second quarter with $1.93 billion in cash, cash equivalents, and marketable securities. Turning now to other business metrics, total customer count was approximately 5,440, up 320 customers sequentially, our largest sequential growth in two years. We are pleased with accelerating growth in total customer count and the quality of customers we have acquired. Additionally, we added 46 customers with $100K plus in ARR and 9 customers with $1M plus in ARR, bringing the total to 1,306 and 177. Our 100K plus ARR customers continue to contribute greater than 85% of our revenue.

Rohan Sivaram: Free cash flow margin turned positive and improved approximately 20 percentage points to 1.2%. And we ended second quarter with $1.93 billion in cash, cash equivalents, and marketable securities.

Speaker Change: Turning now to other business metrics, total customer count was approximately 5,440, up 320 customers sequentially, our largest sequential growth in two years.

Speaker Change: We are pleased with accelerating growth in total customer count and the quality of customers we have acquired.

Speaker Change: Additionally, we added 46 customers with 100k plus in ARR and 9 customers in million dollar plus in ARR, bringing the total to 1,306 and 177 respectively.

Rohan Sivaram: Our 100k plus ARR customers continue to contribute greater than 85% of our revenue. Our new 1 million dollar plus ARR customers include customers from a variety of industries, including energy, financial services, manufacturing, retail, transportation, and more. Turning to NRR, Q2 NRR was 118% below our target range of 125% for this year. This was due to continuing consumption volatility within our large digital native customer base. After the stabilization in Q1 and a healthy starting Q2, we saw increased short-term cloud cost controls and focus on driving efficiencies in this customer cohort in the month of June, which impacted expansion of new users.

Speaker Change: Our 100k plus ARR customers continue to contribute greater than 85% of our revenue.

Rohan Sivaram: Our new $1 million plus ARR customers include customers from a variety of industries, including energy, financial services, manufacturing, retail, transportation, and more. Turning to NRR, Q2 NRR was 118%, below our target range of 120-125% for this year.

Speaker Change: Our new $1 million plus ARR customers include customers from a variety of industries, including energy, financial services, manufacturing, retail, transportation, and more.

Speaker Change: Turning to NRR, Q2 NRR was 118% below our target range of 120-125% for this year. This was due to continuing consumption volatility within our large digital native customer base.

Rohan Sivaram: This was due to continuing consumption volatility within our large digital native customers. After the stabilization in Q1 and a healthy start in Q2, we saw increased short-term cloud cost controls and focus on driving efficiencies in this customer cohort in the month of June, which impacted expansion of new, While the green shoots we saw earlier this year haven't yet translated to the level of consumption we had expected. We are pleased to see continued strength in our growth retention. GRR remained above 90% at a level consistent with the last two quarters, reflecting the sticky nature of our data streaming platform and our continued focus on delivering strong value and ROI to our customers.

Speaker Change: After the stabilization in Q1 and a healthy start in Q2, we saw increased short-term cloud cost controls and focus on driving efficiencies in this customer cohort in the month of June , which impacted expansion of new use cases.

Rohan Sivaram: Kesses. While the green shoots we saw earlier this year haven't yet translated to the level of consumption we had expected, we are pleased to see continued strength in our growth retention rate. GRR remained about 90% at a level consistent with the last two quarters, reflecting the sticky nature of our data streaming platform and our continued focus on delivering strong value and ROI to our customers.

Speaker Change: While the green shoots we saw earlier this year haven't yet translated to the level of consumption we had expected, we are pleased to see continued strength in our gross retention rate.

Speaker Change: GRR remained above 90% at a level consistent with the last two quarters, reflecting the sticky nature of our data streaming platform and our continued focus on delivering strong value and ROI to our customers.

Rohan Sivaram: As we frame our guidance for the second half of 2024, there are two points I would like to call out before getting into the numbers. First, growth of our Confluent platform business remains lumpy, driven by the timing of large renewal and expansion deals. As a reminder, approximately 20% of our Confluent Platform TCV is recognized as upfront license revenue. This could create short-term variability for growth in Confluent platform. Q2 was a good example where we benefited from this dynamic, which creates a tough compare for growth for the rest of 2024. Second, consumption in our digital native customer base remains volatile.

Rohan Sivaram: As we frame our guidance for the second half of 2024, there are two points I would like to call out before getting into the numbers. First, growth of our Confluent platform business remains lumpy, driven by the timing of large renewals and expansion. As a reminder, approximately 20% of our Confluent platform TCV is recognized as upfront license revenue. This could create short-term variability for growth in Confluent Platform.

Speaker Change: As we frame our guidance for the second half of 2024, there are two points I would like to call out before getting into the numbers.

Speaker Change: First, growth of our Confluent platform business remains lumpy, driven by the timing of large renewal and expansion deals.

Speaker Change: As a reminder, approximately 20% of our Confluent platform TCV is recognized as upfront license revenue.

Speaker Change: This could create short-term variability for growth in Confluent platform. Q2 was a good example where we benefited from this dynamic, which creates a tough compare for growth for rest of 2024.

Rohan Sivaram: Q2 was a good example where we benefited from this dynamic, which creates a tough compare for growth for the rest of 2020. Second, consumption in our digital native customer base remains volatile. As mentioned, while the green shoots we saw over the last few months continue to take hold, they have not yet translated to the level of consumption we had expected. We have incorporated this consumption dynamic from our large digital native customers into our second half outcome. Now, let's turn to guidance. For the third quarter of 2024, we expect Prescription Revenue to be in the range of $233 to $234 million, representing growth of approximately 23% to 24%.

Speaker Change: Second, consumption in our digital native customer base remains volatile. As mentioned, while the green shoots we saw over the last few months continue to take hold, they have not yet translated to the level of consumption we had expected.

Rohan Sivaram: As mentioned, while the green shoots we saw over the last few months continue to take hold, they have not yet translated to the level of consumption we had expected. We have incorporated this consumption dynamic from our large digital native customers into our second half outlook.

Speaker Change: We have incorporated this consumption dynamic from our large digital native customers into our second half outlook.

Rohan Sivaram: Now, let's turn to guidance. For the third quarter of 2024, we expect subscription revenue to be in the range of 233 to 234 million, representing growth of approximately 23% to 24%. Non-GAAP net income per diluted share to be 20 cents. And free cash flow margin to break even, representing improvement of approximately 16 percentage points. Looking out longer term, we remain well positioned to address our market opportunity. As she pointed out earlier, we're going after a highly strategic and mission-critical data streaming market, which we believe will be as important as databases. Over the last few decades, history and software has repeated itself many times that platform approach wins.

Rohan Sivaram: Non-GAAP Operating Margin to Breakeven, representing an improvement of approximately 5% and Non-GAAP Net Income per Diluted Share to be 5%. For the full year 2024, we expect subscription revenue to be approximately 910 million. Representing growth of approximately 25%. Non-Gap Operating Margin to Breakeven, representing an improvement of approximately 7% Non-Gap Net Income per Diluted Share to be $26, and Free Cash Flow Margin to Breakeven, representing an improvement of approximately 16%.

Speaker Change: Now, let's turn to guidance. For the third quarter of 2024, we expect subscription revenue to be in the range of $233 to $234 million, representing growth of approximately 23% to 24%.

Speaker Change: Non-Gap Operating Margin to Breakeven, representing improvement of approximately 5 percentage points.

Speaker Change: and non-GAAP net income per diluted share to be $0.05.

Speaker Change: For the full year 2024, we expect subscription revenue to be approximately $910 million, representing growth of approximately 25%.

Speaker Change: Non-Gap Operating Margin to Breakeven, representing improvement of approximately 7 percentage points.

Speaker Change: non-GAAP net income per diluted share to be $0.20.

Speaker Change: and Free Cash Flow Margin to Breakeven, representing improvement of approximately 16 percentage points.

Rohan Sivaram: Looking out longer term, we remain well positioned to address our market. As Shane pointed out earlier, we're going after a highly strategic and mission-critical data streaming market, which we believe will be as important as databases. Over the last few decades, history in software has repeated itself many times, that platform approach. Our industry-leading data streaming platform is the only complete platform spanning stream, connect, process, and govern, enabling us to capture the full lifecycle of data and motion at a lower TCO and deliver strong ROI to our customers.

Speaker Change: Looking out longer term, we remain well-positioned to address a market opportunity. As Shane pointed out earlier, we're going after a highly strategic and mission-critical data streaming market, which we believe will be as important as databases.

Shane Xie: Over the last few decades, history in software has repeated itself many times that platform approach wins.

Rohan Sivaram: Our industry leading data streaming platform is the only complete platform spanning stream, connect, process, and govern, enabling us to capture the full lifecycle of data and motion at a lower TCO and delivering strong ROI to our customers. In Q2, we saw continued adoption of our data streaming platform. The net process and govern of our DSP portfolio accounted for a larger portion of cloud revenue and grew substantially faster than our overall cloud business. Multi-product customers remained our fastest growing customer cohort with NRL substantially higher than 130%. We believe DSP will continue to outgrow our core business for the foreseeable future.

Speaker Change: Our industry-leading data streaming platform is the only complete platform spanning stream, connect, process, and govern, enabling us to capture the full lifecycle of data in motion at a lower TCO and delivering strong ROI to our customers.

Rohan Sivaram: In Q2, we saw continued adoption of our data saving plan. The net process and government of our DSP portfolio accounted for a larger portion of cloud revenue. [inaudible] Multiproduct customers remained our fastest-growing customer cohort, with NRL substantially higher than $130 million. We believe DSP will continue to outgrow our core business for the foreseeable future. And as it continues to scale, DFP is expected to be a strong growth tailwind to our business over a long period. Additionally, the rise of JNEI makes it clear that a modern organization's success is significantly influenced by its data strategy.

Speaker Change: In Q2, we saw continued adoption of our data streaming platform.

Speaker Change: Connect, process, and govern of our DSP portfolio accounted for a larger portion of cloud revenue and grew substantially faster than our overall cloud business.

Speaker Change: Multiproduct customers remained our fastest-growing customer cohort, with NRL substantially higher than 130%.

Speaker Change: We believe DSP will continue to outgrow our core business for the foreseeable future. And as it continues to scale, DSP is expected to be a strong growth tailwind to our business over a long period of time.

Rohan Sivaram: And as it continues to scale, DSP is expected to be a strong growth tailwind to our business over a long period of time. of Time. Additionally, the rise of GNII makes it clear that a modern organization's success is significantly influenced by its data strategy, particularly around data and motion. With a complete cloud native and ubiquitous platform and secular tailwinds for data and motion, we have never been more confident in our ability to sustain durable and efficient growth over the long term. In closing, we're pleased with our solid second quarter results. As we continue to execute on our consumption transformation, we remain focused on driving efficient growth and delivering break even for non-GAAP operating margin and free cash flow margin for 2024.

Speaker Change: Additionally, the rise of Gen AI makes it clear that a modern organization's success is significantly influenced by its data strategy, particularly around data in motion.

Rohan Sivaram: Particularly around data, and with a complete cloud native and ubiquitous platform and secular tailwinds for data in motion, we have never been more confident in our ability to sustain durable and efficient growth over the long term. Finally, we are pleased with our solid second quarter results. As we continue to execute on our consumption transformation, we remain focused on driving efficient growth and delivering break even for non-gap operating margin and free cash flow margin for 2021. Now GNI will take you there.

Speaker Change: With a complete cloud-native and ubiquitous platform and secular tailwinds for data in motion, we have never been more confident in our ability to sustain durable and efficient growth over the long term.

Speaker Change: In closing, we're pleased with our solid second quarter results. As we continue to execute on our consumption transformation, we remain focused on driving efficient growth and delivering breakeven for non-GAAP operating margin and free cash flow margin for 2024.

Shane Zee: Now GNII will take your questions.

Speaker Change: Now Jay and I will take your questions.

Unknown Attendee: Thanks, Rohan, to join the Q&A. Please raise your hand. And today, we will take our first question from Matt Hepper with RBC, followed by Morgan Stanley. Great, thanks for taking my questions, guys. I'm in the airport, so hopefully the background is okay. Jay, you know, I noticed, you know, the strong customer logo ads stood out to me. I think you noted on the underprepared remarks that the quality was also higher. I guess, does that imply that you could see faster expansion from this cohort as they continue to, you know, advance with the platform? Yeah, over time.

Unknown Attendee: Thanks, Rohan. To join the Q&A, please raise your hand. And today we will take our first question from Matt Hepper with RBC, followed by Morgan Stanley. Great. Thanks for taking my questions, guys. I'm at the airport.

Jay: Thanks, Rohan. To join the Q&A, please raise your hand.

Speaker Change: And today we will take our first questions from Matt Hepper with RBC followed by Morgan Stanley .

Unknown Attendee: So hopefully, the background noise is okay. Jay, you know, I noticed, you know, the strong customer logo ad stood out to me. I think you noted in your prepared remarks that the quality was also higher. I guess, does that imply that you could see faster expansion from this cohort as they continue to, you know, advance with the platform? Yeah, over time. So one of the measures we, you know, first of all, I would say, as we undertook this consumption transformation, one of our key goals was to accelerate customer acquisition. So that's played out as we desired.

Matthew George Hedberg: Great. Thanks for taking my questions, guys. I'm in the airport, so hopefully the background noise is okay.

Matthew George Hedberg: Jay, you know, I noticed, you know, the strong customer logo ad stood out to me, I think you noted on the on your prepared remarks, the quality was also higher, I guess, does that imply that you could see faster expansion from this cohort as they continue to, you know, advance with the platform?

Rohan Sivaram: The second thing that we were aiming for was to be a little more targeted in which customers were landing on. And so we, you know, we built a model to try to predict the opportunity in these customers and tagged a set of accounts we felt were high propensity. So the measure we use internally is what percentage of these new customer landings are in that high propensity segment.

Jay Kress: So, one of the measures we, you know, first of all, we say as we undertook this consumption transformation, one of our key goals was to accelerate customer acquisition. So that's played out as we desired. The second thing that we were aiming for was the a little more targeted in which customers were landing in. And so, we, you know, we built the model to try to predict the opportunity in these customers and tagged a set of accounts we felt were high propensity. So the measure we use internally is what percentage of these new customer lands are in that high propensity segment.

Speaker Change: Yeah, over time. So one of the measures we, you know, first of all, I would say as we undertook this consumption transformation, one of our key goals was to accelerate customer acquisition. So that's

Speaker Change: played out as we desired.

Speaker Change: The second thing that we were aiming for was be a little more targeted in which customers were landing in.

Speaker Change: And so we, you know, we built a model to try to predict the opportunity in these customers and tagged a set of accounts we felt were high propensity. So the measure we use internally is what percentage of these new customer lands are in that high propensity segment.

Unknown Attendee: And so, you know, obviously, it's on us to drive the growth in the accounts. But one of the things we think is promising is that that percentage has gone up substantially when we look at the first half of this year versus last year in the customers we were landing. Got it, thank you.

Rohan Sivaram: And so, you know, obviously it's on us to go drive the growth in the accounts. But one of the things we think is promising is that that percentage has gone up substantially when we look at the first half of this year versus last year in the customers were landing in. God, thank you.

Speaker Change: And so, you know, obviously it's on us to go drive the growth in the accounts, but one of the things we think is promising is that that percentage has gone up substantially when we look at the first half of this year versus last year in the customers we're landing in.

Rohan Sivaram: And then maybe one for you, Rohan, you noted some of the NRR pressure and the potential for lumpy Confluent platform business in the second half. It seems like that's contemplated in your guidance. I guess I'm curious, you know, after you saw what sounds like a little bit of slowness in June. How did things trend in July? I mean, have you think, have you seen things kind of stabilized a bit, or maybe just maybe a little bit more linearity on the cloud side? Thanks.

Rohan Sivaram: And then maybe one for you, Ron. You know, you noted some of the NRR pressure and the potential for lumpy complement platform business in the second half. It seems like that's contemplated in your guidance.

Speaker Change: Got it. Thank you. And then maybe one for you, Rohan. You know, you noted some of the NRR pressure and the potential for lumpy Confluent platform business in the second half. It seems like that's contemplated in your guidance.

Rohan Sivaram: I guess I'm curious, you know, after you saw, you know, something like a little bit of slowness in June, you know, how do things trend in July? I mean, if you've seen things kind of stabilized a bit or just maybe a little bit more on the linearity on the cloud side, thanks. Yeah. Thanks for your question, Matt. Yeah, I mean, you know, from a world guidance perspective, as you rightly pointed out, we've considered two factors. Our Confluent Platform business tends to be lumpy, primarily because of how the revrec is and the timing of some of the larger deals.

Speaker Change: I guess I'm curious, you know, after you saw, you know, sounds like a little bit of slowness in June , you know, how did things trend in July ? I mean, have you seen things kind of stabilized a bit or just maybe a little bit more on the linearity on the cloud side? Thanks.

Rohan Sivaram: Yeah, thanks for your question, Matt. Yeah, I mean, from an overall guidance perspective, as you rightly pointed out, we've considered two factors. Our Confluent platform business tends to be lumpy, primarily because of how the revenue rec is and the timing of some of the larger deals. So that's incorporated in the guide.

Speaker Change: Yeah.

Speaker Change: Thanks for your question, Matt.

Speaker Change: Yeah, I mean, you know, from an overall guidance perspective, as you rightly pointed out, we've considered two factors.

Speaker Change: Our Confluent platform business tends to be lumpy primarily because of how the rev-rack is and the timing of some of the larger deals.

Unknown Attendee: And the second one that you mentioned was around digital native customers. So for digital native customers, in Q1, we saw stabilization. And as we entered Q2, we did see a continuation of that stabilization. However, I would say towards the latter half of the quarter, we did see cost efficiencies and a focus on just driving some cost efficiencies from some of these customers, which actually continued into the month of July. So as we think of the back half of the year, we think taking a thoughtful and prudent approach to guidance would be the right thing to do. Thanks a lot, guys. Thanks, Matt.

Rohan Sivaram: So that's incorporated in the guide. And the second one that you mentioned was around the digital native customers. So for digital native customers, we, Q1, resource stabilization. And as we entered Q2, we did see a continuation of that stabilization. However, I would say towards a latter half of the quarter, we did see cost efficiencies and focus on just driving some cost efficiencies from some of these customers, which actually continued into the month of July.

Speaker Change: So that's incorporated in the guide. And the second one that you mentioned was around the digital native customers.

Speaker Change: So, thank you. Thank you.

Speaker Change: For digital native customers, we, Q1, we saw stabilization. And as we entered Q2, we did see a continuation of that stabilization. However, I would say towards the latter half of the quarter, we did see cost efficiencies and focus on just driving some cost efficiencies from some of these customers.

Speaker Change: which actually continued into the month of July . So as we think of the back half of the year, we think taking a thoughtful and prudent approach to guidance would be the right thing to do.

Rohan Sivaram: So as we think of the back half of the year, we think taking a thoughtful and brilliant approach to guidance would be the right thing to do.

Speaker Change: Thanks a lot, guys.

Unknown Attendee: We'll take our next question from Sanjit Singh with Morgan Stanley, followed by Barclays. Thank you for taking the question. I want to return to the sort of go-to-market transformation.

Speaker Change: Thanks, Matt. We'll take our next question from Sanjit Singh with Morgan Stanley , followed by Barclays.

Jay Kress: Thank you for taking the question. I want to return back to that sort of good market transformation. You know, I think there was, you know, an approach to, you know, utilize, you know, similar sales motions like MongoDB, who've done modern sales. One of the things that they've been seeing is that, as they try and sense one more volume and higher volumes of work. The quality 12 months down the road wasn't what they expected.

Sanderson: Thank you for taking the question. I want to return back to that sort of go to market transformation. You know, I think there was a, you know, an approach to

Unknown Attendee: You know, I think there was, you know, an approach to, you know, utilize, you know, similar sales motions like MongoDB, who've done modern cloud sales. One of the things that they've been seeing is that as they try and incentivize more volume and higher volumes of workloads, the quality 12 months down the road wasn't what they expected. I was wondering, Jay, I'm happy to see the new customer logos really accelerate, but if you look at it on a workload basis, how are you guys thinking about ensuring the quality of the workloads and not just seeing that increased volume?

Speaker Change: D. You know, utilize, you know, similar sales motions like MongoDB who've done modern cloud sales. One of the things that they've been seeing is that as they try and incent for more volume and higher volumes of workloads, the quality 12 months.

Speaker Change: Down the road wasn't what they expected. I was wondering, Jay, I'm happy to see the new customer logos really accelerate, but if you look at it on a workload basis, how are you guys thinking about ensuring quality of the workloads and not just seeing that increased volume?

Jay Kress: I was wondering, Jay. I'm happy to see the new customer logos really celebrate. But if you look at it on a workload basis, how are you guys thinking about ensuring all of the workloads and not just seeing that that increased volume. Yeah, you know, that's obviously on us to ensure that we're kind of getting the growth and expansion out of this customer said, you know, the first indication is just, are we getting into the right customers? I think that we've seen, you know, as we think about over the course of this year, we want to see those grow.

Unknown Attendee: Yeah, you know, that's obviously on us to ensure that we're kind of getting growth and expansion out of this customer set. You know, the first indication is just whether we are getting into the right customers. I think that we've seen, you know, as we think about over the course of this year, we want to see those grow. Part of our objective was definitely to get into customers earlier in the lifecycle, earlier in the development lifecycle, where they're actually setting up the architecture, where they can use more of our DSP, you know, in the first application they're planning.

Jay: Yeah, you know, that's obviously on us to ensure that we're kind of getting the growth and expansion out of this customer set. You know, the first indication is just are we getting into the right customer. So I think that we've seen, you know, as we think about over the course of this year, we want to see those grow.

Jay Kress: Part of our objective was definitely to get into customers earlier in the life cycle, earlier in the development life cycle, where they're actually setting up the architecture where they can use more of our DSP. You know, in the first application they're planning, I think that's been successful. And that's allowed us to take up the volume of customers, but yet really showing how those play out and spill into the hundred K plus and million dollar plus that will happen over time. Right.

Jay: Part of our objective was definitely to get into customers earlier in the life cycle, earlier in the development life cycle, where they're actually setting up the architecture, where they can use more of our DSP, you know, in the first application they're planning. I think that's been successful. And that's allowed us to take up the volume of customers.

Unknown Attendee: I think that's been successful, and that's allowed us to take up a volume of customers. But yeah, really showing how those play out and spill into the 100k plus and million dollar plus that will happen over time, right? And then, just as a follow-up, what are you guys thinking when you look at the pieces of real-time data infrastructure? I think OpenAI bought what's called a real-time database.

Jay: But yeah, really showing how those play out and spill into the $100K plus and $1 million plus that will happen over time.

Unknown Attendee: And you guys have sort of talked about the streaming platform, the stream processing platform, where does a real-time database sort of fit in? And is that something that another service offering that Confluent may get involved with? Yeah, we actually partner very closely with a number of providers of similar functionality. So I think Rockset was the company that OpenAI announced having bought.

Jay Kress: And then just as a follow-up, how are you thinking about when you look at the pieces of a real-time data infrastructure? I think OpenAI bought what's called like a real time database and you guys have sort of talked about the streaming platform, the stream processing platform. Where does the real-time database sort of fit in? And is that something that another service offering that complementing and bulk with over time? Yeah, you know, we actually partner very closely with a number of providers of similar functionality. So, you know, I think Rockset was the company that OpenAI announced having thought.

Speaker Change: Great. And then just as a follow-up, how are you guys thinking about when you look at

Speaker Change: The pieces of a real-time data infrastructure, I think OpenAI bought

Speaker Change: What's called like a real time database and you guys have sort of talked about the streaming platform, the stream processing platform. Where does the real time database sort of fit in? And is that something that another service offering that Confluent may get involved with over time?

Speaker Change: Yeah, you know, we actually partner very closely with a number of providers of similar functionality. So I think Rockset was the company that OpenAI announced having bought. There's probably half a dozen to a dozen companies in that segment where they're taking streams of data and serving different types of queries against those streams.

Jay Kress: Yeah, there's probably half a dozen to a dozen companies in that segment where they're taking streams of data and serving different types of queries against those streams. And that's a great set of partners for us. And we work with them around a whole set of applications, including some in the general space. You know, use cases around search, use cases around real-time analytics, use cases around aggregating and storing other key information sets that power workloads are there. There's definitely kind of a nice integration there between some of the real-time databases or streaming databases and the rest of the streaming platform.

Unknown Attendee: There are probably half a dozen to a dozen companies in that segment where they're taking streams of data and serving different types of queries against those streams. And that's a great set of partners for us. And we work with them on a whole set of applications, including some in the Gen-AI space, use cases around search, use cases around real-time analytics, use cases around aggregating and storing other key information sets that power workloads. So there's definitely kind of a nice integration there between some of the real-time databases or streaming databases and the rest of the streaming platform. Thanks, Jeff. Thanks, Sanjit.

Speaker Change: And that's a great set of partners for us. And we work with them around a whole set of applications, including some in the Gen AI space, you know, use cases around search, use cases around real-time analytics.

Speaker Change: use cases around aggregating and storing other key information sets that power workloads. So there's definitely kind of a nice integration there between some of the real-time databases or streaming databases and the rest of the streaming platform.

Raimo Lenschow: Thanks. Thanks, Angie. We'll take the next question from Rimo Lester with Barclays, followed by Deutsche. Hey, hey, thank you. Two very quick questions. First, we had a bit of a change on the field leadership, and I wanted to see if you kind of could have to give us some additional comments there. Angie, on the link as well, we kind of have it in the market for a few months now and you kind of mentioned some of that on the call, but like what's your experience and so far in terms of adoption, what people are using for versus what you expected on the user side.

Jay: Thanks, Jay.

Unknown Attendee: We'll take our next question from Raimo Lenschow on Barclays followed by Deutsche. Hey, thank you. Two very quick questions.

Speaker Change: Thanks, Sanjit. We'll take our next question from Raimo Lenschow with Barclays, followed by Deutscher.

Unknown Attendee: First, we had a bit of a change in sales leadership, and I wanted to see if you could give us some additional comments there. And then Jay, on Slink as well, we kind of have it in the market for a few months now. And you kind of mentioned some of that on the call. But like, what's your experience so far in terms of adoption?

Raimo Lenschow: Hey, thank you. Two very quick questions. First, we had a bit of a change on the Sills leadership and I wanted to see if you could give us some additional comments there. And then Jay, on Slink as well, we kind of have it in the market for a few months now, and you kind of mentioned some of that on the call, but what's your experience so far in terms of adoption, what people are using for versus what you expected from the user side? Thank you.

Jay Kress: Thank you. Yeah, yeah, both good questions. So, yeah, you know, we did have, you know, one departure on the sales side, you know, the structure of our team is the larger field effort. The, you know, reps, technical folks, BD folks, consulting is all under Erica Schultz. So she's kind of at the top of the sales organization and reports to me. She remains in charge of that and has been a confluent for over four years. So there's a fair amount of continuity. Under her, the managers, you know, management structure for the reps just kind of bounced back and forth between something where she manages the individual theater leaders like APAC or via directly or has somebody who, you know, manages that set of theater leaders.

Unknown Attendee: What people are using it for versus what you expected on the user side? Thank you. Yeah, yeah, both good questions. So yeah, you know, we did have, you know, one departure on the sales side. The structure of our team is the larger field effort, the reps, technical folks, BD folks, and consulting are all under Erica Schultz. So she's kind of at the top of the sales organization and reports to me. She remains in charge of that, and she has been at Confluent for over four years.

Jay: Yeah, both good questions. So yeah, you know, we did have, you know, one departure on the sales side, you know, the structure of our team is the larger field effort, the, you know, reps, technical folks,

Jay: BD Folks, Consulting, all under Erica Schultz.

Jay: So she's kind of at the top of the sales organization and reports to me.

Jay: She remains in charge of that and has been at Confluent for over four years.

Unknown Attendee: So there's been a fair amount of continuity under her; the managers, you know, the management structure for the reps, just kind of bounce back and forth between something where she manages the individual theater leaders, like APAC or directly, or has somebody who manages that set of theater leaders. And so we did make a change in that structure. Um, you know, I won't comment on the departure in detail, but, you know, we're not planning on immediately backfilling it. We're, we're comfortable with the arrangement we've had, and, you know, that's worked well for us in the past. And we feel good about that.

Jay: So there's a fair amount of continuity.

Jay: Under her, the managers, you know, management structure for the reps.

Jay: Just kind of bounced back and forth between something where she manages the individual theater leaders like AIPAC or EMEA directly.

Speaker Change: Or as somebody who, you know, manages that set of theater leaders. And so we did make a change in that structure. You know, I won't comment on the departure in detail, but...

Jay Kress: And so we did make a change in that structure. You know, I won't comment on the departure in detail, but you know, we're not playing on immediately back filling out where we're comfortable with the arrangement we've had. And yeah, that's worked well for us in the past. So we feel good about that. Thank you. in the near term.

Speaker Change: We're not planning on immediately backfilling it. We're comfortable with the arrangement we've had, and that's worked well for us in the past, and we feel good about that in the near term.

Unknown Attendee: Um, on Flink, um, yeah, it continues to go well. This is, you know, a ton of excitement from our customers. I think last quarter we said that on the order of around 600 prospects and customers tried it out.

Jay Kress: I'm Flink. Yeah, I continue to go, well, this is, you know, a ton of excitement from our customers. I think last quarter we said on the order of around 600 prospects and customers have tried it out. Yeah, that's up to over 1000 now. You know, we're starting to see really nice growth in the revenue from that, but of course it's still early days, small numbers. What we want to see is see that ramp to a larger percentage of the business, see more of the kind of large-scale production use cases come online. Yeah, that's what we're looking for over the course of this year.

Flink: I'm Flink. Yeah, it continues to go well. There's a ton of excitement from our customers.

Flink: I think last quarter we said on the order of around 600 prospects and customers have tried it out. You know, that's up to over a thousand now. You know, we're starting to see really nice growth in the revenue from that. But of course, it's still early days, small numbers. What we want to see is see that ramp to a larger percentage of the business.

Flink: see more of the kind of large scale production use cases come online. That's what we're looking for over the course of this year. And if we're successful in that, that will be a very positive tailwind for the business overall, as it gets to a larger portion of the business heading into next year.

Jay Kress: And you know, for a successful map, that will be a very positive tailwind for the business overall as it gets to a larger portion of the business heading into next year.

Jay Kress: Okay, perfect. Thank you. Thanks, Raimo.

Speaker Change: Okay, perfect. Thank you.

Unknown Attendee: We'll take our next question from Brett Zelnick with Deutsche, followed by William Blair. Thanks very much, Shane, and great to see the progress in new logo and the path to profitability. Rohan, you characterized digital native customers as volatile. What's the behavior that you're seeing specifically? Are they down selling or the churning? And is this more cloud or complement platform? How much of a risk is this going forward, and the extent to which you're embedding it in the guide? Yeah, thanks for the question, Brad. I mean, when you really look at the digital native segment and customers, and if you zoom out and look at it over a longer period of time, the growth has been linear and growth has been upward, but not linear.

Speaker Change: Thanks, Raimo. We'll take our next question from Brett Zelnick with Deutsche followed by William Blair.

Brad Alan Zelnick: Thanks very much, Shane, and great to see the...

Speaker Change: The Progress, A New Logo, and The Path to Profitability. Rohan, you characterize digital native customers as volatile.

Brad Alan Zelnick: What's the behavior that you're seeing specifically? Are they downselling? Are they churning? And is this more cloud or confluent platform? How much of a risk is this going forward and the extent to which you're embedding it in the guide?

Unknown Attendee: Uh, you know, that's up to over a thousand now. And we're starting to see, uh, really nice, uh, growth in the revenue from that. But of course, it's still early days, and small numbers. What we want to see is that ramp up to a larger percentage of the business, and see more of the kind of large-scale production use cases come online. Um, you know, that's what we're looking for over the course of this year.

Unknown Attendee: And, you know, if we're successful in that, that will be a very positive tailwind for the business overall as it gets to a larger portion of the business heading into next. Okay, perfect. Thank you. Thanks, Raimo.

Rohan Sivaram: Yeah, thanks for the question, Brad. I mean, when you really look at the digital native segment and customers,

Speaker Change: and if you zoom out and look at it over a longer period of time, the growth has been linear and growth has been upward but not linear. So, you know, over a period of time, this segment, we've seen good growth and the growth rates have been higher than the rate of the company.

Rohan Sivaram: So, you know, over a period of time, the segment we've seen good growth, and the growth rates have been higher than the rate of the company. But when you really look at the last 12 or months, the segment has been under some kind of cost efficiency pressure, and you do see every now and then, you know, customers just focusing on the cost side of it and then adding more workloads. So that is a trend that we've seen, but the big takeaway from my perspective is if you step back and look at it over a longer period of time, the segment has been actually a good growth for us.

Speaker Change: But when you really look at the last 12-odd months,

Speaker Change: This segment has been under some kind of cost efficiency pressure.

Speaker Change: And you do see every now and then, you know, customers just focusing on the cost side of it and then adding more workloads. So that is a trend that we've seen. But the big takeaway from my perspective is if you step back and look at it over a longer period of time, this segment has been actually a good grower for us. And that's a long-term outlook.

Jay Kress: And that's a long time outlook. But, you know, as you think about how we saw the month of June, we thought it just proven to make it into our second half outlook as we look ahead. Yeah, I think that's a good characterization. I mean, when we step back and think about the digital native segment overall, you know, we remain very optimistic that that's an area that's grown for us very nicely over the last few years, and we think we'll continue that way. But as Rohan said, yeah, there is probably more cost pressure there, and that does mean that, you know, if we look at Q1 to Q2, we did see different performance, you know, in that segment between those two quarters where we saw.

Speaker Change: But, you know, as you think about how we saw the month of June , we thought it just prudent to make it into our second half outlook as we look ahead.

Speaker Change: Yeah, I think that's a good characterization. I mean, when we step back and think about the digital native segment, overall, we remain very optimistic that that's an area that's grown for us very nicely over the last few years, and we think we'll continue that way.

Rohan Sivaram: But as Rohan said, yeah, there is probably more cost pressure there. And that does mean that, you know, if we look at Q1 to Q2, we did see different performance, you know, in that segment between those two quarters where we saw outsized growth in Q1 and, you know, a little bit more optimization in Q2. And I think that's kind of the balance of those two forces. We expect that to play out in the second half of the year as well.

Jay Kress: Outside growth in Q1 and, you know, a little bit more optimization in Q2, and I think that's kind of the balance of those two forces. We expect that to play out in the second half of the year as well.

Jay Kress: Thanks, Jay. Maybe just a quick follow-up for you. I see you have a number of open job racks for a ease in the US federal market. Can you just remind us of where you stand in that market? And if you see upside in this Q3 that could come from federal, or is this more of a 2025 opportunity? Thanks. Yeah, yeah, you know, by and large, you know, open sales hires in the federal space that we're making, you know, in this next quarter would impact next year. But indeed, there's, you know, a very talented team that covers the public sector in the US and elsewhere.

Rohan Sivaram: Thanks, Jay. Maybe just a quick follow-up for you. I see you have a number of...

Speaker Change: Open job recs for AEs in the U.S. federal market. Can you just remind us of where you stand in that market and if you see upside in this Q3 that could come from federal or is this more of a 2025 opportunity? Thanks.

Jay: Yeah, yeah, you know, by and large, you know,

Speaker Change: Open sales hires in the federal space that we're making, you know, in this next quarter would impact next year, but indeed there's, you know, a very talented team that covers the public sector in the U.S. and elsewhere.

Jay Kress: And it's a good contributor to the business. So yeah, we're adding to that team, and we do think that's an area where we'll see. Cool, thanks, and keep up the good work, guys.

Speaker Change: and is a good contributor to the business. So, yeah, we're adding to that team. And we do think that's an area where we'll see growth.

Speaker Change: Cool. Thanks, Jim. Keep up the good work, guys.

Jason Ader: Thanks. What's the next question from Jason Ader with William Blair, followed by TD Con? Yeah, thanks, Shane.

Unknown Attendee: We'll take our next question from Brett Zelnick with Deutsche followed by William Blair. Thanks very much, Shane. And great to see the progress on the new logo and the path to profitability. Rohan, you characterize digital native customers as volatile. What's the behavior that you're seeing specifically? Are they downselling?

Speaker Change: Thanks. We'll take our next question from Jason Ader with William Blair, followed by T.D. Kahn.

Rohan Sivaram: Are they churning? And is this more of a cloud or confluent platform? How much of a risk is this going forward? And to what extent are you embedding it in the guide?

Jay Kress: Good afternoon, everyone. Just want to ask about go to market. It seems like it's been a bit of an evolution over the last several years, and you guys are so kind of figuring out figuring it out beyond the change to consumption and the management structure that you alluded to. What else would you call out that you've learned? That could help move the needle on your go-to-market motion and where the best banks of the buck investments are going forward? Yeah, it's a good question. If I think about the first half of this year, it was mostly that shift to consumption.

Jason Noah Ader: Thanks, Shane. Good afternoon, everyone. I just want to ask about go-to-market. It seems like it's been a bit of an evolution over the last several years, and you guys are still kind of figuring it out.

Speaker Change: Beyond the change to consumption and the management structure that you alluded to, what else would you call out that you've learned that could help move the needle on your go-to-market motion and where the best bang for the buck investments are going forward?

Unknown Attendee: Yeah, thanks for the question, Brad. I mean, when you look at the digital native segment and customers, and if you zoom out and look at it over a longer period of time, the growth has been linear, and growth has been upward, but not linear. So you know, over a period of time, the segment, we've seen good growth, and the growth rates have been higher than the growth rates of the company.

Speaker Change: Yeah, it's a good question. You know, if I think about the first half of this year, it was mostly that, you know, shift to consumption is kind of rebuilding what you had on a new foundation around a different set of metrics, you know, oriented on something new.

Unknown Attendee: But when you really look at the last 12-odd months, this segment has been under some kind of cost efficiency pressure. And you do see every now and then, you know, customers just focusing on the cost side of it and then adding more workloads.

Jay Kress: It's kind of rebuilding what you had on a new foundation around a different set of metrics oriented on something new. Yeah, if I think about the balance of the year, and the odd is really taking advantage of that structure. I do think that's the right setup for the type of cloud infrastructure company that you're going to need. Whether we are, if you look at both peer companies and what the cloud providers have done over time to drive growth of workloads, it really hinges around that. And so I feel good about the progress we've made. And some of the early results from that, but I think it's even more exciting when we think about how we can use that to drive the adoption of these expansion product areas and the expansion of new workloads in the customer base.

Speaker Change: You know, if I think about the balance of the year beyond is really taking advantage of that structure. I do think that's the right setup for the type of cloud infrastructure company that we are.

Speaker Change: If you look at both peer companies and what the cloud providers have done over time,

Speaker Change: to drive growth of workloads. It really hinges around that. And so I feel good about the progress we've made.

Speaker Change: And some of the early results from that, but I think it's even more exciting when we think about how we can use that to drive the adoption of these expansion product areas and the expansion of new workloads in the customer base.

Jay Kress: And then just a quick follow-up on the consumption transition. I think you said smaller lands, Jay, is that right? Yeah, yeah, if I think about what we've shown, we've kind of taken up the volume of lands, but we will be catching these kind of earlier in the build cycle. We think that's largely good, but it does mean that first quarter, the contribution from a given customer would be smaller than it was in the past, just because we're earlier in that project life cycle.

Rohan Sivaram: So that is a trend that we've seen. But the big takeaway from my perspective is if you step back and look at it over a longer period of time, this segment has actually been a good grower for us. And that's a long-term outlook. But, you know, as you think about how we saw the month of June, we thought it was just prudent to make it into our second half outlook as we look ahead. Yeah, I think that's a good characterization.

Unknown Attendee: I mean, when we step back and think about the digital native segment, overall, you know, we remain very optimistic that that's an area that's grown for us very nicely over the last few years. And we think we'll continue that way. But as Rohan said, yeah, there is probably more cost pressure there.

Jay: And then just a quick follow-up on the consumption transition you talked about. I think you said smaller lands, Jay, is that right?

Jay: Yeah, yeah, if I think about, you know, what we've shown, we've kind of taken up the volume of lands, but we will be catching these kind of earlier in the build cycle. We think that's largely good, but it does mean, you know, in that first quarter, the contribution from a given customer will be smaller than it was in the past.

Unknown Attendee: And that does mean that, you know, if we look at Q1 to Q2, we did see different performance in that segment between those two quarters, where we saw outsized growth in Q1 and, you know, a little bit more optimization in Q2. And I think that's kind of the balance of those two forces; we expect that to play out in the second half of the year. Thanks, Jay.

Jay: Just because we're, you know, earlier in that project life cycle.

Jay Kress: Thank you. Thanks, Jason. What's going to next question from Derek Wood with TD Colin Fall about DA basis? Great, thanks Jay. In terms of the new motions of cross-selling DSP to the base, can you talk about what parts of that portfolio are seeing the strongest uptake when you look at governance connectors, processors? Is there anything you'd highlight getting more traction? And when you sell into a core customer, what's often the ASP uplift when you cross-sell one of those components? Yeah, yeah, it's a good question. Yeah, I would think that each of those products is being in a kind of S curve where, you know, it's on some ramp. The, you know, earliest of those was our connector ecosystem where we continue to make improvements and drive growth with it.

Speaker Change: Thank you.

Unknown Attendee: Maybe just a quick follow up for you. I see you have a number of open job recs for AEs in the US federal market. Can you just remind us of where you stand in that market? And if you see upside in Q3, that could come from federal? Or is this more of a 2025 opportunity? Thanks.

Speaker Change: Thanks Jason. We'll take our next question from Derek Wood with T.D. Cowan followed by D.A. Davidson.

Unknown Attendee: Yeah, by and large, open sales hires in the federal space that we're making in this next quarter would impact next year. But indeed, there's a very talented team that covers the public sector in the US and elsewhere and is a good contributor to the business. So yeah, we're adding to that team, and we do think that's an area where we'll see growth. Cool. Thanks, Jim. Keep up the good work, guys. Thanks. We'll take our next question from Jason Ader with William Blair, followed by TD Commons. Thanks, Shane. Good afternoon, everyone.

Unknown Attendee: I just want to ask about going-to-market. It seems like it's been a bit of an evolution over the last several years, and you guys are still kind of figuring it out. Beyond the change to consumption and the management structure that you alluded to, what else would you call out that you've learned that could help move the needle on your go-to-market motion and where the best bang for the buck investments are going forward? Yeah, it's a good question.

Unknown Attendee: You know, if I think about the first half of this year, it was mostly that shift to consumption; it's kind of rebuilding what you had on a new foundation around a different set of metrics, you know, oriented on something new. You know, if I think about the balance of the year beyond really taking advantage of that structure, I do think that's the right setup for the type of cloud infrastructure company that we are.

Speaker Change: Great. Thanks.

Jay: Jay, in terms of the new motions of cross selling DSP to the base, can you

Speaker Change: Talk about what parts of that portfolio are

Unknown Attendee: Seeing the strongest uptake when you look at governance, connectors, processors. Is there anything you'd highlight getting more traction? And when you sell into a core customer, what's often the ASP uplift when you cross sell one of those components?

Unknown Attendee: If you look at both peer companies and what cloud providers have done over time to drive growth of workloads, it really hinges on that. And so I feel good about the progress we've made. And some of the early results from that, but I think it's even more exciting when we think about how we can use that to drive the adoption of these expansion product areas and the expansion of new workloads in the customer. And then just a quick follow-up on the consumption transition you talked about. I think you said smaller lands, Jay, is that right?

Jay: Yeah, yeah, it's a good question. Yeah, I would think of each of those products as being in a kind of S-curve, where, you know, it's on some ramp. The, you know, earliest of those was our connector ecosystem, where we continue to make improvements and drive growth with it. We think there's a lot of opportunity there.

Jay Kress: We think there's a lot of opportunity there. The governance portfolio was next, and Flink is the newest addition to that. And so, you know, I think there's interest interaction around all three, but Connect is the bigger business out of those three just because it started earlier. You know, when we think about kind of percentage growth, of course, you see the highest percentage off length because it's start from the small space. And so we want to continue to ramp all three of those, but we expect the attach from those components to increase quite substantially in the year ahead as we open that up to more customers.

Unknown Attendee: The Governance Portfolio was next, and Flink is the newest addition to that.

Unknown Attendee: And so, you know, I think there's interest and traction around all three, but Connect is, you know, the bigger business out of those three, just because it started earlier. You know, when we think about kind of percentage growth, of course, you'd see the highest percentage off-link because it started from the small space.

Unknown Attendee: And so we want to continue to ramp all three of those, but we expect.

Unknown Attendee: The attach from those components to increase quite substantially.

Unknown Attendee: in the year ahead as we open that up to more customers.

Jay Kress: What drives that is, in part, maturity of the product. The, you know, a lot of the security, kind of private networking functionality, other things that are important for our largest revenue customers to use those components are, you know, either just added or just being added over the course of this year, and that really opens up a lot more of the large scale production usage to the rest of our customer base. And so that's a critical focus for us when we think about that.

Unknown Attendee: What drives that is, in part, maturity of the product, a lot of the security, private networking functionality, other things that are important for our largest revenue customers to use those components are either just added or just being added over the course of this year, and that really opens up a lot more of the large-scale production usage.

Unknown Attendee: to the rest of our customer base. And so that's a critical focus for us when we think about the balance of the year.

Jay Kress: Councilor here. Yeah, we haven't given an exact kind of uplift number. We shared a little bit of sketch of the shape of that business so far. I think, to be honest, I think it's so early days as these components have even a customer that's adopted connectors. There's more of them they can use, even if they have their first few Flink queries. You know, we would like to take over a substantial portion of their applications in the stream processing layer. And so I wouldn't think about as a dynamic uplift of like, oh, you'll see X percent.

Unknown Attendee: We haven't given an exact kind of uplift number, we shared a little bit of

Unknown Attendee: sketch of the shape of that business, you know, so far.

Unknown Attendee: I think, you know, to be honest, I think it's so early days as these components ramp, even a customer that's adopted connectors, there's more of them they can use.

Unknown Attendee: Even if they have their first few Flink queries, you know, we would like to take over a substantial portion of their applications in the stream processing layer. And so I wouldn't think of that as a dynamic uplift of like, oh, you'll see X percent and it's binary either on or off. I would see, you know, this is kind of unlocking an adoption cycle that drives growth, not just in core Kafka, but now in these components as well, which will themselves produce more growth in the underlying Kafka usage.

Rohan Sivaram: And it's a binary, either on or off. I would see, you know, this is kind of unlocking an adoption cycle that drives growth, not just in Korkovka, but now in these components as well, which will themselves produce more growth in the underlying off of usage. Yeah, that makes a lot of sense. Thanks. Rohan, for you, last quarter, I think you highlighted targets of getting to 125% NRR next year. Given that NRR dropped below 120, and you're seeing some different behavior. How does this kind of change your view on where you think you can get to and fiscal 25 on NRR?

Unknown Attendee: Yeah. Yeah. If I think about, you know, what we've shown, we've kind of taken up the volume of lands, but we will be catching these kinds of things kind of earlier in the build cycle. We think that's largely good, but it does mean, you know, that first quarter, the contribution from a given customer will be smaller than it was in the past just because we're, you know, earlier in that project lifecycle. Thank you. Thanks, Jason. We'll take our next question from Derek Wood with TD Collins, followed by DA Davis.

Unknown Attendee: Yeah, that that makes a lot of sense. Thanks. Rohan, for you, last quarter.

Rohan Sivaram: I think you highlighted targets of getting to 125% NRR next year.

Speaker Change: Given that NRR dropped below 120 and you're seeing some different behavior, how does this kind of change your view on where you think you can get to in fiscal 25 on NRR?

Unknown Attendee: Great. Thanks, Jay. In terms of the new motions of cross-selling DSP to the base, can you talk about what parts of that portfolio are seeing the strongest uptake when you look at governance, connectors, and processors? Is there anything you'd highlight getting more traction? And when you sell into a core customer, what's the ASP uplift when you cross sell one of those components? Yeah, yeah, it's a good question.

Rohan Sivaram: Yeah, Derek, I mean, when I really look at the medium term, as Jay highlighted right now, you know, the outlook has not changed at all.

Unknown Attendee: Yeah, I would think of each of those products as being in a kind of S-curve where, you know, they're on some ramp. The earliest of those was our connector ecosystem, where we continue to make improvements and drive growth with it. We think there's a lot of opportunity there. The Governance Portfolio was next, and Flink is the newest addition to that.

Unknown Attendee: And so, you know, I think there's interest and traction around all three, but Connect is, you know, the bigger business out of those three, just because it started earlier. You know, when we think about kind of percentage growth, of course, you'd see the highest percentage on Flink because it started from the smallest. And so we want to continue to ramp up all three of those, but we expect the attach rate from those components to increase quite substantially in the year ahead as we open that up to more customers. What drives that is, in part, the maturity of the product.

Rohan Sivaram: Yeah, Derek, I mean, when I really look at the medium term, as Jay highlighted, right now, you know, the outlook has not changed at all. I'll basically talk about three things.

Unknown Attendee: A lot of the security, private networking functionality, other things that are important for our largest revenue customers to use those components are either just added or are just being added over the course of this year. And that really opens up a lot more of the large-scale production usage to the rest of our customer base. And so that's a critical focus for us when we think about the balance. We haven't given any exact kind of uplift number.

Unknown Attendee: We shared a little bit of a kind of sketch of the shape of that business, you know, so far. I think, you know, to be honest, I think it's still early days as these components ramp up, even a customer that's adopted connectors, there are more of them they can use, even if they have their first few Flink queries. We would like to take over a substantial portion of their applications in the stream processing layer.

Unknown Attendee: And so I wouldn't think of that as a dynamic uplift of like, oh, you'll see X percent, and it's binary, either on or off. I would see, you know, this is kind of unlocking an adoption cycle that drives growth, not just in core Kafka but now in these components as well, which will themselves produce more growth in the underlying Kafka user. Yeah, that makes a lot of sense

Rohan Sivaram: I'll basically talk about three things. First, you know, data streaming platform. And as Jay just pointed out, the products within our data streaming platform be Connect, Stream Processing or Fling or Governance. There are all early stages of adoption. And 2025 is going to be the year where there is going to be monetization and material contribution to revenue. The second is around consumption transformation. By the time we finish the year, we'll have completed a full year of the transformation and a full year of fine tuning. Our go-to market, all things consumption. So we expect to get a win from that.

Speaker Change: First, you know, data streaming platform. And as Jay just pointed out,

Speaker Change: The products within our data streaming platform, be it Connect, Stream Processing, or Flink, or Governance, they're all early stages of adoption. And 2025 is going to be the year where there is going to be monetization and material contribution to revenue.

Unknown Attendee: Rohan, for you, last quarter, I think you highlighted targets of getting to 125% NRR next year. Given that NRR dropped below 120, and you're seeing some different behavior. How does this kind of change your view on where you think you can get to in fiscal 25 on NRR? Yeah, Derek. I mean, when I really look at the medium term, as Jay highlighted, right now, the outlook has not changed at all. I'll basically talk about three things. First, you know, the data streaming platform.

Rohan Sivaram: And as Jay just pointed out, the products within our data streaming platform, be it Connect, Stream Processing, Flink, or Governance, are all in the early stages of adoption, and 2025 is going to be the year where there is going to be monetization and material contribution to revenue. The second is around the consumption transformation.

Speaker Change: The second is around consumption transformation. By the time we finish the year, we'll have completed a full year of the transformation and a full year of fine-tuning our go-to-market, all-things consumption. So we expect to get tailwind from that.

Rohan Sivaram: By the time we finish the year, we'll have completed a full year of the transformation and a full year of fine-tuning our go-to-market all-things consumption, so we expect to get tailwind from that. And the third category is Gen AI.

Rohan Sivaram: And the third category is Jenny. We've been talking to customers, and Jay highlighted also in his prepared remarks. Real-time data is going to be a key component and key part of this model ecosystem. So when you really take a step back and look at some of these drivers and vectors of growth, our view around NRR getting back to our medium-term targets have not changed. Thank you for the color.

Speaker Change: And the third category is Gen AI. We've been talking to customers, and Jay highlighted also in his prepared remarks.

Rohan Sivaram: We've been talking to customers, and Jay highlighted in his prepared remarks that real-time data is going to be a key component and key part of this broader ecosystem. So when you really take a step back and look at some of these drivers and vectors of growth, our view around NRR getting back to our medium-term targets has not changed. Thank you for the color.

Speaker Change: Real-time data is going to be a key component and key part of this broader ecosystem. So when you really take a step back and look at some of these drivers and vectors of growth, our view around NRR getting back to our medium-term targets has not changed.

Speaker Change: Thank you for the color.

Rudy Kessinger: Thanks, Derek. We'll take on the next question from Rudy Gessinger with D.A. Davidson, followed by a wolf research. Hey guys, can you hear me? Okay, I'm going to have an active issue. Yeah, love, and clear. Okay, great.

Unknown Attendee: Thanks, Derek. We'll take our next question from Rudy Kessinger with D.A. Davidson, followed by Wolf Research. Hey guys, can you hear me okay?

Speaker Change: Thanks, Derek. We'll take our next question from Rudy Kassinger with DA Davidson, followed by Wolf Research.

Unknown Attendee: I'm having a bit of an activity issue. Yeah, loud and clear. Okay, great. I'm curious about international growth; it has actually slowed there quite drastically relative to U.S. growth. And in some of the sales attrition I've seen, it seems like it's been more weighted towards folks in Australia, APAC, more so than the U.S. relative to your revenue split. So any, any comments you can provide there just on some of the slowdown in international sales? Yeah, do you want to speak to him about that, Rohan? Yeah, happy to. Rudy, candidly, not a whole lot to read into it.

Rudy Kassinger: Hey guys, can you hear me okay? I'm having a connectivity issue. Yeah, loud and clear.

Rohan Sivaram: I'm sure some international growth is actually slowed there quite a bit or actively relative to US growth. And in some of the sales attrition, I've seen it seems like it's been more weighted towards folks in Australia, APAC more so than the US relative to your revenue. So any any colors can buy there just on some slow down international. Yeah, do you want to speak to that round? Yeah, happy to. Rudy can't really not a whole lot to read into it. When you see the relative, I would say difference in growth rates between international and US.

Speaker Change: I'm curious on the international, the growth has actually slowed there, quite irreversibly relative to U.S. growth, and in some of the sales attrition I've seen, it's been a

Speaker Change: It seems like it's been more weighted towards folks in Australia, APAC, more so than the US, relative to your revenue split. So any comments you can provide there, just on some of the slowdown in international? Yeah. Do you want to speak to that, Rohan?

Rohan Sivaram: When you see the relative, I would say, difference in growth rates between international and U.S., more often than not, the driver is the timing of some of these larger confluent platform deals. And I mean, Q2 was exactly the same. We called out two large eight-figure deals. Both of the deals were in North America, and hence the delta, I would say, relative difference in the growth rates. So not a whole lot to call out.

Rohan Sivaram: Yeah, happy to. Rudy, candidly, not a whole lot to read into it. When you see the relative, I would say, difference in growth rates between international and U.S.,

Rohan Sivaram: More often than not, the driver is timing of some of these larger conference platform deals. And I mean, Q2 was exactly the same. We called out to large eight-figure deals. Both of the deals were in North America, and hence the delta, I would say, relative difference in the growth rates. So not a whole lot to call out on the sales attrition.

Speaker Change: More often than not, the driver is timing of some of these larger Confluent platform deals.

Rohan Sivaram: And, I mean, Q2 was exactly the same. We called out two large eight-figure deals. Both of the deals were in North America, and hence the delta, I would say, relative difference in the growth rates.

Rohan Sivaram: So, not a whole lot to call out. On the sales attrition, I'd say, again, you know, no specific trends that we'd like to call out. Just two comments I'll make on that front.

Rohan Sivaram: I'd say again, you know, no no specific friends that we'd like to call out; just two prop comments I'll make on that front. First is, you know, as we kind of went through the consumption transformation, obviously, as we stand right now reflecting back, we feel really good with the overall sales capacity we have on board. The first half of the year we've had strong hiring from a sales organization perspective, and that just sets us well as we look ahead for rest of the year. I'd say we have the right capacity in place to deliver on our four.

Rohan Sivaram: On sales attrition, I'd say, again, you know, no, no specific trends that we'd like to call out. There are just two comments I'll make on that front. First, you know, as we kind of went through the consumption transformation, obviously, as we stand right now, reflecting back, we feel really good with the overall sales capacity we have on board. In the first half of the year, we've had strong hiring from a sales organization perspective. And that just sets us well as we look ahead for the rest of the year.

Speaker Change: First is, you know, as we kind of went through the consumption transformation, obviously, as we stand right now, reflecting back,

Speaker Change: We feel really good with the overall sales capacity we have on board.

Speaker Change: The first half of the year, we've had strong hiring from a sales organization perspective, and that just sets us well as we look ahead for the rest of the year, I'd say we have the right capacity in place to deliver on our forecast.

Rohan Sivaram: Yes.

Rohan Sivaram: Okay, and then secondly, just on the model, I know you guys are guiding us, just a total subscription revenue. It sounds like platform; it's probably, you know, tough comparing a certain kind of person's first half, maybe down a bit. And Q3, do I have that right? And secondly, on cloud revenue, just any directional color you can give in the sequential expectations of cloud. It sounds like maybe some of the headwinds in June, July, maybe the sequential add in Q3 is a bit lower than Q2. I lost you a little bit on the first part of your question, but I'll answer it if it's not covered. Let me know, right?

Rohan Sivaram: I'd say we have the right capacity in place to deliver on our forecast. Okay, and then secondly, just on the model, I know you guys are guiding just total subscription revenue. It sounds like platform is probably, you know, tough comparing the second half versus the first half, maybe down a bit in Q3. Do I have that right?

Speaker Change: Okay, and then secondly, just on the model, I know you guys are guiding, it's just total subscription revenue. It sounds like platform is probably, you know, tough comparing a second half versus first half, maybe down a bit.

Speaker Change: Steffan Tomlinson, Shane Xie, Edward Kreps, Rohan Sivaram

Unknown Attendee: And secondly, on cloud revenue, just any directional color you can give on the sequential expectations for cloud, it sounds like that maybe some of the headwinds in June and July, maybe the sequential ad in Q3 is a bit lower than Q2. I lost you a little bit on the first part of your question, but I'll answer it. If it's not covered, let me know, right?

Speaker Change: I lost you a little bit on the first part of your question, but I'll answer it if it's not covered. Let me know. Right. Well, when we look at the second half guidance, I'll say I called out two drivers.

Rohan Sivaram: When we look at the second half, guidance, I'll say I called out to drivers. The first is around Confluent Platform. And in general, when you have these large deals, the timing of these deals matters. And the timing of these deals, not only from a renewal perspective, but also from an expansion perspective. Renewals that tend to be a lot more predictable than the expansions. And hence my comment around the second half, you know, with respect to platform on the Confluent Cloud side. Again, what we are essentially modeling out is we're thinking that at the dynamics that we saw in the digital native customer segment will kind of continue into the second half.

Speaker Change: The first is around Confluent platform and

Speaker Change: In general, when you have these large deals, the timing of these deals matters.

Speaker Change: And the timing of these deals, not only from a renewal perspective, but also from an expansion perspective. Renewals tend to be a lot more predictable than the expansions. And hence my comment around the second half, you know, with respect to platform.

Rohan Sivaram: Well, when we look at the second half guidance, I'll say I called out two drivers. The first is around the Confluent Platform. And in general, when you have these large deals, the timing of these deals matters. And the timing of these deals, not only from a renewal perspective but also from an expansion perspective. Renewals tend to be a lot more predictable than the expansions. And hence my comment about the second half, you know, with respect to platform.

Speaker Change: On the Confluent Cloud side, again, what we are essentially modeling out is we're thinking that as the dynamics that we saw in the digital native customer segment will kind of continue into the second half.

Rohan Sivaram: So yeah, starting this quarter, we've obviously stopped guiding total revenue, and the focus will be on subscription revenue. But just to help with the transition from an overall modeling point perspective, we expect cloud mix for the full year as a percentage of total subscription revenue to be approximately 53% in that zip code. And that's really consistent with the mix that I shared earlier in the years, so not a whole lot has changed. But I just wanted to provide that color as you think about the second half, Rudy. Yeah, that's helpful. You, you, you have both parts.

Speaker Change: So, yeah, starting this quarter, we've obviously stopped guiding total revenue and the focus will be on subscription revenue. But just to help with the transition from an overall modeling point perspective,

Unknown Attendee: On the Confluent Cloud side, again, what we are essentially modeling out is that the dynamics that we saw in the digital native customer segment will kind of continue into the second half. So yeah, starting this quarter, we've obviously stopped guiding total revenue, and the focus will be on subscription revenue. But just to help with the transition from an overall modeling point of view, we expect cloud mix for the full year as a percentage of total subscription revenue to be approximately 53% in that zip code.

Speaker Change: We expect cloud-mix.

Speaker Change: for the full year as a percentage of total subscription revenue to be approximately 53% in that zip code. And that's very consistent with the mix that I shared earlier in the year. So not a whole lot has changed. But I just wanted to provide that color as you think about the second half, Rudy.

Unknown Attendee: And that's very consistent with the mix that I shared earlier in the year. So not a whole lot has changed, but I just wanted to provide that color as you think about the second half, Rudy. Yeah, that's helpful. And you hit on both parts. Thanks.

Rudy Kassinger: Yeah, that's helpful. And you hit on both parts. Thank you.

Rohan Sivaram: Thank you.

Alex: Thanks, Rudy. We'll take on the next question from Alex. You can with what research followed by going. Hey guys, thanks for saying a question.

Unknown Attendee: We'll take our next question from Alex Zukin with Wolf Research followed by Golan. Hey, guys, thanks for the questions. It's great to be on with you.

Speaker Change: Thanks, Rudy. We'll take our next question from Alex Zukin with Wolf Research, followed by Golan.

Unknown Attendee: I guess maybe just on the first one on the digital natives, if you can kind of, dig in a little bit there on maybe, did you see, was the moderation in consumption or some of the modulation of the green shoots, was that tied to a particular vertical, a particular geography? We heard Microsoft last night talk about how some consumption trends were less than they expected in Europe. So, just curious if you could maybe categorize where some of those modulations came from.

Alex Zukin: Hey guys, thanks for taking the question. It's great to be on with you. I guess maybe just on the first one, on the digital natives, if you can kind of...

Jay Kress: It's great to be on with you. I guess maybe just on the first one on the digital natives. If you can kind of dig in a little bit there on maybe did you see it was the moderation in consumption or some of the modulation of the green shoots with that tied to a particular vertical, a particular geography. We talked, we heard Microsoft, you know, last night, talk about how some consumption trends were less than expected in Europe. So just curious if you could maybe categorize where some of those modulations came from. Yeah, there may be some geographical fact, but I don't think that's the main thing.

Alex Zukin: Dig in a little bit there on maybe.

Speaker Change: Did you see...

Speaker Change: Was the moderation in consumption, or some of the...

Speaker Change: I'd say modulation of the green shoots. Was that tied to a particular vertical, a particular geography? We talked, we heard Microsoft, you know, last night talk about how some consumption trends

Speaker Change: were less than they expected in Europe . So just curious if you could maybe categorize where some of those modulations came from.

Speaker Change: Yeah, yeah, there may be some geographical effect. I don't think that's the main thing. You know, we we actually saw this primarily in the larger set of digital native customers globally, right? So, you know, US, India, etc.

Unknown Attendee: Yeah, there may be some geographical effect, but I don't think that's the main thing. We actually saw this primarily in the larger set of digital native customers globally, right? So the US, India, and, you know, what are they doing?

Jay Kress: You know, we, we actually saw this primarily in the larger set of digital native customers globally. Right. So, you know, US and etc. And you know, what, what is their doing? You know, it's not the case that they're cutting projects; you know, it's not the case that they're switching to competitors or there's any kind of customer loss in that segment. It really was about kind of optimizing their use of the underlying infrastructure. And so, you know, in a lot of these customers, they have a built-out team that's. FinOps or something like that that's kind of scrutinizing costs and working with infrastructure teams, you know, figure out, hey, can we consolidate clusters across teams?

Unknown Attendee: You know, it's not the case that they're cutting projects. It's not the case that they're, you know, switching to competitors, or there's any kind of customer loss in that segment. It really was about kind of optimizing their use of the underlying infrastructure. And so, you know, in a lot of these customers, they have a built-out team that's FinOps or something like that, that's kind of scrutinizing costs and working with infrastructure teams to, you know, figure out, hey, can we consolidate clusters across teams? Can we compress data more?

Speaker Change: And, you know, what is it they're doing? You know, it's not the case that they're cutting projects.

Speaker Change: You know, it's not the case that they're, you know, switching to competitors or there's any kind of customer loss in that segment, it really was about kind of optimizing their use of the underlying infrastructure. And so, you know, in a lot of these customers, they have a built out team that's

Speaker Change: FinOps, or something like that, that's kind of scrutinizing costs and working with infrastructure teams to figure out, hey, can we consolidate clusters across teams? Can we compress data more? What can we do to kind of squeeze a little bit more juice?

Unknown Attendee: You know, what can we do to kind of squeeze a little bit more juice out of each dollar of cloud spend? It's not unique to Confluent, but we did see a little bit more of that activity. Any quarter in that segment is a balance of that kind of optimization and expansion. You know, when we think about last quarter, the balance was definitely on the expansion side. This quarter, you know, we did a little bit more on the optimization side.

Jay Kress: Can we compress data more? What can we do to kind of squeeze a little bit more juice out of each dollar of cloud spend is not unique to Timeline. But we did see a little bit more of that activity. Any quarter in that segment is a balance of that kind of optimization and expansion. You know, we think about last quarter; the balance was definitely on the expansion side. This quarter, you know, a little bit more on the optimization side. That means when we think about the rest of the year, you know, could play out either way, but we're factoring in, you know, more risk when we think about what we'll get out of.

Speaker Change: Out of each dollar of cloud spend is not unique to Confluent, but we did see a little bit more of that activity. Any quarter in that segment is a balance of that kind of optimization and expansion.

Speaker Change: You know, we think about last quarter, the balance was definitely on the expansion side. This quarter, you know, a little bit more on the optimization side. That means when we think about the rest of the year, you know, could play out either way, but we're factoring in, you know, more risk when, when we think about what we'll get out of that.

Unknown Attendee: That means when we think about the rest of the year, it could play out either way, but we're factoring in, you know, more risk. And when we think about what we'll get out of it, it makes a ton of sense. And then maybe the second one, super helpful, by the way, in helping on the cloud revenue component for the second half. But maybe, like, given the fact that you're signing more customers that you're landing, maybe a little bit smaller initially, you've got these number of product vectors, starting to gain traction with Flink, and a few others, and then you know, presumably some of these gen AI use cases ramping, is How do we think about the sequencing of those tailwinds to maybe drive reacceleration?

Jay Kress: That's it. Makes makes sense and then maybe the second one super helpful by the way on help on the cloud revenue component for for the second half. But maybe, like given the fact that you're signing more customers, that you're landing maybe a little bit smaller initially, you've got these not a number of product vectors starting to gain traction with fling. And and and a few others, and then you know presumably some of these gen AI use cases ramping is there. You know the possibility that even though the second half implied guidance for subscription for cloud, you know there is a bit of deceleration in that guide to account for the conservatism.

Speaker Change: It makes a ton of sense. And then maybe the second one, super helpful, by the way, on the cloud revenue component for the second half.

Speaker Change: But maybe like given the fact that you're signing more customers that you're landing maybe a little bit smaller initially, you've got these a number of product vectors starting to gain traction with Flink and a few others. And then presumably some of these Gen AI use cases ramping, is there...

Speaker Change: You know, the possibility that even though the second half implied guidance for subscription for cloud, you know, there is a bit of deceleration in that guide to account for the conservatism.

Jay Kress: How do we think about the sequencing of those tailwinds to maybe drive re-acceleration again. Yeah, I'll point to Microsoft; he told us, you know, second half of their fiscal year they're going to see as a re-accelerate. Yeah, yeah, I mean, you know, obviously we've kind of given the guidance for this year. It would be, you know, I think early to start describing next year. But just kind of broadly or qualitatively, as we add into that, yeah, we feel like there's substantial tailwinds and you know all the things you just mentioned. But yeah, I think we'll start to contribute more materially, and that's definitely a positive factor for us.

Unknown Attendee: Again, I'll point to Microsoft, who told us that in the second half of their fiscal year, they're gonna see Azure reaccelerate. Yeah, yeah. Yeah, I mean, obviously, we've kind of given the guidance for this year; it would be, you know, I think early to start describing next year. But just kind of broadly or qualitatively, as we head into that, yeah, we feel like there are substantial tailwinds. And, you know, all the things you just mentioned will start to contribute more materially, and that's definitely a positive factor for us.

Speaker Change: How do we think about the sequencing of those tailwinds to maybe drive re-acceleration? Again, I'll point to Microsoft, who told us, you know, second half of their fiscal year they're going to see Azure re-accelerate. Yeah, yeah. Yeah, I mean, um...

Unknown Attendee: And then when we just talked to customers, you know, I think this is an area they continue to really bet on and invest in. And it's increasingly, you know, for these larger customers, becoming a very substantive part of their overall data infrastructure. And so I think, yeah, that gives us a lot of confidence heading into next year about what the trajectory is. Perfect. Thank you guys. Thanks, Alex.

Speaker Change: You know, obviously, we've kind of given the guidance for this year, it would be, you know, I think early to start describing next year. But just kind of broadly or qualitatively, as we head into that, yeah, we feel like there's substantial tailwinds. And, you know, all the things you just mentioned, you know, I think will start to contribute more materially. And that's definitely a positive factor for us. And then when we just talked to customers, you know, I think this is an area they continue to

Jay Kress: And then when we just talk to customers, you know, I think this is an area they continue to really bet on and invest in, and it's increasingly, you know, for these larger customers becoming a very substantive part of their overall data infrastructure.

Speaker Change: really bet on and invest in. And it's increasingly, you know, for these larger customers becoming a very substantive part of their overall data infrastructure. And so I think, yeah, that that gives us a lot of confidence heading into next year about what the trajectory is.

Jay Kress: So I think, yeah, that gives us a lot of confidence heading into next year about what the trajectory is. Perfect.

Jay Kress: Thank you, guys. Thanks, Alex.

Speaker Change #100: Perfect, thank you guys.

Unknown Attendee: We'll take our next question from Cash Rangan with Goldman Sachs, followed by JP Morgan. Thank you guys. So Jay, the motivation behind the transition to consumption was to ultimately get better growth rate acceleration, which was the right thing to do. So as you are halfway through the year, what are the things that you uncovered as unlocks?

Kasthuri Rangan: We'll take our next question from Cash, Rangin with Goldman Sachs, followed by JP Morgan. Thank you, guys. Jay though, the motivation behind the transition to consumption was to ultimately get better growth rate acceleration, which was the right thing to do as you are halfway through the mark of the year. One of the things that you uncovered as unlocks what are the things that are working, things that still need work. Because when you look at the, you know, if it were to accelerate, which I think is definitely the goal of the company and certainly the right thing.

Speaker Change #103: Thanks, Alex. We'll take our next question from Cash Rangan with Goldman Sachs, followed by J.P. Morgan.

Unknown Attendee: What are the things that are working and things that still need to be worked on? Because when you look at the, if it were to accelerate, which I think is definitely the goal of the company and certainly the right thing, we should be starting to see some leading indicators get better, and maybe it's not the right way to look at the subscription revenue growth or the cloud revenue growth, which have been slowing down a bit, right? Maybe due to a whole host of other reasons, while your lands are certainly very impressive.

Speaker Change: Thank you, guys.

Jay: So Jay, the motivation behind the transition to

Speaker Change: Consumption was to ultimately get better growth rate acceleration, which was the right thing to do. So, as you are halfway through the mark of the year,

Kasthuri Gopalan Rangan: One of the things that you you uncovered as unlocks, what are the things that are working, things that still need work? Because when you look at the, you know, if it were to accelerate, which I think is definitely the goal of the company, and certainly the right thing.

Jay Kress: We should be starting to see some leading indicators get better. And maybe it's not the right way to look at the subscription revenue growth or the cloud revenue growth, which have been slowing down a bit, right. Maybe due to a whole host of other reasons, well, your lands are saving is very impressive.

Kasthuri Gopalan Rangan: We should be starting to see some leading indicators get better and maybe it's not the right way to look at

Jay Kress: So what needs to happen more for the transition to unlock the real growth potential of the company, which is, you know, the acceleration that you have planned for sometime and down to 25, and I will follow a question. Thank you so much. Yeah, yeah. I mean, obviously, you know, when we look at the performance any year, there's a number of factors in play, including just, you know, the fact that we're changing a lot of things that we go to market. The first step is kind of get back to where you work in the new system.

Unknown Attendee: So what needs to happen more for the transition to unlock the real growth potential of the company, which is, you know, the acceleration that you have planned for sometime in calendar 25? And I have a follow-up question. Thank you so much.

Speaker Change: Yeah.

Speaker Change #114: the acceleration that you have planned for sometime in calendar 25? And I have a follow up question. Thank you so much. Yeah, yeah. I mean, obviously, you know, that when we look at the performance any year, there's a number of factors in play, including just, you know, the fact that we're changing a lot of things when we go to market.

Unknown Attendee: Yeah. Yeah. I mean, obviously, when we look at the performance of any given year, there's a number of factors in play, including just, you know, the fact that we're changing a lot of things when we go to market. The first step is to kind of get back to where you were in the new system.

Unknown Attendee: And I feel like, hey, we've kind of done that. It doesn't mean that everything is dramatically better, but it means we're now oriented around consumption, tracking each of the individual workloads in each customer, tracking the actual spend by components and the opportunities around that, which is what will drive DSP growth. So that's a good foundation to build on. Now, what is it that we need to do?

Jay Kress: And I feel like, hey, we've kind of done that. It doesn't mean that everything is dramatically better, but it means we're now oriented around consumption tracking each of the individual workloads and each customer tracking the actual spend by component of the opportunities around that, which is what will drive the DSP growth. So that's a good foundation to build on.

Speaker Change: It doesn't mean that everything is.

Jay Kress: So what is it that we need to do? We need to really harness that and lean into it, you know, as the driver of growth. And I think that'll be a positive tailwind for us as we kind of head into next year, as well as all the customers we've planned. You know, the nice thing is, hey, as we think about halfway into this year, we're actually have a much broader base to grow out of in terms of new lands. And you know, provided we're able to continue that throughout the second half of the year, heading into next year.

Unknown Attendee: We need to really harness that and lean into it, you know, as the driver of growth. And I think that'll be a positive tailwind for us as we kind of head into next year, as well as all the customers we've landed. You know, the nice thing is, hey, as we think about halfway into this year, we actually have a much broader base to grow out of in terms of new lands.

Unknown Attendee: And, you know, provided we're able to continue that throughout the second half of the year, heading into next year, that's kind of a cohort to drive growth that will be kind of coming towards their, you know, more production, maturity, additional use cases, et cetera. And that'll be

Jay Kress: That's kind of a cohort to drive growth that will be kind of coming towards their, you know, more production maturity, additional use cases, etc.

Rohan Sivaram: And that'll be it. Rohan, so as you have the net expansion rates, I mean certainly they came not a bit, but broadly speaking they're still okay relative to the overall growth rate of the company. Is it mean that you could get more profitably because generating growth within the basis less costly, less time consuming than going for growth outside, or there are other puts and takes that offset that consideration netting out on where you stand in terms of profitably and could net expansion rates be a driver of that or profitably. Yeah, I mean, cash, time for your question, higher net expansion rates and net retention rates are obviously a driver of a leverage over a long period of time, so there's no question about it. But when I, when I really, I'll probably take the question in two lenses.

Rohan Sivaram: And Rohan, so as you have the net expansion rates, I mean, certainly, they came down a bit, but broadly speaking, they're still okay relative to the overall growth rate of the company. Does that mean that you could get more profitably because generating growth wasn't the basis? Less costly and less time-consuming than going for growth outside. Or there are other puts and takes that offset that consideration.

Speaker Change #101: less costly, less time consuming than going for growth outside. Or there are other puts and takes that offset that consideration, netting out on where you stand in terms of profitability and good net expansion rates be a driver of better profitability.

Rohan Sivaram: Netting out where you stand in terms of profitability and good net expansion rates be a driver of better profitability. Yeah, I mean, Kash, thanks for your question. Higher net expansion rates and net retention rates are obviously a driver of leverage over a long period of time. So there's no question about it. But, you know, when I, when I really do, I'll probably take the question through two lenses.

Rohan Sivaram: First, when you double click on net retention, in addition to the current trends that you see, we spoke about data streaming platform. And for customers that are using multiple products for us, then net retention rates are well above 130%. So as you think about the next wave of growth, next vector of growth, that's going to be a tailwind for net retention rates. So that's one piece of it.

Speaker Change: Yeah, I mean, Kash, thanks for your question. Higher net expansion rates and net retention rates are obviously

Rohan Sivaram: First, when you double-click into net retention, in addition to the current trends that you see, we spoke about data streaming platform. And for customers that are using multi products for us, their net retention rates are well above 130%. So, as you think about the next wave of growth, next vector of growth, that's going to be a tailwind to net retention rates. So that's one piece of it. The second piece of it around the margin side, I mean, you know, when we think about our resource allocation philosophy. It is always making sure you get the right balance between growth and profitability, and you're driving efficient growth over a long period of time.

Rohan Sivaram: The second piece of it on the margin side, I mean, when we think about our resource allocation philosophy, it is always making sure you get the right balance between growth and profitability, and you're driving efficient growth over a long period of time. And that's our goal.

Speaker Change: So, as you think about the next wave of growth, next vector of growth,

Speaker Change: That's going to be a tailwind to net retention rates.

Speaker Change: So that's one piece of it.

Speaker Change: The second piece of it, around the margin side, I mean, you know, when we think about our resource allocation philosophy, it is always making sure you get the right balance between growth and profitability, and you're driving efficient growth over a long period of time. And that's our goal.

Rohan Sivaram: Given the opportunities that we have in 2025 and beyond with respect to the new growth vectors, we're being prudent about it. You know, when you look at the second half, we'll be adding the right amount of capacity in engineering, in sales, and marketing to make sure we are ready. And, you know, we are in the right position from our overall capacity perspective as we embark on next year. And I mean, most of the hiring we're going to do between now and the end of the year is going to benefit us, you know, next year.

Rohan Sivaram: And that's our goal, given the opportunities that we have in 2025 and beyond, with respect to the new growth vectors. We're being prudent about it, you know. When you look at the second now, we'll be adding the right amount of capacity in engineering, in sales and marketing, to make sure we are ready. And you know, we are in the right position from our overall capacity perspective as we embark on next year. I mean, most of the hiring we're going to do between now and the end of the year is going to benefit us, you know, next year.

Speaker Change: Given the opportunities that we have in 2025 and beyond with respect to the new growth vectors,

Speaker Change: We're being prudent about it, you know, when you look at the second half, we'll be adding the right amount of capacity in engineering, in sales and marketing to make sure we are ready. And, you know, we are in the right position from our overall capacity perspective as we embark on next year.

Speaker Change: I mean, most of the hiring we're going to do between now and end of the year is going to benefit us, you know, next year.

Rohan Sivaram: And I'll finish off by saying our medium-term goals from an operating margin perspective, which are in the zip code of five to 10%, continue to be the same. And we're going to manage that proactively by balancing both growth and profitability. Thanks so much.

Rohan Sivaram: And I'll finish off by saying our medium term goals from an operating margin perspective, which is in the zip code of five to 10%, continues to be the same. And we're going to manage that proactively by balancing both growth and profitability.

Speaker Change: And I'll finish up by saying our medium-term goals from an operating margin perspective, which is in the zip code of 5 to 10 percent, continues to be the same. And we are going to manage that proactively by balancing both growth and profitability. Thanks so much.

Rohan Sivaram: Thanks so much. Thank you.

Unknown Attendee: Thank you. We will take our next question from Pinjalim Bora with J.B. Morgan followed by Oppenheimer. Great, hey guys, thank you for taking the question. One question for you, I'll just blurt both of them out.

Unknown Attendee: We'll take our next question from team to the board with JP Morgan, followed by Oppenheimer. Great. Hey guys, thank you for taking the question. One question for you. Just blurred both of them out on the Flink market. If you try to kind of execute towards capturing this link opportunity, how does the maturity and kind of the understanding of the use cases compare to that of the core market and trying to understand if you're finding customers that have well defined Flink use cases. And there's a pent-up demand, you know, versus the use cases are not as defined as that of the core Kafka market.

Speaker Change #102: Thank you. We'll take our next question from Pinjalim Bora with J.B. Morgan, followed by Oppenheimer.

Pinjalim Bora: Great. Hey, guys, thank you for taking the question.

Pinjalim Bora: One question for you, I'll just blurt both of them out. On the flink market, if you try to kind of execute towards capturing the flink opportunity, how does the maturity and

Unknown Attendee: On the Flink market, as you try to kind of execute towards capturing the Flink opportunity, how does the maturity and kind of understanding of the use cases compare to that of the core market? I'm trying to understand if you're finding customers that have well-defined Flink use cases and there's pent-up demand, you know, versus the use cases are not as defined as those of the core Kafka market, and there's a little bit of evangelization that maybe needs to happen. That's the first question. And second question: how big is the digital native segment for you?

Speaker Change #108: Kind of the understanding of the use cases, compare

Pinjalim Bora: to that of the cold market. I'm trying to listen if you're finding customers that have well-defined flink use cases.

Speaker Change #104: and there's a pent-up demand, you know, versus the use cases are not as defined as that of the core Kafka market and there's a little bit of evangelization that maybe needs to happen. That's the first question and second question, how big is the digital native segment for you? Thank you. Yeah.

Unknown Attendee: There's a little bit of evangelization that maybe needs to happen.

Jay Kress: That's the first question and second question. How big is the digital native segment for you? Thank you. Yeah. Yeah, I would think about the Flink as being maybe an open source project, call it maybe three years behind Kafka probably. And so, in terms of maturity, that's probably where it is. Is that mean customers have use cases or don't have use cases as well? It depends on the customer, right? Typically, the way these technologies progress is from more technologically sophisticated companies to less technologically sophisticated companies. And so, you know, in maybe some of the banks, digital native companies, they would have, you know, pretty mature Flink practices.

Unknown Attendee: Yeah, yeah, I would think about Flink being maybe, as an open source project, call it maybe three years behind Kafka, broadly. And so in terms of maturity, that's probably where it is. Does that mean customers have use cases or don't have use cases? Well, it depends on the customer, right? Typically, the way these technologies progress is from more technologically sophisticated companies to less technologically sophisticated companies. And so, you know, maybe some of the banks, the digital native companies, they would have, you know, pretty mature Flink practices, maybe not on a large scale as their Kafka usage, but, you know, certainly up and running. If you get out further into mainstream enterprise, you'd see some of that, but maybe less, right? And so I would think about that as being kind of the vector of diffusion and very similar to Kafka's usage.

Pinjalim Bora: Yeah, I would think about the, you know, Flink as being maybe as an open source project, call it.

Bradley: Maybe three years behind Kafka, Bradley. And so in terms of maturity, that's probably where it is.

Speaker Change #109: Does that mean customers have use cases or don't have use cases? Well, it depends on the customer, right? Typically, the way these technologies progress.

Pinjalim Bora: is from more technologically sophisticated companies to less technologically sophisticated companies.

Pinjalim Bora: And so, you know, in

Pinjalim Bora: maybe some of the banks, digital native companies, they would have, you know,

Jay Kress: Maybe not as large scale as their Kafka usage, but you know, certainly up and running. You get out further into mainstream enterprise. You see some of that, but maybe less, right? And so I think about that as being kind of the vector of diffusion. And very similar to coffee usage. So I think it follows a very similar pattern, but you know, several years earlier in that flow. You know, for us, I think the project is a lot easier than the initial Kafka land. You know, if you think about what we had to do, getting into these new accounts with a cloud offering, especially early on, a lot of these customers did not have a lot of cloud products for infrastructure outside of the cloud provider.

Pinjalim Bora: Pretty mature Flink practices, maybe not as large scale as their Kafka usage, but you know, certainly up and running you get out further into mainstream enterprise, you'd see some of that but maybe less right. And so I would think about that as being kind of the vector of diffusion.

Unknown Attendee: So I think it follows a very similar pattern, but several years earlier in that flow. For us, I think the project is a lot easier than the initial Kafka land. You know, if you think about what we had to do, getting into these new accounts with a cloud offering, especially early on, a lot of these customers did not have a lot of cloud products for infrastructure outside of the cloud provider. So that kind of initial lift was definitely the harder lift.

Pinjalim Bora: and very similar to Kafka usage. So I think it follows very similar pattern, but you know, several years earlier in that flow.

Speaker Change #106: You know, for us, I think the project is a lot easier than the initial Kafka land. You know, if you think about what we had to do

Speaker Change #123: Getting into these new accounts with a cloud offering, especially early on, a lot of these customers did not have a lot of cloud products for infrastructure outside of the cloud provider. So that kind of initial land was definitely the harder lift.

Jay Kress: So that that kind of initial land is definitely the harder lift. As you think about, okay, great. Now they've got these streams of data expansion to things that use the stream of data. I think it's definitely easier. You know, then, you know, kind of getting Kafka in the first time. And I think that's a positive force for getting our product to ramp quickly. And so, you know, we think that's a positive thing.

Unknown Attendee: As you think about, okay, great, now they've got these streams of data expanding to things that use the stream of data, I think it's definitely easier than, you know, kind of getting Kafka up and running the first time. And I think that's a positive force for getting that product to ramp quickly. And so, you know, we think that's a positive thing. And remind me of the second question you had.

Pinjalim Bora: As you think about, okay, great, now they've got these streams of data expansion to things that use the stream of data.

Pinjalim Bora: I think it's definitely easier, you know, than, you know, kind of getting Kafka in the first time. And I think that's a positive force for getting that product to ramp quickly.

Pinjalim Bora: And so, you know, we think that's a positive thing.

Unknown Attendee: Just the size of digital natives for- Oh yeah. Yeah. We haven't broken that out yet.

Jay Kress: And remind me of the second, the second question you had. Just the size of distillators. Oh, yeah, yeah. We haven't broken that out. You know, if we think about the business overall, it's not the largest kind of vertical. It's not even that well defined, just kind of broadly in the industry, but, you know, we have a definition internally that we tag accounts with. So it's not the largest vertical for us, but it is. Thank you.

Speaker Change #105: and remind me of the second the second question you had just the just the size of digital natives oh yeah yeah we haven't broken that out you know you know if we think about the business overall it's not the largest

Unknown Attendee: You know, if we think about the business overall, it's not the largest kind of vertical. It's not even that well-defined kind of broadly in the industry, but, you know, we have a definition internally that we tag accounts with. So it's not the largest vertical for us, but it is sizable. Thank you. We'll take our next question from Ittai Kidron with Oppenheimer followed by Mr. H

Speaker Change #105: It's not even that well defined kind of broadly in the industry, but we have a definition internally that we tag accounts with. So it's not the largest vertical for us, but it is sizable.

Speaker Change #113: Thank you.

Rohan Sivaram: We'll take our next question. So, Ittai Kidron, with Open Himer. Follows on Mr. Zoot. Thanks, Shane. Rohan, first question to you. Can you tell me what percent of your platform revenue is associated with cloud customers as well? I'm just trying to think because there's a significant overlap there. I'll think that over time, the lumpiness and hair lumpiness and platform would fade. So we'll have to get color on that. Yeah, that's a great question. Well, we've not broken that out, but what I can tell you is there is an increasing set of customers who are using both Platform and Confluent Cloud.

Speaker Change #111: Thank you. We'll take our next question from Itai Kitram with Oppenheimer, followed by Mr. Hu.

Ittai Kidron: Thanks, Shane. Rohan, first question to you. Can you tell me what percent of your platform revenue is associated with cloud customers as well? I'm just trying to think because if there's a significant overlap there, I would think that over time, the inherent lumpiness in the platform would fade. So we'll have to get some color on that. Yeah, that's a great question. Well, we've not broken that down yet.

Itai Kitram: Thanks, Shane. Rohan, first question to you. Can you tell me

Itai Kitram: What percent of your platform revenue is associated with cloud customers as well? I'm just trying to think, because if there's a significant overlap there, I would think that over time the lumpiness, inherent lumpiness in the platform would fade. So we'll have to get color on that.

Rohan Sivaram: But what I can tell you is there is an increasing set of customers who are using both platform and Confluent Cloud. And, you know, a couple of quarters back, we've been kind of also providing updates that when customers have both cloud and platform, they tend to be more sticky, and their NRRs are higher than the company average NRRs as well. So that's one piece of it. But your other point around, if you have both platform and cloud, the lumpiness will come down, probably not always because some, most of the time, you know, you do have complementary use cases that are working in parallel. So when the time for a platform renewal actually comes, there is an event that happens that drives upfront revenue recognition, that doesn't change. So the lumpiness will still be there.

Rohan Sivaram: Yeah, that's a that's a great question. Well, we've not broken that out. But what I can tell you is there is a increasing set of customers who are using both platform and Confluent Cloud.

Rohan Sivaram: And, you know, a couple of quarters back, we've been kind of also providing updates that, you know, when customers have both cloud and platform, they tend to be more sticky and their and our hours are higher than the company average and our hours as well. So that's one piece of it, but your other point around if you have both platform and cloud, the lumpiness will come down probably not always because some, some most of these times, you know, you do have complimentary use cases that are working in parallel. So when a time for a platform renewal actually comes, there is an event that happens that drives upfront revenue recognition; that doesn't change.

Speaker Change #119: And, you know, a couple of quarters back, we've been kind of also providing updates that, you know, when customers have both cloud and platform, they tend to be more sticky, and their NRRs are higher than the company average NRRs as well. So that's one piece of it.

Speaker Change #112: But to your other point around if you have both platform and cloud, the lumpiness will come down. Probably not always.

Speaker Change #112: Because most of these times, you know, you do have complementary use cases that are working in parallel. So when a time for a platform renewal actually comes,

Rohan Sivaram: But I think to answer your question, yeah, there is a growing number of customers that are using both platform and cloud. And actually, that's exactly the direction we want to go, because that makes our customers a lot stickier. And Jay, I have a second question for you.

Rohan Sivaram: There is an event that happens that drives

Rohan Sivaram: Upfront Revenue Recognition. That doesn't change. So the lumpiness will still be there, but I think to answer your question, yeah, there is a growing number of customers that are using both platform and cloud. And actually, that's exactly the direction we want to go because that makes our customers a lot more stickier.

Rohan Sivaram: So the lumpiness will still be there, but I think to answer your question, yeah, there is a growing number of customers that are using both platform and cloud, and actually that's exactly the direction we want to go because that makes our customers a lot more secure.

Unknown Attendee: You talked about how the quality of the new customer additions is higher. Maybe you can dig into that a little bit more. What does that mean? Is this a global 2,000 customers more weighted? Any color that would be better?

Jay Kress: And Jay, second question for you: you talked about how the quality of the new customer additions is higher. Maybe you can dig into that a little bit more on what does that mean? It's just a global 2000 customers more weighted. Any color that was. Yeah, it's exactly Global 2000. You know, we have a couple of mechanisms that we include in that, but it, you know, it'd probably align to something like that. We would also include certain types of tech customers that, you know, might not be Global 2000 that have high potential. You know, so it's, you know, it's a defined customer list that we've exercised, that something like that, where we feel like there's potential for high IT spend and therefore, a bigger growth for us over time.

Jay: Jay, second question for you.

Jay: You talked about how the quality of the new customer additions is higher. Maybe you can dig into that a little bit more. What does that mean? Is this a global 2,000 customers more weighted?

Unknown Attendee: Yeah, it's not exactly global 2,000. You know, we have a couple of mechanisms that we include in that, but it would be the Broadway Alliance or something like that. We would also include certain types of tech customers that, you know, might not be global 2,000 but have high potential. You know, so it's, you know, it's a defined customer list that we've set aside. So it's something like that where we feel like, hey, there's potential for high IT spend and, therefore, kind of bigger growth for us overall.

Jay: Yeah, it's not exactly Global 2000. You know, we have a couple mechanisms that we include in that, but it, you know, it'd be broadly aligned to something like that. We would also include certain types of tech customers that, you know, might not be

Speaker Change #116: Global 2000, that have high potential, you know, so it's, you know, it's a defined customer list that we've set aside. So it's something like that, where we feel like, hey, there's potential for high IT spend, and therefore, kind of bigger growth for us over time. Yeah, appreciate it.

Unknown Attendee: Yeah, I appreciate it.

Unknown Attendee: Thanks. We'll take our next question from Gray. Thank you. Okay, thank you.

Unknown Attendee: Thanks. We'll take our next question from Gregg Moskowitz with Misuho, followed by Needham. Okay, thank you. Rohan, you did a nice job explaining some of the deliberation by digital native customers and what you're assuming going forward. That said, you beat Q2 subscription revenue by about $7 million, guided in line for Q3, which implies a fairly meaningful Q4 reduction. So I did just want to ask if any of these large deals closed sooner than you had expected, or if there's anything you're seeing in the pipeline that has caused you to be a little more cautious with respect to Q4 specifically.

Speaker Change #115: Thanks. We'll take our next question from Gregg Moskowitz with Misuho, followed by Needham.

Gregg Moskowitz: Rohan, you did a nice job explaining some of the deliberation by the digital native customers and what you're assuming going forward. That said, you beat Q2 subscription revenue by about 7 million, guided in line for Q3, which implies a fairly meaningful Q4 reduction. So I just want to ask if either of these large deals close sooner than you had expected. Or if there's anything you're seeing in the pipeline that has caused you to be a little more cautious with respect to the Q4 specifically.

Gregg Steven Moskowitz: Okay. Thank you, Rohan. You did a nice job explaining some of the deliberation by the digital native customers and what you're assuming going forward. That said, you beat Q2 subscription revenue by about $7 million, guided in line for Q3, which implies a fairly meaningful Q4 reduction. So I did just want to ask if either of these large deals closed sooner than you had expected, or if there's anything you're seeing in the pipeline that has caused you to be a little more cautious with respect to the Q4 specifically.

Rohan Sivaram: Yeah, Greg, I'll say that I'll go back to like, would we think about the second half guidance. Obviously, these two drivers that we that I spoke about on the Confluence platform side, you know, in general, you have Confluence platform large deals that are either renewals and expansions and new deals. For the renewals, it's fairly predictable. You you have visibility 12 months down the road when that's going to happen, and more often than not, it ends up kind of in that zip code for the newer deals and for the expansion deals. That's where you could see deals kind of shift one quarter plus minus, and that's the dynamic that basically I called out for the second half guidance.

Unknown Attendee: Yeah, Greg, I'll say that I'll go back to, when we think about the second half guidance, obviously, these two drivers that I spoke about, on the Confluent platform side, you know, in general, you have Confluent platform large deals that are either renewals, Expansions, and New Deals. For the renewals, it's fairly predictable. You have visibility 12 months down the road when that's going to happen, and more often than not, it ends up kind of in that zip code.

Speaker Change #117: Yeah, Greg, I'll say that I'll go back to like, when we think about the second half guidance, obviously, these two drivers that we that I spoke about, on the Confluent platform side, you know, in general, you have Confluent platform large deals that are either renewals,

Speaker Change #117: and Expansions and New Deals.

Jay: For the renewals, it's fairly predictable. You have visibility 12 months down the road when that's going to happen, and more often than not, it ends up kind of in that zip code.

Rohan Sivaram: For the newer deals and for the expansion deals, that's where you could see deals kind of shift by one quarter plus or minus. And that's the dynamic that basically I called out for the second half guidance. And, you know, it's also important to notice that our backdrop is what continues to be a fairly volatile macro environment. And we want to be, we want to make sure that we are thoughtful and prudent with respect to as we think about the outlook.

Jay: For the newer deals and for the expansion deals, that's where you could see deals kind of shift one quarter plus minus.

Jay: and that's the dynamic that basically I called out for the second half guidance and you know it's also important to notice that you know our backdrop what continues to be a fairly volatile macro environment and we want to be we want to make sure that we are thoughtful and prudent with respect to as we think about the outlook

Rohan Sivaram: And you know, it's also important to notice that you know, our backdrop with what continues to be a fairly volatile macro environment. And we want to be we want to make sure that we are thoughtful and proven with respect to as we think about the outlook on the Confluence Cloud side. Again, you know, not a whole lot of new things to share, but we are basically assuming that the dynamics that we saw towards the end of Q2 will kind of have impact to the second half of the year. Thank you.

Rohan Sivaram: On the Confluent cloud side, again, you know, not a whole lot of new things to share, but we are basically assuming that the dynamics that we saw towards the end of Q2 will kind of have an impact on the second half of the year. Okay, thank you.

Jay: On the Confluent cloud side, again, you know, not a whole lot of new things to share, but we are basically assuming that the dynamics that we saw towards the end of Q2 will kind of have an impact to the second half of the year.

Unknown Attendee: And then just for Jay, can you walk through the rationale for switching Confluent cloud pricing for your basic and standard clusters from basin partitions previously to elastic CKUs? And then also, does this change have any impact on revenue over the remainder of 24? Yeah, we made a set of pricing changes. Those were some of them.

Jay Kress: And then just for Jay, can you walk through the rationale of switching Confluent Cloud pricing for your basic and standard clusters from basin partitions previously to the last 60 to use, and then also does this change has any impact on revenue over the remainder of 24? Yeah, we made a set of pricing changes; those were some of them. There was also some tune-ups on some of the throughput-related pricing, some of the connector pricing. We talked a little bit about that. But a few earnings back, as you know, being kind of aligned with this consumption transformation.

Jay: Thank you. And then just for Jay, can you walk through the rationale of switching Confluent cloud pricing for your basic and standard clusters from base and partitions previously to Elastic CKUs? And then also, does this change have any impact on revenue over the remainder of 24?

Unknown Attendee: There was also some tune-ups on some of the throughput-related pricing, some of the connector pricing. We talked a little bit about that a few earnings back as, you know, being kind of aligned with this consumption transformation. So, in general, we were looking at things that caused friction early in the buying process and were kind of more aligned to a big upfront purchase than they were to a kind of use-case-by-use-case expansion, and we wanted to pull some of that out.

Jay: Yeah, you know, we made a set of pricing changes. Those were some of them. There was also some tune-ups on some of the throughput-related pricing, some of the connector pricing. We talked a little bit about that a few earnings back as, you know, being kind of aligned with this consumption transformation. So in general, we were looking at things that

Jay Kress: So, in general, we were looking at things that cost friction early in the buying process. And we're kind of more aligned to a big upfront purchase than they were to a kind of use case by use case expansion. We wanted to pull some of that out. If you think about what we're trying to do broadly, you know, there's a lot of open source Kafka usage out there. You know, we've monetized a small percentage of it, mostly sitting out there in open source. We want to go get it. There's a bunch of things we do to make that happen, but part of what we want to do is really cover the spectrum of kind of TCO needs. You know, there are very high volume, very price sensitive workloads.

Jay: Cost Friction Early in the Buying Process and we're kind of more aligned to a big upfront purchase than they were to a kind of use case by use case expansion and we wanted to pull some of that out.

Unknown Attendee: If you think about what we're trying to do broadly, you know, there's a lot of open-source Kafka usage out there. You know, we've monetized a small percentage of it, mostly sitting out there in open source. We want to go get it.

Jay: If you think about what we're trying to do broadly, you know, there's a lot of open source Kafka usage out there. You know, we've monetized a small percentage of it mostly sitting out there in open source, we want to go get it.

Jay: There's a bunch of things we do to make that happen. But part of what we want to do is really cover the spectrum of kind of

Unknown Attendee: There's a bunch of things we do to make that happen, but part of what we want to do is really cover the spectrum of kinds of TCO needs. You know, there are very high-volume, very price-sensitive workloads. There are very premium, high-quality workloads.

Jay: TCO needs. You know, there are very high volume, very price sensitive workloads. There's very premium, high quality workloads. You actually need some different SKUs.

Jay Kress: There's very premium by quality workloads. You actually need some different excuse to actually segment that market and go after it in the best way. So if you think about the additions to our portfolio, both the new offerings in Kafka for very large scale, some of the tuning at the low end, it really is about trying to properly segment that market and go capture it to kind of soak up more of the world's Kafka. I think has proven successful in part as evidenced by the higher volume of customer lands. I mean part of that's a kind of comp and sales practice thing, but part of this also changes in the product that make it easier to land.

Unknown Attendee: You actually need some different SKUs to actually segment that market and go after it in the best way. So, if you think about the additions to our portfolio, both the new offerings in Kafka for very large scale, some of the tuning at the low end, it really is about trying to properly segment that market and go after it to kind of soak up more of the world's Kafka. You know, I think it has proven successful, in part as evidenced by the higher volume of customer lands.

Jay: to actually segment that market and go after it in the best way. So if you think about the additions to our portfolio, both the new offerings in Kafka for very large scale, some of the tuning at the low end, it really is about trying to properly segment that market and go capture it.

Jay: to kind of soak up more of the world's Kafka, you know, I think has proven successful, you know, in part as evidenced by the higher volume of customer lands. I mean, part of that's a kind of comp and sales practice thing, but part of it is also changes in the product that make it easier to land.

Unknown Attendee: I mean, part of that's a kind of comp and sales practice thing, but part of it is also, you know, changes in the product that make it easier to land. Does it have an impact on revenue? Yeah, it does have some.

Jay Kress: Does it have an impact on revenue? Yeah, it does have some, you know, whenever any of these things that kind of give customers more options, it does give them more opportunity to shift around. When you know, when we look at that, that effectively came out as expected. So we had some model of like, hey, how much shift are we going to see? Typically, what you see when you make one of these changes is initially some shift that may be a little bit negative, and then, you know, kind of better expansion as you have more options for customers to plug into.

Jay: Does it have impact on revenue? Yeah, it does have some, you know, whenever any of these things that kind of, you know, give customers more options, it does give them more opportunity to shift around.

Unknown Attendee: You know, whenever any of these things that kind of, you know, give customers more options, it does give them more opportunity to shift around. And when, you know, when we look at that, it effectively came out as expected. So, we had some model of like, hey, how much shift are we going to see? Typically, what you see when you make one of these changes is initially some shift that may be a little bit negative and then, you know, kind of better expansion as you have more options for customers to plug into. And so, you know, when we were checking ourselves against the model we built in terms of the impact of that, it was more or less exactly what we expected.

Speaker Change #125: When we look at that, that effectively came out as expected. So we had some model of like, hey, how much shift are we going to see?

Jay: Typically, what you see when you make one of these changes is initially some shifts that may be a little bit negative, and then, you know, kind of better expansion as you have more options for customers to plug into.

Rohan Sivaram: And so, you know, when we were checking ourselves against the model, we built in terms of the impact of that, you know, is more or less exactly what we expected when you take it all together. Of course, individual changes might be a little bit more or less. So the change on those use was kind of part of that larger vision, which is like simplification, friction reduction, and just kind of soaking up all the Kafka. So helpful. Yeah, super helpful. Thank you.

Jay: And so, you know, when we were checking ourselves against the model we built in terms of the impact of that, you know, is more or less exactly what we expected when you take it all together. Of course, individual changes might be a little bit more or less.

Unknown Attendee: When you take it all together, of course, individual changes might be a little bit more or less. So the change on those SKUs was kind of part of that larger vision, which is like simplification, friction, reduction, and just kind of soaking up all the. Is that helpful? Yep. Very helpful.

Speaker Change #120: So the change on those SKUs was kind of part of that larger vision, which is like simplification and friction reduction and just kind of soaking up all the Kafka.

Gregg Steven Moskowitz: Is that helpful? Yep. Super helpful. Thank you. And Gregg, I'll just add to what Jay said, that is, as we look at the second half of the year, some of these dynamics that he called out is essentially baked into our outlook for the year as well. Yeah. All right.

Unknown Attendee: And Greg, I'll just add to what Jay said, that is, as we look at the second half of the year, some of these dynamics that he called out are essentially baked into our outlook for the year as well. All right. Thank you, guys. Thanks. Let's go to Mike Cikos. We need him.

Unknown Attendee: Greg, I'll just add to what Jay said that as we look at the second half of the year, some of these dynamics that we called out is essentially big into our outlook for the year as well. Yeah. Thank you, guys. Thanks.

Unknown Attendee: Let's go to the mic. She goes with me.

Gregg Steven Moskowitz: Thanks. Let's go to Mike Cikos, we need him. Mike?

Unknown Attendee: Mike. Hey, thanks for taking the question, guys. But before I dig in a mind, it's just to make sure we're clear on where we were going with Greg's last question there. As far as those pricing changes, that was contemplated when you guys provided us the guide for the full year two quarters ago. Or no, we're making changes now in real time off the Q2 results. Yeah, I think it was factored in earlier. I'm like, we had a model of what impact that would have, and we haven't seen it DDA from that. So when we think about, like, hey, what are the factors impacting guidance in the second half?

Unknown Attendee: Hey, thanks for taking the questions, guys. But before I dig into mine, just to make sure we're clear on where we were going with Gregg's last question there. As far as those pricing changes go, that was contemplated when you guys provided us the guide for the full year, two quarters ago, or no, we're making changes now in real time based on the Q2 results. Yeah, yeah, I think it was factored in early on, like we had a model for what impact that would have. And we haven't seen it deviate from that.

Michael Joseph Cikos: Hey, thanks for taking the question, guys. Before I dig into mine, just to make sure we're clear on...

Michael Joseph Cikos: where we were going with Gregg's last question there.

Michael Joseph Cikos: As far as those pricing changes, that was contemplated when you guys provided us the guide for the full year, two quarters ago, or no, we're making changes now in real time off the Q2 result.

Speaker Change #124: Yeah, yeah, I think it was factored in early on, like, we had a model for what impact that would have, and we haven't seen it deviate from that. So when we think about, like, hey, what are the factors impacting guidance in the second half? I think it's exactly what Rohan said, which is, you know, the Confluent platform lumpiness,

Unknown Attendee: So when we think about, hey, what are the factors impacting guidance in the second half? I think it's exactly what Rohan said, which is, you know, Confluent platform lumpiness and what we've seen in the digital native segment, price changes, you know, we think it's net positive, you know, over time, but it's not a huge factor one way or the other.

Jay Kress: I think it's exactly what Rohan said, which is, you know, the complement platform lumpiness and what we've seen in the digital live segment. The price change is, you know, we think it's not positive, but you know, over time, but it's not a huge factor when we're at the other right now.

Rohan Sivaram: and what we've seen in the digital native segment. The price changes, you know, we think it's net positive, you know, over time, but that is not a huge factor one way or the other right now.

Jay Kress: Awesome, awesome. So, one at the start with, I know the digital natives, we've highlighted that a lot. Is there any way to think about how their spend compares to other pieces or other segments within the Confluent customer base? Like, are these? Is it a two X? Like what's the significance of the spend on a per customer basis versus the rest of the Confluent customer base? Yeah, you know, digital native itself spans from very small kind of tech companies to very large tech organizations with thousands of engineers. And so, you know, be inaccurate to characterize that as a whole.

Unknown Attendee: So wanted to start with, I know the digital natives. We've highlighted that a lot. Is there any way to think about how their spend compares to other pieces or other segments within the Confluent customer base? Like, is this, is it a 2x?

Speaker Change #127: Awesome. Awesome. So I wanted to start with, I know the digital natives, we've highlighted that a lot. Is there any way to think about how their spend compares to other pieces or other segments within the Confluent customer base? Like are these

Unknown Attendee: Like, like, what's the significance of the spend on a per customer basis versus the rest of the Confluent customer base? Yeah, you know, digital native itself spans from very small tech companies to very large tech organizations with dozens of engineers. And so, you know, it'd be inaccurate to characterize that as a whole.

Speaker Change #118: Is it a 2x? Like, what's the significance of the spend on a per-customer basis versus the rest of the Confluent customer base?

Speaker Change #128: Yeah, you know, digital native itself spans from very small kind of tech companies to very large tech organizations with thousands of engineers. And so, you know, it'd be inaccurate to characterize that as a whole. So even internally, we break that into a, you know, kind of large tech companies and smaller tech companies.

Unknown Attendee: So even internally, we break that into, you know, kind of large tech companies and smaller tech companies. But, you know, what we saw was more concentrated on these large tech companies that are kind of more actively pursuing optimization. For those large customers, yeah, they do tend to operate at scale, they have a lot of engineers, they tend to move quicker than the average customer in terms of adoption, expansion, but also in terms of optimization. They're just a little bit more agile than a similarly sized company elsewhere in enterprise. You know, that's probably broadly how I would characterize it.

Jay Kress: So even internally, we break that into large tech companies and smaller tech companies. You know, what we saw was more concentrated on these large tech companies that are kind of more actively pursuing optimization for those large customers. Yeah, they do tend to operate at scale. They have a lot of engineers. They tend to move quicker than the average customer in terms of adoption expansion, but also in terms of optimization that you know, just a little bit more agile than a similar sized company elsewhere in enterprise. You know, that's probably broadly how I would characterize it.

Speaker Change #118: What we saw was more concentrated on these large tech companies that are kind of more actively pursuing optimization.

Speaker Change #118: For those large customers, yeah, they do tend to operate at scale, they have a lot of engineers, they tend to move quicker than the average customer in terms of adoption and expansion, but also in terms of optimization, they're just a little bit more agile, they're similarly sized.

Unknown Attendee: Their kinds of use cases aren't vastly different from the rest of the world. They just tend to have a bit more data and, you know, somewhat more engineers than the average. Okay.

Speaker Change #118: Company Elsewhere and Enterprise. You know, that's probably broadly how I would characterize it. Their kind of use cases aren't vastly different from the rest of the world. They just tend to have a bit more data and, you know, somewhat more engineers than the average company of that size.

Jay Kress: There are kind of use cases aren't vastly different from the rest of the world. They just tend to have a bit more data and, you know, someone more engineers than the average company that size.

Jay Kress: Okay. And just thinking about, again, the quality of those new logos that we've highlighted a couple of times here as well. We're early days here, but is there any way to think about how the expansion of these new logos is played out versus what you've seen historically? And I got the second part here for those new logos. Does it skew more heavily towards digital natives, or is there any way to think about the composition of these new logos? Yeah, you know, what we've shared is, you know, it's kind of broadly more concentrated in that, you know, high propensity customer list, which you did think of as kind of global 2000 plus high propensity tech.

Unknown Attendee: And just thinking about, again, the quality of those new logos that we've highlighted a couple of times here as well. We're in the early days here, but is there any way to think about how the expansion of these new logos has played out versus what you've seen historically? And I guess the second part here, for those new logos: does it skew more heavily towards digital natives? Or is there any way to think about the composition of these new logos?

Speaker Change #130: Okay. And just thinking about, again, the quality of those new logos that we've highlighted a couple times here as well. We're early days here, but is there any way to think about how the expansion of these new logos has played out versus what you've seen historically? And I guess the second part here, for those new logos,

Speaker Change #126: Does it skew more heavily towards digital natives, or is there any way to think about the composition of these new logos?

Unknown Attendee: Yeah, you know, what we've shared is that it's kind of broadly more concentrated in that, you know, high propensity customer list, which you can think of as kind of a global 2000 plus high propensity tech. I haven't looked at the tech composition specifically broken out.

Speaker Change #136: Yeah, you know, with what we've shared is, you know, it's kind of broadly more concentrated in that, you know, high propensity customer list, which you could think of as kind of global 2000 plus.

Jay Kress: Yeah, I haven't looked at the tech composition specifically broken out, so I can give you more color on that, but I'm not aware of that being a factor. And then, yeah, we are catching these use cases earlier. You know, it's just easier in this consumption motion for us to land. You know, we're more flexible on the commitment amount. The product is better optimized for that. The comp is incentivizing it. And so, yeah, it is easier for us to get in early, but the key thing for us will be to kind of show that ramp of consumption over the course of the year with these new customers.

Speaker Change #133: High Propensity Tech. Yeah, I haven't looked at the tech composition specifically broken out, so I couldn't give you more color on that, but I'm not aware of that being a factor.

Unknown Attendee: So I can give you more color on that, but I'm not aware of that being a factor. And then, yeah, we are catching these use cases earlier. You know, it's just easier in this consumption motion for us to land, we're more flexible on the commitment amount, and the product is better optimized for that.

Speaker Change #126: And then, yeah, we are catching these use cases earlier. You know, it's just easier in this consumption motion for us to land. You know, we're more flexible on the commitment amount. The product is better optimized for that.

Speaker Change #132: The comp is incentivizing it. And so yeah, it is easier for us to get in early. But the key thing for us will be to kind of show that ramp of consumption.

Unknown Attendee: The comp is incentivizing it. And so, yeah, it is easier for us to get in early. But the key thing for us will be to kind of show that ramp of consumption over the course of the year with these new customers. You know, what we've seen so far is promising, both in terms of the numbers and that ramp time. I don't think it'll be exactly the same amount per customer, but the customer volume is much higher.

Speaker Change #126: over the course of the year with these new customers. Yeah, what we've seen so far is promising both in terms of the

Jay Kress: You know, what we've seen so far is promising, those in terms of the numbers and that ramp time. I don't think it'll be exactly the same amount per customer, but the customer volume is much higher. And so, you know, we think overall that's a net positive contributor when we think about what the basic new customers that were. Require.

Speaker Change #126: Numbers and that ramp time. I don't think it'll be exactly the same amount per customer, but the customer volume is much higher. And so, you know, we think overall, that's a net positive contributor when we think about what the base of new customers that were acquired.

Michael Turrin: Great, thanks. I'll find a question. They will come from Michael Turrin with lost work of.

Unknown Attendee: And so, you know, we think overall that's a net positive contributor when we think about the base of new customers that we're, you know, that we're going to be able to get to. Great, thanks. A final question today will come from Michael Turrin with Wells Fargo. Thanks for squeezing me in.

Speaker Change #126: A final question today will come from Michael Turrin with Wells Fargo.

Unknown Attendee: Jay, between the go-to-market changes and the new product efforts, it seems like you're setting the stage for the next phase of Confluent. When do you think the foundation there is largely set? And we go past talking about some of the transition impacts and more directly to some of the benefits from consumption focus and new products. Is that something we can start to see build towards today? Is that the end of the year? Obviously, there's no moment in time where yesterday it was the old thing, and today it's the new thing. But yeah, it's certainly the case that this year we've got a lot of moving parts that are part of setting up where we want to get to. The consumption changes are part of that.

Michael Turrin: Thanks for squeezing me on Jay. Between the go-to-market changes and the new product efforts, it seems like you're setting the stage for the next phase of pipeline. When do you think the foundation there is largely set and we go past talking about some of the transition impacts and more directly to some of the benefits from consumption focus and new products? Is that something we can start to see build tours today? Is that end of year?

Michael James Turrin: Thanks for squeezing me on. Jay, between the go-to-market changes and the new product efforts, it seems like you're

Michael James Turrin: Setting the stage for the next phase of Confluent, when do you think the foundation there is largely set? And we go past talking about

Speaker Change #134: Some of the transition impacts and more directly to some of the benefits from consumption focus and new products. Is that?

Speaker Change #135: Something we can start to see build towards today, is that end of year? Yeah, yeah, that's a good question. I mean, obviously there's no moment in time where, you know, yesterday it was the old thing and today it's the new thing.

Jay Kress: I mean, obviously there's no moment in time where yesterday it was the old thing and today it's the new thing. But yeah, it's certainly the case that this year we've got a lot of moving parts that are part of kind of setting up where we want to get to, right? The consumption changes are part of that; the new product introduction is part of that. You know, as it becomes more of a tailwind for the business, I think it's definitely as we had it in the next year. That's where we have a more stable system that we're executing the good market in that we've had more history with.

Speaker Change #135: But yeah, it's certainly the case that this year we've got a lot of moving parts that are part of kind of setting up where we want to get to, right? The consumption changes are part of that. The new product introductions are part of that.

Unknown Attendee: The new product introductions are part of that. As it becomes more of a tailwind for the business, I think it's definitely as we head into next year, that's where we have a more stable system that we're executing the go-to-market in. New York, Dan Zelnick, Kasthuri Rangan, Matthew Hedberg, Bradley Sills, Rudy Kessinger, Michael Turrin, Michael Cikos, Jason Ader, Sanjit Singh, Shane Xie, Steffan Tomlinson, Michael Turrin, Edward Kreps, Michael Turrin, Michael Sehgal, Howard Massey, Philip Kessinger, Robert, However, any of the big things start small, and so kind of, you know, getting those things seeded and started now, I think, is very important, you know, both in terms of what we want the business to do over the course of, you know, the next three years, but also in terms of what we want to be in customers, like the capabilities we want to provide them, you know, setting ourselves up to really be a strategic platform in these organizations. So, yeah, obviously, that's a key effort this year. I would think about the contribution as being, you know, throughout next year and kind of a tailwind. Thanks very much. Thanks, Michael. This concludes

Speaker Change #126: As it becomes more of a tailwind for the business, I think it's definitely, as we head into next year, that's where we have a more stable system that we're executing the go-to-market in, that we've had.

Speaker Change #126: you know, more history with.

Jay Kress: And then we have products that have kind of gotten to enough scale of revenue where they can move the overall number. Obviously, these newer offerings, you invest a lot of time in them, but the early results, you're just building that initial customer base that's relative to the amount of effort. You're not getting as much dollars out as you would with the core business. However, any of the big things start small, and so kind of, you know, getting those things seeded and started now, I think is very important. You know, both in terms of what we want the business to do over the course of, you know, the next three years, but also in terms of what we want to be in customers, like the capabilities we want to provide them, you know, setting ourselves up to really be a strategic platform in these organizations.

Speaker Change #126: And then we have products that have kind of gotten to enough scale of revenue where they can move the overall number. Obviously, these newer offerings, you invest a lot of time in them, but the, you know, the early results, you're just building that initial customer base. So it's not, you know, relative to the amount of effort, you're not getting as much dollars out as you would with the core business.

Speaker Change #126: However, any of the big things start small. And so kind of, you know, getting those things seeded and started now, I think is very important. You know, both both in terms of what we want the business to do over the course of, you know, the next

Speaker Change #126: three years. But also in terms of what we want to be in customers, like the capabilities, we want to provide them, you know, setting ourselves up to really be a strategic platform in these organizations. So yeah, obviously, that's it.

Jay Kress: So, yeah, we obviously that's a key effort this year. I think about the contribution as being, you know, throughout the next year. Kind of a tail in that.

Speaker Change #126: Key effort this year, I would think about the contribution as being, you know, you know, throughout, throughout next year, and kind of a tailwind then.

Unknown Attendee: Thanks very much. Thanks, Michael.

Speaker Change #131: Thanks very much.

Unknown Attendee: This concludes the earnings call today. Thanks again for joining us. My everyone.

Unknown Attendee: Thank you.