Q1 2025 Confluent Inc Earnings Call

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Speaker Change: Welcome to the <unk> Q1, 2025 earnings conference call I am <unk> from Investor Relations and I'm joined by Jay Crafts, co founder and CEO and <unk> <unk> CFO.

Shane Xie: Welcome to the Confluent Q1 2025 Earnings Conference Call.

Shane Xie: I'm Shane Xie from Investor Relations, and I'm joined by Jay Kreps, co-founder and CEO, and Rohan Sivaram, CFO.

Shane Xie: During today's call, management will make forward-looking statements regarding our business, operations, market and product positioning, growth strategies, financial performance, and future prospects, including statements regarding our financial guidance for the fiscal second quarter of 2025 and fiscal year 2025. These forward-looking 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-K file with the SEC.

Speaker Change: During today's call management will make forward looking statements regarding our business operations market and product positioning growth strategies financial performance and future prospects, including statements regarding our financial guidance for the fiscal second quarter of 2025 in fiscal year 2025. These forward looking 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-K filed with the SEC.

Shane Xie: We assume no obligation to update these statements after today's call except as required by law. Unless stated 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 analysis of a financial and business trend and for internal planning and forecasting purposes. 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.

Speaker Change: We assume no obligation to update these statements after today's call except as required by law.

Speaker Change: Unless stated 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.

Speaker Change: We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. 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 Xie: A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings price release and supplemental financials, which can be found on our website at investments.confluent.io. References to profitability on today's call refer to non-GAAP operating margin unless stated otherwise.

Speaker Change: A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, and supplemental financials, which can be found on Iowa site at <unk> Dot com for not out.

Speaker Change: References to profitability on today's call refer to non-GAAP operating margin unless stated otherwise and with that I'll hand, the call over to Jay.

Jay Kreps: And with that, I'll hand the call over to Jay. Thanks, Shane. Good afternoon, everyone.

Jay: Thanks, Jamie good afternoon, everyone and welcome to our first quarter earnings call.

Jay Kreps: Welcome to our first quarter earnings call. We're pleased to start the year with solid momentum. Q1 subscription revenue grew 26% to $261 million. Confluent cloud revenue grew 34% to $143 million. And non-GAP operating margin improved six percentage points to 4%. Our Q1 results demonstrate the mission critical nature of data streaming and our significant product leadership. We remain laser focused on enabling our customers to cost efficiently build next generation applications, and win in the age of AI.

Jay: We're pleased to start the year with solid momentum Q1 subscription revenue grew 26% to $261 million confluent cloud revenue grew 34% to 143 million and non-GAAP operating margin improved six percentage points to 4%. Our Q1 results demonstrate the mission critical nature of data streaming and our significant product leadership we.

We remain laser focused on enabling our customers to cost efficiently build next generation applications and win in the age of AI.

Jay: On today's call I'd like to walk through four key strategic drivers behind our resilience in the current environment. In fact, our resilience has been tested by multiple macro headwinds since <unk> founding over 10 years ago and it continues to support our path towards delivering long term growth and profitability.

Jay Kreps: On today's call, I'd like to walk through four key strategic drivers behind our resilience in the current environment. In fact, our resilience has been tested by multiple macro headwinds since Confluent's founding over 10 years ago, and it continues to support our path towards delivering long-term growth and profitability. First and most critically, data streaming sits at the heart of the mission-critical use cases that our customers rely on every day. These are not lightweight experiments, they're the backbone of real production workloads. These applications play a critical role in the day-to-day business of our customers and can't be turned off without major disruption to core parts of their business.

Jay: First and most critically data streaming sits at the heart of our mission critical use cases that our customers rely on every day. These are not lightweight experiments to the backbone of real production workloads. These applications play a critical role in the day to day business of our customers and can't be turned off without major disruption to core parts of their business comfortable empowers real time fraud detection for financial institutions.

Jay Kreps: Confluent powers real-time fraud detection for financial institutions, inventory management for retailers, 5G networks for telcos, and data pipelines that power countless industries. This dynamic has helped sustain gross retention rate above 90% despite multiple points of instability in the macro-environment that reduced IT spend for some of our customers.

Jay: <unk> inventory management for retailers <unk> networks for telcos and data pipelines that power businesses and countless industries.

Jay: Mick has helped sustain gross retention rate above 90% despite multiple points of instability in the macro environment the reduced it spend for some of our customers.

Jay Kreps: The second driver of our resilience is the scale of the opportunity we're going after. Apache Kafka has become a foundational technology for data management. Today, it's used by more than 150,000 organizations, representing $100 billion-plus addressable market opportunity. Soaking up the countless use cases built on Kafka has been a core engine of our growth and continues to be a powerful tailwind. This quarter, we added 340 new customers, our highest net add in three years, and we continue to see robust growth with many of our largest customers as they expand to new use cases. In Q1, we added 16 new customers to our cohort of million-dollar-plus ARR customers, our highest addition to that cohort ever.

Jay: The second driver of our resilience is the scale of the opportunity we're going at Apache Kafka has become a foundational technology for data management today, it's used by more than 150000 organizations, representing $100 billion plus addressable market opportunity soaking up the countless use cases built on Kafka has been a core engine of our growth continues to be a powerful tailwind.

Jay: This quarter, we added 340, new customers, our highest net add in three years and we continue to see robust growth with many of our largest customers as they expand to new use cases in Q1, we added 16, new customers to our cohort of $1 billion plus <unk> customers. Our highest addition to that cohort Catherine our customer base is diversified by industry and by geography.

Jay Kreps: Our customer base is diversified by industry and by geography, and no single customer accounts for more than 2% of our total ARR. This diversification further strengthens the resilience and durability of our business.

Jay: And no single customer accounts for more than 2% of our total error.

Jay: This diversification further strengthens the resilience and durability of our business Odyssey and booking dot com are two great. Examples of customers that started with open source and then converted comparably.

Jay Kreps: Odyssey and Booking.com are two great examples of customers that started with open source and then converted to Confluent. Odyssey is a leading audio entertainment company with 200 million listeners across radio broadcasts, podcasts, and other digital content. As their audience grew and customer expectations rose, their old infrastructure began to hold them back. Developers were spending most of their time wrestling with brittle point-to-point integrations built with open source Kafka. These were difficult to manage and even harder to scale. Delivering new features at the pace the business needed became a major challenge. That's when Odyssey turned to Confluent.

Jay: Odyssey is our leading audio entertainment company with 200 million listeners across Radiobroadcast podcasts and other digital content as their audience grew in customer expectations rose their old infrastructure began hold them back developers, we're spending most of their time wrestling with brittle point to point integrations built with open source Kafka these were difficult to manage.

Jay: Even harder to scale delivering new features at the pace of the business needed became a major challenge.

Jay: Odyssey turned to confluence are prebuilt connectors allowed them to easily integrate data streaming into their existing tools and systems stream governance, Naples them to quickly and easily enforce data consistency across dozens of different systems and applications with our complete data streaming platform Odyssey freed up developer resources. So they can focus on innovation instead of Mad.

Jay Kreps: Our pre-built connectors allow them to easily integrate data streaming into their existing tools and systems. Stream governance enables them to quickly and easily enforce data consistency across dozens of different systems and applications. With our complete data streaming platform, Odyssey freed up developer resources so they can focus on innovation instead of managing infrastructure. As a result, Odyssey accelerated feature development by 40%, delivering more personalized experience to keep their customers listening. This helps unlock new digital revenue opportunities across their platform.

Jay: Aging infrastructure as a result Odyssey accelerated feature development by 40% delivering more personalized experience that keeps our customers. Let's say this helps unlock new digital revenue opportunities across their platform.

Jay: Booking dot com is one of the world's largest online travel agencies. Its mobile app is one of the most downloaded travel agency option the world booking Dot com developed an in house data streaming platform based on open source Kafka, However, self managing Kafka became increasingly burdensome as the company grew and introduce new use cases scaling clusters handling updates and monitoring pipe.

Jay Kreps: Booking.com is one of the world's largest online travel agencies. Its mobile app is one of the most downloaded travel agency apps in the world. Booking.com developed an in-house data streaming platform based on open source Kafka. However, self-managing Kafka became increasingly burdensome as the company grew and introduced new use cases. Scaling clusters, handling updates and monitoring pipelines consumed significant resources. To alleviate the operational complexities of managing Kafka, Booking.com migrated each business unit's open source clusters to Confluent platform. Our complete enterprise-grade solution provided enhanced reliability and out-of-the-box functionality. By spending less time managing infrastructure, Booking.com can now support various mission-critical use cases more efficiently, including marketing, payments, personalization and core booking processes.

Jay: <unk> consumed significant resources to alleviate the operational complexities and managing Kafka booking dot com migrated each business units open source clusters to confluent platform, our complete enterprise grade solution provided enhanced reliability and out of the box functionality by spending less time, managing infrastructure booking dot com can now support various mission critical.

Jay: Use cases, more efficiently, including marketing payments personalization and core booking processes with a complete data streaming platform that is connected across their business. They were also able to deploy a connected trip experience. This allows customers to seamlessly book flights accommodations car rentals and experiences in one visit.

Jay Kreps: With a complete data streaming platform that is connected across their business, they were also able to deploy a connected trip experience. This allows customers to seamlessly book flights, accommodations, car rentals and experiences in one visit.

Jay: The third driver of our resiliency as meeting customers wherever they are whether that's on prem on the edge in any cloud or hybrid environment that flexibility also provides another layer of resilient star business means our growth strategy is less exposed to changes in cloud investment and provides a healthy mix of ratable and consumption based revenue streams.

Jay Kreps: The third driver of our resiliency is meeting customers wherever they are, whether that's on-prem, on the edge, in any cloud, or hybrid environment. That flexibility also provides another layer of resilience to our business. It means our growth strategy is less exposed to changes in cloud investment and provides a healthy mix of routable and consumption-based revenue streams. Just as importantly, it lets us land in expanded environments where cloud isn't an option, whether for regulatory reasons, company mandates, or just customer preference. We continue to see strong momentum in this area. Our Confluent platform business had a particularly strong quarter with revenue growth accelerating to 18% year over year, representing its strongest Q1 growth in three years.

Jay: Just as importantly, it lets us land and expand it environments, where cloud is it's an option whether for regulatory reasons company mandates or just customer preference. We continue to see strong momentum in this area are confluent platform business had a particularly strong quarter with revenue growth accelerating to each 1% year over year, representing its strongest Q1 growth in three years.

Jay: And finally, it's not just that our products are better faster and more reliable. They are also more cost effective. This is a strong differentiator and provides our customers with more value for less money across a wide range of use cases are low tcf enables us to expand usage within our existing customer base and also drive new conversions from open source Kafka, It's one of the key levers that helps us.

Jay Kreps: And finally, it's not just that our products are better, faster, and more reliable, they're also more cost effective. This is a strong differentiator and provides our customers with more value for less money across a wide range of use cases. Our low TCO enables us to expand usage within our existing customer base and also drive new conversions from open source Kafka. It's one of the key levers that helps us retain customers, grow within our installed base, and tap into the broader open source community in a meaningful way. Key to capitalizing on this TCO advantage is offering pricing and packaging that fits the full range of Kafka use cases, from early projects to the most demanding production workloads.

Jay: Retain customers grow within our installed base and tap into the broader open source community in a meaningful way.

Jay: Key to capitalizing on this tcl advantage is offering pricing and packaging that fits the full range of Kafka use cases from early projects to the most demanding production workloads with new offerings like work stream and freight clusters, we're now able to serve high throughput low latency workloads at attractive price points, enabling our customers to tackle a wider range of use cases.

Jay Kreps: With new offerings like Warp Stream and Freight Clusters, we're now able to serve high-throughput, low-latency workloads at attractive price points, enabling our customers to tackle a wider range of use cases. We continue to see strong traction with both offerings in Q1, including new customers like Liftoff.io, and the next wave of Gen AI companies like Cursor and Thinking Machines.

Jay: We continue to see strong traction with both offerings in Q1, including new customers like lift off Dot Io in the next wave of Gen AI companies like cursor and thinking machines.

Jay Kreps: Here's an example of how our TCO advantage drives sustained growth with a top 20 global bank. This 5 million plus ARR customer, who most recently increased their spend with us by over 30%, initially relied on open source Kafka. However, the complexity and rising costs of self-managing Kafka quickly outweighed the value they received. More than five years ago, they migrated their first use case to Confluent. Since then, we've become a strategic partner as they've transitioned numerous legacy workloads to the cloud. Today, Confluent powers hundreds of use cases across their business, like fraud detection, capital management, regulatory reporting of trade data, and more.

Jay: Here's an example of how our GTO advantage drive sustained growth with a top 20 global back this $5 million plus a customer who most recently increased their spend with us by over 30% initially blood on open source Kafka Harvey the complexity and rising costs of self managing Kafka quickly outweighed the value they receive more than five years ago. They migrated their.

Jay: First use case to contract.

Jay: And we've become a strategic partner as they've transitioned numerous legacy workloads to the cloud today confluent powers hundreds of use cases across their business like fraud detection capital management regulatory reporting of trade data and more by moving to confluent, they've significantly reduced operational costs turned their real time data into a competitive advantage and lowered their tcl.

Jay Kreps: By moving to Confluent, they have significantly reduced operational costs, turned their real-time data into a competitive advantage, and lowered their TCO. In fact, the customer believes that for every dollar they spend with Confluent, they would otherwise spend $3 managing Kafka themselves.

In fact, the customer believes that for every dollar they spend with confluent they would otherwise spent $3 managing kafka themselves.

Jay Kreps: Together, these four factors, mission critical use cases, open source conversion opportunities, hybrid business model, and two CO advantages have laid the foundation and made our business more resilient through multiple shifts in the macro environment.

Jay: Together. These four factors mission critical use cases open source conversion opportunities hybrid business model and <unk> advantages have laid the foundation and made our business more resilient through multiple shifts in the macro environment.

Jay Kreps: Additionally, we see continued adoption of our DSP components, which significantly outgrew our core cloud business. Confluent unifies everything organizations need to work with real-time data. The ability to stream, connect, process, and govern continuously flowing streams of data, all in one platform. This foundation is proving especially valuable as generative AI moves from experimentation to execution. In particular, we're seeing strong interest in adoption for Flink and two of the most recent additions to our DSP. Our complete platform is becoming the connective tissue that brings real-time context to our customers' gen AI applications, so they can deliver trustworthy and actionable results that work in everyday operations.

Jay: Additionally, we see continued adoption of our DSP components, which significantly outgrew our core cloud business console that unifies everything organizations need to work with real time data the ability to stream connect process and govern continuously flowing streams of data all in one platform. This foundation is proving especially valuable is generated with AI moves from express.

Jay: A mutation to execution in particular, we're seeing strong interest and adoption for flink in table two of the most recent additions to our DSP. Our complete platform is becoming the connective tissue that brings real time context to our customers Gen. AI applications. So they can deliver trustworthy and actionable results that work in everyday operations, it's very exciting to see.

Jay Kreps: It's very exciting to see what our DSP enables our customers to do.

Jay: But our DSP enables our customers to do.

Jay Kreps: For example, a leading luxury goods conglomerate with 75 brands and over 6,000 stores worldwide uses our Confluent Cloud for Apache Flink to power its real-time order management and drive e-commerce growth. The company initially turned to Confluent Cloud to stream order management data to give internal teams accurate real-time visibility into product availability. As Confluent proved its value with this first use case, the customer consumed more of our platform, including our fully managed Flink service to prevent inaccurate stock information caused by duplicate data. This customer uses Flink to filter out orders and inventory duplicates and to continuously analyze real-time product availability.

Jay: For example, a leading luxury goods conglomerate with 75 brands and over 6000 stores worldwide uses are confluent cloud for Apache flake to power its real time order management and drive ecommerce grip. The company initially turned to confluent cloud to stream order management data to give internal teams accurate real time visibility into product availability.

Jay: As confluent proved its value with this first use case, the customer consumes more of our platform, including our fully managed service to prevent inaccurate stock information costs by duplicate data. This customer uses splunk to filter out orders and inventory duplicates and to continuously analyze real time product availability when high demand items come back in stock.

Jay Kreps: When high demand items come back in stock, Flink automatically triggers real-time alerts to notify waiting customers, enhancing the customer experience and driving incremental revenue. Building on the success of their initial Flink use case, they are now exploring new ways to leverage the technology to streamline and scale product inventory management.

Jay: <unk> triggers real time alerts to notify waiting customers enhancing the customer experience and driving incremental revenue building on the success of their initial <unk> use case. They are now exploring new ways to leverage the technology to streamline and scale product inventory management.

Jay: Before closing I am excited to share two updates first Ryan Mcmahon has been promoted to chief revenue officer at Cottonwood in this expanded role Brian will lead the global field strategy, bringing together sales sales engineering customer success and sales operations to help customers activate real time data to build the next wave of intelligent applications.

Jay Kreps: Before closing, I'm excited to share two updates. First, Ryan McBann has been promoted to Chief Revenue Officer at Confluent. In this expanded role, Ryan will lead the global field strategy, bringing together sales, sales engineering, customer success, and sales operations to help customers activate real-time data to build the next wave of intelligent applications.

Ryan joined Confluent last year as senior Vice President Global head of sales. He brings over 20 years of sales leadership experience building and leading top performing teams around the world before console that Ryan was president of UI path Americas, where he drove significant growth across their multi product platform. He also held senior leadership roles at Vmware.

Jay Kreps: Ryan joined Confluent last year as Senior Vice President, Global Head of Sales. He brings over 20 years of sales leadership experience, building and leading top-performing teams around the world.

Jay Kreps: Before Confluent, Ryan was President of UiPath Americas, where he drove significant growth across their multi-product platform. He also held senior leadership roles at VMware and Cisco.

Jay: <unk> and Cisco.

Jay Kreps: Second, we're honored to be named a Google Partner of the Year for the sixth time. This recognition is a reflection of the strong partnership we have with the leading CSPs. Together, we enable organizations to deliver the next generation applications they need to thrive in the age of AI.

Speaker Change: Second we're honored to be named a Google partner of the year for the sixth time. This recognition is a reflection of the strong partnership we have with the leading csp's together, we enable organizations to deliver the next generation applications they need to thrive in the age of AI.

Jay Kreps: In closing, we're proud of our strong start to the year, our commitment to providing the industry's most complete data streaming platform paired with a highly resilient business uniquely positions Confluent to seize the $100 billion plus data streaming market.

Speaker Change: In closing, we're proud of our strong start to the year, our commitment to providing the industry's most complete data streaming platform paired with a highly resilient business uniquely positions confluent to seize the $100 billion plus data streaming market with that I'll turn it over to Robyn.

Rohan Sivaram: With that, I'll turn it over to Rohan. Thanks, Shea. Good afternoon, everyone. And thanks for joining our earnings call. Our first quarter performance underscores the strength of our mission-critical data streaming platform, the strategic value of our multi-cloud, multi-data destination, and multi-deployment approach, as well as the flexibility of our well-diversified growth strategy. Turning to the results, Q1 subscription revenue grew 26% to $260.9 million, exceeding the high end of our guidance and representing 96% of total revenue. Platform revenue reached a new record of 118.2 million with growth accelerating to 18%. This momentum was driven by early traction in our partner ecosystem where OEM showed particular strength internationally.

Robyn: Thanks, Jay Good afternoon, everyone and thanks for joining our earnings call.

Robyn: Our first quarter performance underscores the strength of our mission critical data streaming platform.

Robyn: The strategic value of our multi cloud multi data destination and multi deployment approach as well as the flexibility of our well diversified growth strategy.

Robyn: Turning to the results Q1 subscription revenue grew 26% to $260 9 million exceeding the high end of our guidance and representing 96% of total revenue.

Robyn: Console platform revenue reached a new record of $118 2 million with growth accelerating to 18%. This momentum was driven by early traction in our partner ecosystem.

Robyn: OEM showed particular strength internationally.

Rohan Sivaram: Cloud revenue grew 34% to $142.7 million, representing 55% of subscription revenue. The revenue impact of lapping the leap year was approximately negative $1.6 million, as Q1 this year had one fewer day for consumption.

Robyn: Cloud revenue grew 34% to $142 7 million, representing 55% of subscription revenue the revenue impact of lapping the leap year was approximately negative $1 6 million as Q1. This year had one fewer day for consumption.

Rohan Sivaram: Turning to the geographical mix of total revenue, revenue from the U.S. grew 23% to $156.4 million. Revenue growth from outside the U.S. grew 28% to $114.7 million.

Robyn: Turning to the geographical mix of total revenue revenue from the U S grew 23% to $156 4 million.

Robyn: Revenue growth from outside the U S grew 28% to $114 7 million.

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

Rohan Sivaram: Moving on to rest of the income statement. I'll be referring to non-GAAP results unless stated otherwise. While driving top-line growth at scale, we continued to show significant operating leverage in our model. In Q1, subscription gross margin increased 100 basis points to 81.7%, primarily driven by continued efficiency gain in Confluent Cloud, coupled with strength in Confluent Platform. Operating margin was 4.3%, exceeding our guidance of approximately 3%, and was primarily driven by revenue and gross margin outperformance. Adjusted Free Cash Flow Margin, which excluded the non-recurring impact of our compensation change in Q1, was 1.8%. The impact of the change to Free Cash Flow Margin in Q1 was approximately 14 percentage points.

Robyn: While driving topline growth at scale, we continued to show significant operating leverage in our model.

Robyn: In Q1 subscription gross margin increased 100 basis points to 81, 7%, primarily driven by continued efficiency gain and content cloud coupled with strength in continental platform.

Robyn: Operating margin was four 3% exceeding our guidance of approximately 3% and was primarily driven by revenue and gross margin outperformance.

Robyn: Adjusted free cash flow margin, which excluded the nonrecurring impact of our compensation change in Q1 was one 8% the impact of the change to free cash flow margin. In Q1 was approximately 14 percentage points net income per share was <unk> using 367 8 million diluted weighted average shares outstanding.

Rohan Sivaram: Net income per share was $0.08, using 367.8 million diluted weighted average shares outstanding. Fully diluted share count under the Treasury stock method was approximately $380.9 million.

Robyn: Fully diluted share count under the Treasury stock method was approximately $380 9 million.

Robyn: We ended the first quarter with $1 $92 billion in cash cash equivalents and marketable securities.

Rohan Sivaram: We ended the first quarter with $1.92 billion in cash, cash equivalents, and marketable securities. Turning now to customer metrics, we ended Q1 with approximately 6,140 customers, representing a sequential increase of 340 customers, our highest sequential increase since Q1 of 2022. This robust growth underscores the strong value proposition of our multi-product platform and our continued success in capturing the open source conversion opportunity.

Robyn: Turning now to customer metrics. We ended Q1 with approximately 6140 customers representing a sequential increase of 340 customers our highest sequential increase since Q1 of 2022.

Robyn: This robust growth underscores the strong value proposition of our multi product platform and our continued success in capturing the open source conversion opportunity.

Rohan Sivaram: As mentioned at Investor Day 2025, we will report total customer count on an annual basis and begin reporting 20k plus ERR customers on a quarterly basis. In Q1, 20K plus ARR customer count increased to 2,487, up 41 customers sequentially and represented more than 95% of our ARR. Our 100K plus ARR customer count increased to 1,412, up 31 customers sequentially and accounted for greater than 90% of our ARR. Our $1 million plus ARR customer count grew to 210, up 16 customers sequentially, our NRR for the quarter remains stable at 117%, while GRR continued to be greater than 90%, demonstrating the mission-critical nature of our data streaming platform for our customers.

Robyn: As mentioned at Investor Day, 2025, we will report total customer count on an annual basis and begin reporting 20, <unk> plus <unk> customers on a quarterly basis.

Robyn: In Q1, <unk>, plus <unk> customer count increased to 2000, and 487 up 41 customer sequentially and represented more than 95% of our IRR.

Robyn: 100, K plus era of customer account increased to 1412.

Robyn: 31 customers sequentially and accounted for greater than 90% of our era or $1 million plus we had our customer count grew to 210 up 16 customers sequentially, our best quarter in net add for this cohort.

Robyn: <unk> for the quarter remains stable at 117%, while <unk> continued to be greater than 90% demonstrating the mission critical nature of our data streaming platform for our customers.

Robyn: Turning to our outlook for the fiscal second quarter of 2025, we expect subscription revenue to be in the range of 267 $268 million representing growth of approximately 19% non-GAAP operating margin to be approximately 5% and non-GAAP net income per diluted share to be in the range of eight.

Rohan Sivaram: Turning to our outlook, for the fiscal second quarter of 2025, we expect subscription revenue to be in the range of 267 to 268 million, representing growth of approximately 19%, non-GAAP operating margin to be approximately 5%, and non-GAAP net income per diluted share to be in the range of 8 cents to 9 cents. For fiscal year 2025, we expect subscription revenue to be in the range of $1.1 billion to $1.11 billion, representing growth of approximately 19% to 20%, non-GAAP operating margin to be approximately 6%, and non-GAAP net income per diluted share to be approximately $0.36.

Robyn: Two nine cents.

Robyn: For fiscal year 2025, we expect subscription revenue to be in the range of $1 1 billion to 1.11 billion representing growth of approximately 19% to 20% non-GAAP operating margin to be approximately 6% and non-GAAP net income per diluted share to be approximately 36 cents.

Rohan Sivaram: Now I'd like to provide some additional context for our guidance, along with a few modeling points. In light of the uncertainties in the current environment, we are widening our revenue guidance range and embedding a modest decline in growth rates from Q2 through Q4. For our cloud business, some of our larger customers began slowing the pace of new use case addition and focusing on cost optimization efforts in March. In contrast, consumption activities in our smaller customer base remain stable. These trends have continued into April. Given the current macro conditions, we believe it's prudent to assume there will not be a near-term rebound in consumption.

Robyn: Now I'd like to provide some additional context for our guidance along with a few modeling points.

Robyn: In light of the uncertainties in the current environment, we are widening our revenue guidance range and embedding a modest decline in growth rates from Q2 through Q4.

Robyn: For our cloud business some of our larger customers began slowing the pace of new use case edition and focusing on cost optimization efforts in March and contrast consumption activities in our smaller customer base remains stable. These trends have continued into April given the current macro conditions, we believe it's prudent to assume.

Robyn: There will not be a near term rebound in consumption.

Rohan Sivaram: This contrasts with previous cycles, where we typically saw a subsequent expansion following a period of slower consumption. As a result, we now expect cloud subscription revenue mix to be approximately 58% for Q4-25, with a sequential mix increase of approximately 1 point each quarter. Finally, we expect FY25 adjusted free cash flow margin to be approximately 6%. This excludes, as previously discussed, a one-time headwind of 3-4 percentage points for the full year due to our compensation change in Q1.

This contrast, with previous cycles, where we typically saw a subsequent expansion following a BDO slower consumption.

Robyn: As a result, we now expect cloud subscription revenue mix to be approximately 58% for Q4 25 with the sequential mix increase of approximately one point each quarter.

Robyn: Finally, we expect fiscal year 'twenty five adjusted free cash flow margin to be approximately 6%. This excludes as previously discussed a onetime headwind of three to four percentage points for the full year due to our compensation change in Q1.

Rohan Sivaram: We are confident that our updated guidance, coupled with multiple paths to growth, sets us up for success this year. Specifically, we see four key drivers of growth in our business. First, the core streaming conversion opportunity, targeting an open-source install base of over 150,000 organizations. Second, our DSP upsell opportunities across connect, process, govern, and table flow. Third, our highly strategic role in the age of AI. As traditional enterprises accelerate AI adoption, we believe this represents our largest monetization opportunity within AI. And fourth, the leverage we gain from our expanding partner ecosystem, including the OEMs, SIs, MSPs, and other high-impact strategic partnerships that help us extend our global reach and accelerate go-to-market efforts.

Robyn: We are confident that our updated guidance coupled with multiple paths to growth sets us up for success. This year, specifically, we see four key drivers of growth in our business first the core streaming conversion opportunity targeting an open source installed base of over 150000 organizations.

Robyn: Second our DSP upsell opportunities across connect process, Gaba and data flow.

Robyn: Todd are highly strategic role in the age of AI as traditional enterprises accelerate AI adoption. We believe this represents our largest monetization opportunity with an AI and fourth the leverage we gain from our expanding partner ecosystem, including the Oems.

Robyn: Size Msp's and other high impact strategic partnerships that help us extend our global reach and accelerated go to market efforts.

Rohan Sivaram: It's important to note these aren't just cloud-only growth vectors. We believe they represent durable growth drivers for both Confluent Cloud and Confluent Platform.

Robyn: Important to note. These on just cloud only growth vectors, we believe they represent durable growth drivers for both consumer and cloud and offer a platform. For example in Q1 revenue outperformance was driven by on Prem momentum with confluent platform and its critical role in closing large enterprise deals with our OEM.

Rohan Sivaram: For example, in Q1, revenue outperformance was driven by on-prem momentum with Confluent Platform and its critical role in closing large enterprise deals with our OEM partners. Our well-diversified growth strategy gives us resilience and flexibility, enabling us to continue to drive durable and profitable growth.

Robyn: Our well diversified growth strategy gives us resilience and flexibility, enabling us to continue to drive durable and profitable growth.

Rohan Sivaram: In closing, our first quarter results are a testament to the resilience of our business and our ability to capture our market opportunity. With a large TAN, category-defining technology, and an exceptional team, we are firmly positioned to sustain long-term growth and profitability.

Robyn: In closing our first quarter results are a testament to the resilience of our business and our ability to capture our market opportunity.

Robyn: With a large tam category defining technology and an exceptional team they are firmly positioned to sustain long term growth and profitability.

Jay Kreps: Now, Jay and I will take your questions. Thanks, Rohan.

Robyn: Now Jay and I will take your questions.

Robyn: Thanks, Ron joined the Q&A. Please click on the raise an icon on the Euro zone screen when selecting for Q&A, we ask that you limit yourself to one question and one follow up.

Operator: To join the Q&A, please click on the raise hand icon on your Zoom screen. When selected for Q&A, we ask that you limit yourself to one question and one follow-up.

Robyn: And today, our first question will come from the pendulum Bora with J P. Morgan followed by RBC and John.

Pinjalim Bora: And today, our first question will come from Pinjalim Bora with J.P. Morgan, followed by RBC. Oh, great. Thank you for taking the questions. Obviously, macro has been top of mind for everybody. I think you said you've seen some slowdown in new use cases across large customers. I want to ask you, what about existing kind of use cases, the consumption run rate there? Because I would assume that the existing use cases probably drive the bigger portion of revenue than kind of the ramping of new use cases, right?

Robyn: Oh, great. Thank you for taking the questions.

Robyn: Obviously, the macro has been top of mind for everybody I think you said youre seeing some slowdown in new use cases across large customers wanted to ask you.

Robyn: One of our existing kind of use cases, the consumption consumption run rate there because I would assume that the existing use cases, probably drive the bigger portion of revenue than kind of the ramping of new use cases and.

Robyn: So from the ECB commitment standpoint are you seeing any difference.

Jay Kreps: And also, from the ACV commitment standpoint, are you seeing any difference so far in April, which makes you to kind of look at the guidance Yeah, yeah, great, great question. So overall, what we said, you know, is that we did see a bit of lower consumption in our larger customers on the cloud side. And so overall, good, good quarter, you know, strong growth in CP, solid growth in cloud. This was a combination of optimizations and, you know, slower addition of new use cases, I would say both, you know, that wasn't across the customer base, you know, in our smaller customers, we didn't see that pattern.

Robyn: So far in April which makes you look.

Robyn: Look at the guidance.

Robyn: Yeah, Yeah, great Great question. So overall, what we said.

Robyn: We did see a bit of lower consumption in our larger customers on the cloud side and so overall good quarter strong growth in CP solid growth in cloud and this was a combination of the optimizations and slower addition of new use cases I would say.

Robyn: Yes that wasn't across the customer base, given our smaller customers, we didn't see that pattern and it wasn't specific to a single segment either in terms of international distribution industry.

Jay Kreps: And it wasn't specific to a single segment, you know, either in terms of international distribution or industry. You know, I wouldn't attribute that directly to macro. You know, I think the way I would explain it is this, right, we've seen a bit of an oscillating pattern in these larger customers, where they tend to, you know, have kind of a cycle of optimization, and then additional growth and optimization and growth. In times that were a bit more certain, we would probably bake in the assumption that that pattern would continue, and we'd see more of a rebound.

Robyn: I wouldn't attribute that directly to macro.

Robyn: I think the way I would explain it is that right we've seen a bit of an oscillating pattern in these larger customers, where they tend to have kind of a cycle of optimization and that additional growth and optimization and ground.

Robyn: In times that were a bit more certain we would probably baked in the assumption that that pattern would continue and we'd see more of a rebound given the current environment. We don't want to do that we want to be a little bit more conservative in how we're looking at that and just kind of play it forward straight through the year and that's what we've done when we've constructed the guidance for this year.

Jay Kreps: Given the current environment, we don't want to do that. We want to be a little bit more conservative in how we're looking at that and just kind of play it forward straight through the year. And that's what we've done when we've constructed the guidance for this year.

Rohan Sivaram: Rohan, you may have more to add to that. Now, I think you covered it, Pinjalim, I'll take the second part of your question. On the commitments, as you can see from our PO numbers, Q1 was strong. Both on the CP side, where we saw multi-year deals, customers committing multiple multi-year deals. Also, on the cloud side, where our cloud motion continues to be consumption first, but we've seen a lot of actually come and commit to multi-year deals on the cloud side as well. So basically, the commitments in Q1 was strong. That's how I'd categorize it. Yeah, got it.

Speaker Change: Ron you may have more to add to that.

Ron: I think I think Youre about AG, Hey, Julien I'll take the second part of your question on the commitments as you can see from our numbers.

Speaker Change: Q1 was strong.

Speaker Change: Both on the CD side, where we saw multiyear deals customers committing multiple mega deals also on the cloud side, where our cloud Fortunately continues to be consumption cost, but we've seen a lot of customers actually remained.

Speaker Change: On the cloud side as well so basically commitments in Q1 was.

Speaker Change: With strong that's how I would categorize it.

Speaker Change: Yes, Jay one follow up for you and this is more of a high level, we have seen some enthusiasm in the open source community around this idea of a diskless.

Pinjalim Bora: Jay, one follow up for you, and this is more of a high level. We have seen some enthusiasm in the open source community around this idea of a diskless Kafka, with a new KIP around there. Obviously, that's writing directly to object storage, and Warpstream has been doing that for some time now, and you own Warpstream. So I want to ask you, how do you kind of see the future of Confluent? Is Confluent overall as a whole, not just Warpstream?

Speaker Change: Kafka.

Speaker Change: With the new can be around there.

Speaker Change: Obviously, that's writing directly to object storage and <unk> stream has been doing that.

Speaker Change: For some time now.

Speaker Change: So wanted to ask you how do you how do you guys see the future of confluence is this constant overall as a whole just watching could it move toward this less future.

Jay Kreps: Could it move to a diskless future at some point, or the latency issues kind of with object storage kind of might be- Yeah, it's a great question. Yeah, we've actually done that in both our cloud and with Warpstream. We're actually very intelligent about the use of storage, and so our freight clusters use kind of a pure diskless approach. Our other clusters use a combination of storage technologies across the memory hierarchy to optimize it, and there's a fair amount of sophistication in that layer, and it actually matters a lot. When you think about the cost characteristics and the performance tradeoffs, it's definitely an area we put a fair amount of our Thank you so much.

Speaker Change: At some point or the latency issues kind of object storage.

Speaker Change: Yes, we've actually it's a great question, yes, we've actually done that in both our cloud and with our upstream.

Speaker Change: We're actually very intelligent about the use of storage and so our freight clusters, you use kind of a pure disclosed approach our other clusters. He's a combination.

Speaker Change: Storage technologies across the memory hierarchy to optimizing theres, a fair amount of sophistication in that manner and it actually matters a lot when you think about the cost characteristics.

Speaker Change: Mormons tradeoffs, that's definitely an area, we put a fair amount in R&D effort.

Speaker Change: Thank you so much alright, thanks pendulum will take our next question from Matt Hedberg with RBC, followed by Wells Fargo.

Operator: All right. Thanks, Pinjalim.

Matt Hepper: We'll take our next question from Matt Hepper with RBC, followed by Walsh Fargo. Hey, great. Thanks guys for the questions. Congrats on the quarter. Not an easy environment at all. Jay, you know, it's great to hear the success in DSP. I think you called out Flink and TableFlow in particular. I'm sort of curious, I think we have 4Q you called out DSP was 13% of your cloud business. I'm wondering if you could sort of quantify how that improved sequentially. And then, you know, maybe just a little bit more on Flink. It really seems to be coming up more and more in our partner checks.

Speaker Change: Hey, great. Thanks, guys for the questions Congrats on the quarter not an easy environment at all Jay it's great to hear the success and DSP I think you called out slink in table flow in particular, I am sort of curious any <unk> you called out DSP was 13% of your cloud business I'm wondering if you could sort of quantify how that improved sequentially and then maybe just a little bit more on slinky it really.

Speaker Change: He seems to be coming up more and more in our in our partner checks I'm wondering are you seeing some of the earliest adoption there.

Jay Kreps: I'm wondering where you're seeing some of the earliest adoption there. Yeah, you know, I'll give you some characterization.

Speaker Change: I'll give you some characterization.

Jay Kreps: You know, our intention with that kind of DSP percentage is to come back to that periodically, but not every single quarter. And so, you know, here's what we're seeing. So, a ton of enthusiasm, you know, overall, like sentiment in the company is the DSP offerings are on, you know, great success trajectory, significantly outgrowing the kind of core cloud business. And, you know, we've kind of been through this before as that stuff starts to get to scale, it moves the overall numbers and a lot of enthusiasm from customers. You know, we just released TableFlow as GA in AWS, you know, great early signs for that.

Speaker Change: Our intention with that kind of a DSP percentage is to come back to that periodically, but not every single quarter and so here's here's what we're seeing so.

Speaker Change: A lot of enthusiasm overall sentiment in the company is the DSP offerings are on great success trajectory significantly outgrowing the kind of core cloud business and we've kind of been through this before is that starting to get to scale. It moves the overall numbers and a lot of enthusiasm from customers.

Speaker Change: We just.

Speaker Change: Release table flow is G&A and AWS, great early signs for that.

Jay Kreps: And then Flink is succeeding really nicely, both in the cloud, as well as in CP. We've added this to our CP offering and picked up some really sizable customers on that doing awesome. And so, you know, I think this is still the early innings for the offerings on both sides, but great initial success. In the cloud, you know, these kind of serverless offerings, you start with kind of a broad base of simple use cases, then you start to build to these more mission critical large conversions where people are moving, you know, dozens or hundreds of different processing jobs over.

Speaker Change: And in Flink is succeeding really nicely both in the cloud as well as in CPE. We've added this to our CP offering and picked up some really sizable customers are not doing awesome use cases, and so I think this is still the early innings for.

Speaker Change: The offerings on both sides, but great initial success in the cloud server.

Speaker Change: <unk> offerings, you start with kind of a broad base of simple use cases, then you start to build to these more mission critical large conversions where people are moving.

Speaker Change: Dozens or hundreds of different processing jobs over and Thats of course, when you start to see.

Jay Kreps: And that's, of course, when you start to see, you know, the real money move. And, you know, we're starting to win some of those kind of larger customer engagements. We're putting in a ton of work to make sure we can really deliver against these big migrations. And, you know, that's a real focus in the team. But overall, you know, I do think that there's a significant push inside companies towards real time in the use of data. We're seeing this pattern around, we would call it shift left, where, you know, a lot of what customers were doing with data is moving upstream into the real time area so that it can go to multiple destinations, so that it can land in their analytics environments faster, and so that it can be part of the use of AI applications, which often need that.

Speaker Change: The real money move and we're starting to win some of those kind of larger customer engagements.

Speaker Change: We're putting in a ton of work to make sure we can really deliver against these big migrations.

Speaker Change: It's a real focus in the team, but overall I do think that there's a significant push inside companies towards real time and the use of data. We're seeing this pattern around we would call. It shifts left where lot of what customers were doing with data as moving upstream into the real time area. So that it can go to multiple destinations so that it can land.

Speaker Change: And their analytics environments faster and so that it can be part of the use of AI applications, which often need that and for all those reasons I think we have great great tailwind in that area, we ultimately will be.

Jay Kreps: And, you know, for all those reasons, I think we have great, you know, great tailwinds in that area. You know, we ultimately don't bake a ton of that, you know, product success into our guidance. You know, it's often hard to forecast, these new things, you know, something like table flow, that's just coming out to GA right now, you know, we would have internal goals. But when we think about our financial plan for the year, we wouldn't have something attached to that until we really see it perform. But the initial signs are very promising in terms of the build of pipeline and customer conversations.

And ton of that.

Speaker Change: <unk> success into our guidance, it's often hard to forecast. These new things you know something like table flow, that's just coming out of <unk>.

Speaker Change: Right now we would have internal goals, but when we think about our financial plan for the year, we wouldn't have something attached to that until we really see it perform.

Speaker Change: But the initial signs are very promising in terms of the build the pipeline and customer conversations.

Operator: That's fantastic.

Rohan Sivaram: And then maybe just one for Rohan. I think, you know, I think the reduced guidance makes a lot of sense to us, just given the macro. I appreciate some of the conservatism there.

Speaker Change: And then maybe just one for Ron I think I think the reduced guidance makes a lot of sense to us just given the macro and I. Appreciate some of the conservatism there coming off of a record quarter at least from the past several years of new customer adds I'm wondering how you're thinking about the relative rate of customer adds versus <unk> I mean, how are you.

Rohan Sivaram: You know, coming off of a record quarter, at least from the past several years of new customer ads, I'm wondering how you're thinking about the, you know, the relative rate of customer ads versus NRR. I mean, are you assuming that that NRR comes down a little bit, new customer ads, just kind of the components of that would be helpful? Yeah, Matt, sure thing. I mean, I'll make a couple of comments on guidance. And then I'll get to your question on NRN customer account. I mean, you know, as you called out, our guidance philosophy has been very consistent.

Speaker Change: Assuming that <unk> comes down a little bit new customer I was just kind of the components of that would be helpful.

Mike: Yes, Mike.

Speaker Change: Sure Okay.

Speaker Change: Make a couple of comments on guidance and then I'll get to your question on NII and customer commentary as you called out.

Speaker Change: Our guidance philosophy.

Speaker Change: Been very consistent and how we've approached it is disciplined approach and set goals and targets and Jay talked about dynamic around consumption on the CPE side.

Rohan Sivaram: And how we've approached it is disciplined approach and set prudent targets. And Jay talked about the dynamic around consumption. On the CP side, we did see good momentum in Q1, our visibility for Q2 remains good. So that's kind of driving our outlook for Q2 and rest of the year. But if I take a step back, and look at the guidance, what I'll tell you is we're looking at a guidance of 19 to 20% for the year at a billion dollar plus scale. And we're doing that with what I would call a fairly prudent setup for us.

Speaker Change: We did see good momentum in Q1, our visibility for Q2 remains good so thats kind of driving our outlook for Q2 and rest of the year.

Speaker Change: If I take a step back and look at the guidance what I can tell you is we're looking at our guidance of 19% to 20% for the year.

Speaker Change: Plus scale and we're doing that with what I would call a fairly prudent set out for us and we have multiple vectors of growth as we look at it which include streaming which includes DSP the AI as well as the partner ecosystem. So that's a little bit about the guidance and why we feel good with the center.

Rohan Sivaram: And, you know, and we have multiple vectors of growth, as we look at it, which includes streaming, which includes DSP, the AI, as well as the partner ecosystem.

Rohan Sivaram: So that's a little bit about the guidance and, you know, why we feel good with the setup that we have right now. To your question around customer account, that's right. I mean, that entire ecosystem of customer account, not only total customers on one bookend, but also million dollar plus customers, we had the best quarter from a million dollar plus customers. That tells you that, you know, top of the funnel, obviously, we are adding a lot of customers into the Confluent ecosystem. Our 20k customer tell you the amount of, I would say, high intensity, high frequency customers who can spend a lot with us.

Speaker Change: That we have right now to your question around customer going Thats right.

Speaker Change: Our ecosystem of customers not only Europe.

Speaker Change: <unk> online booking but also million dollar plus customers, we had the best quarter for $1 billion of those customers back.

Speaker Change: Thank you.

Speaker Change: Obviously, you're adding with auto.

Speaker Change: Customers into the ecosystem are quite dk customer tell you.

Speaker Change: Mt.

Speaker Change: I would say.

Speaker Change: High intensity high frequency customers, who can spend along with us.

Rohan Sivaram: That's that shows the core customer account. And million dollar plus customers is just how we are pushing them through the funnel. So overall, we feel good. And our last couple of quarters has been give or take around 117% range. And, you know, what supports that NRR is our consistency on the GRR side. That's call out number one, we've been greater than 90% since we've been a public company. And on the expansion side, you know, the dynamic that we called out on the consumption side could have an impact. But if I think about NRR, it should be in that zip code of 117% as we look ahead.

Speaker Change: It shows the core customer count and cluster.

Speaker Change: Customers are just we are pushing them through the funnel. So overall, we feel good and at our last couple of quarters has been give or take around 117% range.

Speaker Change: <unk>.

Speaker Change: What supports that NR is consistency on the G on our site.

Speaker Change: Call out number one we've been greater than 90% since we've been a public company and on the expansion side.

Speaker Change: The dynamics that we called out on the consumption side could have an impact.

Speaker Change: Think about MLR it should be in that ZIP code of 117% as we look ahead.

Operator: Well done, guys. Thanks, Matt.

Speaker Change: Well done guys.

Speaker Change: Thanks, Matt we'll take our next question from Michael <unk> with Wells Fargo, followed by Morgan Stanley.

Michael Turrin: We'll take our next question from Michael Turrin with the Wells Fargo followed by Morgan Stanley. Hey, great. Thanks. Nice to see everyone. I appreciate you taking the questions.

Speaker Change: Great. Thanks, and nice to see everyone. I. Appreciate you taking my questions I wanted to I wanted to start with something that was I think a very top of mind at the Investor Day, which is just some of the AI related use cases, you've mentioned cursor a couple of times investors sentiment.

Jay Kreps: Jay, I want to start with something that was, I think, very top of mind at the investor day, which was just some of the AI related use cases. You've mentioned Cursor a couple of times, Investor Summit on this topic certainly seems to ebb and flow. But can you just help add some context around what you're seeing in terms of AI related demand, if there are certain use cases you're finding, you'll have strong product market fit as those evolve, and just how we should start to expect some of this to evolve over a longer period of time?

Speaker Change: On this topic, certainly seems to ebb and flow, but can you just add.

Speaker Change: Some context around what youre seeing in terms of AI related demand. If there are certain use cases, you are finding you'll have strong product market fit as it has evolved.

Speaker Change: We should start to expect some of this to evolve over a longer period of time, yeah, absolutely. So we've seen success kind of in two dimensions in the AI area I mean first selling to AI companies like cursor as you mentioned the other is kind of an enterprise uses of AI where were.

Jay Kreps: Yeah, absolutely. So, you know, we've seen success kind of in two dimensions in the AI area. I mean, first, selling to AI companies like Cursor, as you mentioned, the other is the kind of enterprise uses of AI where we're You know, we're really fulfilling two roles. You know, one is this data supply chain for getting the data that fulfills the context for some of these AI applications. The second is, you know, for these agents that are actually acting on things in real time. You know, the use of the more sophisticated use of data has often been, you know, some batch job at the end of the day, but the point of these agents is to get into the real time flow.

Speaker Change: We're really fulfilling two roles. One is this data supply chain for getting the data that fulfills the context for some of these AI applications. The second is for these agents that are actually acting on things in real time.

Speaker Change: The use is the more sophisticated use of data is often then.

Speaker Change: Some batch job at the end of the day, but the point of these agents is to get into the kind of real time 12 things and we are starting to see those use cases emerge I would say that as earlier.

Jay Kreps: And we are starting to see those use cases emerge. I would say that's earlier, you know, of the two. But but I think it's a pattern that's quite durable, you know, we've done a fair amount of writing, and kind of thought leadership in this area, and really seeing kind of a community of interest forming around this in our customer base, and well beyond in the larger community.

Speaker Change: Q.

Speaker Change: But I think it's a pattern that's quite durable we've done a fair amount of writing and kind of thought leadership in this area and really seeing kind of a community of interest forming around this in our customer base and well beyond in the larger community. So I think thats very promising.

Jay Kreps: So I think that's very Just as a follow up, if I may just beyond the consumption patterns in terms of some of the things you're contemplating with guidance, sounds like newer products are just lower assumptions in the earlier stage. But are there certain milestones we should be thinking about in terms of go live with some of the newer products and then on the go to market transition? Maybe just help us with what you've seen from Ryan and how you're thinking about the shape of productivity you could see throughout the year? Yeah, yeah. So I'm really excited to be working with Ryan.

Speaker Change: Yes.

Speaker Change: A follow up if I may just beyond the consumption pattern in terms of some of the things you are contemplating with guidance sounds like newer product searches.

Speaker Change: Lower assumptions in the earlier stage, but are there certain milestones we should be thinking about in terms of go live with some of the newer products and then on the go to market transition, maybe just help us with what you've seen for Brian and how youre thinking about the shape of productivity you can see throughout the year, yes, yes, so im really excited to be <unk>.

Ryan Mcmahon: Talking with Ryan.

Jay Kreps: You know, any of these executive roles, we obviously do, you know, very broad outside search and look inside as well. And, you know, met a lot of people in the process. And, yeah, I felt like a internally, we had somebody who had, you know, a ton of strength and execution, you know, was a strategic thinker and understood what we were doing as a business, the space we were operating in. It would be awesome. Executive Team and Leadership of the Company. So I feel really good about the changes. Obviously, also less disruptive, because you have somebody who's already managing the full set of sales reps, just kind of taking on additional responsibility.

Ryan Mcmahon: Any of these executive roles.

Ryan Mcmahon: Obviously do.

Ryan Mcmahon: Very broad outside search and look inside as well.

Ryan Mcmahon: And met a lot of people and the process in salt.

Ryan Mcmahon: Internally, we had somebody who had a ton of strength and execution.

Ryan Mcmahon: It was a strategic thinker and understood what we were doing as a business the space we were operating in.

Ryan Mcmahon: It would be awesome part of the executive team and leadership to the company. So I feel really good about the changes obviously also less disruptive because you have somebody was already managing the full set of sales reps just kind of taking on additional responsibility and you have somebody that kind.

Jay Kreps: And you have somebody who had kind of proven themselves on the field, versus, you know, taking a shot on somebody new coming in and adjusting to our space. feel really good about that. And you know, excited about what we can do in the year ahead. You know, obviously less changes overall on the go to market side this year than last year, as you know, last year, we were doing this bigger set of consumption changes. So, you know, I think overall, that's, you know, a positive setup And then remind me of the other part of the question.

Ryan Mcmahon: Proving themselves on the field.

Ryan Mcmahon: <unk> taken a shot on somebody new coming in and adjusting to our space.

Ryan Mcmahon: Feel really good about that and excited about what we can do in the year ahead.

Ryan Mcmahon: Obviously less changes overall on the go to market side. This year than last year is last year. We were doing this bigger sandoz consumption changes. So I think overall that's.

Ryan Mcmahon: Positive setup for us.

And then remind me the other part of the question just on some of the new products.

Jay Kreps: Just on some of the new products, are there timelines we should be thinking about where, you know, those could start to see a steeper adoption ramp just based on that? Yeah, the two things that I think are in our minds, you know, we're, you know, we've started to get this Connect business to scale the business around the connectors. You know, we're now able to do much more of the kind of lift and shift of existing use of open source Kafka Connect and bring that into our platform. We feel pretty good about that motion. So now it's kind of taken that to scale.

We should be thinking about where this could start to see a steeper adoption ramp just.

Ryan Mcmahon: Yes, the two things that I think are in our mind.

Ryan Mcmahon: Sure.

Ryan Mcmahon: We've started to get this connect business to scale the business round. The connectors, we're now able to do much more of the kind of lift and shift of existing use of open source Kafka connect and bring that into our platform. We feel pretty good about that motion. So now it's kind of taken that to scale for.

Jay Kreps: For Flink, you know, it really is about these larger customers and use cases, you know, taking the, any kind of cloud layer that does data processing is basically a programming framework where you're writing effectively complete programs in SQL or Java and, you know, the ability for customers to take things that they've done and migrate in and really get to scale with that across big, complicated production use cases. As we start to make more of those successful more quickly, that's kind of the, you know, the motion to start bringing more and more onto the cloud offering there.

Ryan Mcmahon: Flink really is about these larger customers in use cases, taking these.

Ryan Mcmahon: Any kind of cloud layer that does data processing is basically a programming framework, where youre, writing effectively complete programs and sequel our job.

Ryan Mcmahon: Ability for customers to take things that they've done to migrate and it really gets your scale without across big complicated production use cases.

Ryan Mcmahon: As we start to make more of those successful more quickly that's kind of the.

Ryan Mcmahon: The motion to start bringing more and more onto the cloud offering there <unk> I think is off to a nice.

Jay Kreps: CP Flink, I think, is off to a nice start with customers. You know, that's kind of an easier process of lift and shift. And then TableFlow is, you know, just out of the starting gates. So the big milestones there are getting it across all the clouds, opening up the integration with Delta and Unity, the Databricks technologies that, you know, we've kind of promised to our customers and are working with Databricks around, you know, both of those are exciting milestones.

Ryan Mcmahon: Start with customers.

Ryan Mcmahon: Kind of an easier process of lift and shift.

Ryan Mcmahon: And then table flowers just out of the starting gates. So the big milestones there getting it across all the clouds opening up the integration with Delta and unity the data bricks technologies.

Ryan Mcmahon: We've kind of promise to our customers and are working with data breaks around both of those are exciting milestones I think we'll start to see that get out to early customers and have a better sense of the trajectory there.

Jay Kreps: I think we'll start to see that get out to early customers and have a better sense of the trajectory, you know, in the coming quarter.

Ryan Mcmahon: Coming quarters.

Speaker Change: Thanks, very much alright.

Operator: Thanks very much. All right, thanks, Michael.

Speaker Change: Alright, Thanks, Michael we'll take our next question from Sanjay <unk> with Morgan Stanley followed by Georgia.

Sanjit Singh: We'll take the next question from Sanjit Singh with Morgan Stanley, followed by Boyd. Yeah, thank you for taking the question. As we sort of enter this period of uncertainty, it sounds like the business coming in is quite healthy and really impressive customer ad metrics, you know, across the board. One of the things I'm trying to, you know, try and get a handle on, I'm sure we're all trying to get a handle on, is that if optimization activity comes back online, how to compare it, maybe to what we saw in the back half of 2022, throughout 2023, when there was, you know, kind of a more widespread optimization activity across the customer base.

Sanjay: Yes, Thank you for taking the question.

Sanjay: Sort of entered this period of uncertainty and it sounds like the business coming in is quite healthy really impressive customer add metrics.

Sanjay: Across the board one of the things I'm trying to.

Speaker Change: Try and get a handle on shareholder all trying to get a handle on is that if optimization activity comes back online how to compare it maybe to what we saw in the back half of 2022 throughout 2023, when there was kind of a more widespread optimization activity across the customer base. So in that spirit. Jay I was wondering if you can talk about.

Jay Kreps: So in that spirit, Jay, I was wondering if you talk about maybe the profile of the business back then in the second half of 22 and 23, versus what's driving growth in your customer base today. And if we did see another round of optimization activity, how would you compare it versus the last Yeah, you know, I would say the probably the biggest change in the business, you know, between those two timeframes is, I do think customers have done a lot of this, you know, when you think about, you know, effectively, what we went through 19, 20, 21, there was kind of a run up in cloud spend and a big push on just build, build, build new stuff, new stuff, new stuff.

Speaker Change: Maybe the profile of the business back then in the second half of 'twenty, two and 'twenty three versus what's driving growth in your customer base today, and if we did see another round of optimization activity, how would you compare it versus the last cycle.

Jay: I would say the probably the biggest change in the business.

Speaker Change: Between those two timeframes.

Jay: I do think customers have done a lot of this when you think about.

Jay: Effectively what we went through 1920 21, there is kind of a run up in cloud spend and a big push on just build build build new sesame stuff the stuff and in that environment, you do get a lot of effectively an optimized cloud usage in a variety of ways.

Jay Kreps: And in that environment, you do get a lot of, you know, effectively, unoptimized cloud usage, you know, in a variety of ways. And, you know, probably the companies with a consumption model, as we as we have for our cloud, you know, saw the run up of that the fastest. And then, you know, of course, also in that consumption model, it's easier than for the customer to be able to make sure they're really getting the full value out of it. And, you know, that will take down the spend. I think the difference now is a lot of that has been done, right.

Jay: And probably the companies with a consumption model as we as we have for our club saw the run up of that the fastest and then of course also in a consumption model, it's easier for the customer should be able to make sure. They are really getting the full value out of it and that will take down the spend I think the difference now is a lot of that has been done right. So we do see.

Jay: Refinement in customer usage.

Jay Kreps: So we do see refinement in customer usage. But I don't think that there's nearly as much of a, you know, I think there's a lot more tightness in the base of the cloud usage than there was. So maybe the range of outcomes is maybe narrower than it was a couple of years ago. I think that's probably right. Yeah.

Jay: But I don't think that theres nearly as much of the I think there's a lot more tightness in the base of the cloud usage than there was at that time period.

Jay: So maybe the range of outcomes is maybe near or.

Jay: I.

Jay: I think thats probably right.

Jay: So picking up on the strong console platform performance the acceleration 18%.

Jay Kreps: And so picking up on the strong Confluent platform performance, the acceleration, 18 percent, I was wondering if you sort of view that as a structural change, as some of the knock on effects from some of the policies, the macro policies and the policy debate around customers toggling a little bit more to self-managed, given potential actions on digital services, those type of things. And so do you see sort of Confluent platform and some of the innovation around CP flanked? Is that now more of a better grower for the product portfolio in your view? Yeah, I think it's too early to say, to make that call.

Jay: I'm wondering if you sort of view that as a structural change at some of the knock on effects Simpson.

Jay: Policies.

Jay: <unk> policy is that in the policy debate around customers toggling, a little bit more to self managed given potential options on digital services.

Jay: And so do you see do you see sort of console platform and some of the innovation around round Cp's link is that now more of a.

Jay: A better grower for the product portfolio in your view, Yeah, I think it's too early to say to make that call. What we saw in Q1 was actually just really good performance in CPE.

Jay Kreps: You know, what we saw in Q1 was actually just really good performance in CP. You know, I don't think those deals obviously have some timeline to build. So it wasn't, you know, directly in relation to tariffs or anything like that. It just won't happen that quickly. You know, so what we have, you know, what we have seen, I think, is probably a ton of exuberance about cloud heavy investment. And I would say maybe a more measured cloud and on premise strategy in some of the larger enterprises. And, you know, what you're saying is relevant, right?

Jay: I think those deals obviously have some timeline to build so it wasn't directly in relation to tariffs or anything like that is just wouldn't happen that quickly.

Jay: So what we have what we have seen I think is probably a ton of exuberance about cloud heavy investment and I would say, maybe a more measured cloud and on premise strategy and some of the larger enterprises.

Jay: And what Youre seeing is relevant right, which is hey.

Jay Kreps: Which is, hey, you know, if if companies are internationally are more concerned about the interaction with the US , you know, could there be more pressure on cloud usage? It's certainly possible. I mean, I don't see any kind of major pullback from the cloud. But, you know, it's certainly possible. The one thing I would say is, you know, Confluent has intentionally built to be highly resilient, you know, across that. And so to some extent, we're not taking a hard bet on one side or the other. We've continued to invest in Confluent platform. We've continued to add functionality that there wasn't as much growth in data center usage for a period of time.

Jay: As companies are.

Jay: Internationally are more concerned about the interaction with the U S could there be more pressure on cloud usage.

Jay: Certainly possible.

Jay: I don't see any kind of major pullback from the cloud.

Jay: Certainly possible. The one thing I would say is youll confluent has intentionally built to be highly resilient.

Jay: Across that and so to some extent, we're not taking a hard to bet on one side or the other we've continued to invest in consequent platform. We've continued to add functionality there wasn't as much growth in data center usage for a period of time, if there is a bit more C. P will probably grow that faster.

Jay Kreps: If there's a bit more, CP will probably grow a bit faster. You know, that's not the case. Cloud will grow faster. You know, we're basically happy to support customers wherever they are. I don't you know, I wouldn't expect a large scale pullback from the cloud just because we've as an industry kind of come to just rely so heavily on it. So, you know, I think it'd be premature to call any of that. But, you know, the key point for us is making sure we're in a great place with customers one way or the other.

Jay: That's not the case cloud will grow faster, we're basically happy to support customers wherever they are idle.

Jay: I wouldn't expect a large scale pullback from the cloud just because we've as an industry kind of come to just rely so heavily on it. So I think it'd be premature to call any of that but.

Jay: A key point for us is making sure we're in a great place with customers one way or the other and I will tell you that this ability to serve customers multi cloud and hybrid has become really top of mind for a lot of these companies as they are just starting to think about the balance of investment what they are doing.

Jay Kreps: And I will tell you that this ability to serve customers, multi cloud and hybrid has become really top of mind for a lot of these companies as they are just starting to think about, you know, the balance of investment, what they're doing, what's happening with some of the legacy stacks, et cetera. You know, I think that's turned into a real asset in a way that, you know, maybe four years ago was more hypothetical. You know, now is just a very concrete must have. Yeah, I appreciate the perspective. Thanks, Jay.

Jay: What's happening with some of the legacy stacks et cetera.

Jay: It's turned into a real asset and with it maybe.

Jay: Maybe.

Jay: Four years ago was more hypothetical unit now is just a very concrete must have yes.

Yes, I appreciate the perspective, thank you Sanjay.

Rohan Sivaram: Sanjit, I'll add another, I would say, slightly different lens to what Jay just shared. You know, when you look at our million dollar plus customers today, and we added net 16 customers, the highest we've had, the mix of that is very balanced across our portfolio. For example, like seven of those customers were driven by CP expansions or driven by CP. And then, you know, 50% of them are currently hybrid customers. And 13 out of those 16 customers actually had DSP in it. So fairly balanced. And I think that's a, that's something that we feel good about.

Jay: Add another I would say slightly different lens to what Jay just shared when you look at the million dollar plus customers today, and we added nearly 16 customer with the highest we've had.

Sometimes it's very balanced across our portfolio.

Jay: For example, like seven of those customers were driven by CB expansions are driven by <unk> and then.

Jay: 50% of them are currently hybrid customers.

Jay: Okay.

Jay: 16 customers actually had the SP unit, so fairly balanced.

Jay: That's something that we feel good about.

Jay Kreps: Yeah, yeah, I think another way to look at this is, you know, as we were going public, I think there was concern because our cloud revenue base was smaller, like, hey, can these guys really be successful in the cloud? You know, can they really take a leadership position there? And, you know, at least personally, I think that question is kind of answered. At this point, we really have a leadership product leadership, I think, in the cloud product leadership on premise and a really good hybrid story. And so we feel at this point, it's kind of, you know, the customer's choice how they want to Awesome.

Jay: Yeah, I think another way to look at this is as we were going public I think there was concern because our cloud revenue base was smaller and I can't can these guys really be successful in the cloud can they really take a leadership position there and at least personally I think that question has kind of answered at this point, we really have a leadership product leadership I think in the cloud.

Jay: Leadership on premise in a really good hybrid story and so we feel at this point, it's kind of the customer's choice how they want to buy.

Angela: Awesome. Thanks for the presenter Alright. Thanks, Angela next question from Brian <unk> with Deutsche Bank, followed by William Blair.

Operator: Thanks for the perspective.

Operator: All right.

Operator: Thanks, Sanjay.

Brett Zelnick: We'll take the next question from Brett Zelnick with Deutsche Bank, followed by William Black. Great. Thanks so much, guys. Nice to see everybody. I wanted to follow up on Sanjit's question. I mean, such a strong CP quarter out of the gate here in Q1. And I think, you know, within that, term license is up like 60% year on year. And if I listen carefully to your comments, Rohan, and the prepared remarks, you've mentioned the OEM relationships in international. I don't typically think of you guys as a strong OEM company, maybe not like Microsoft, but maybe I'm just not listening well enough.

Speaker Change: Great. Thanks, so much guys nice to see everybody.

Brian: I wanted to follow up on <unk> question, I mean, such a strong CPE quarter out of the gate here in Q1, and I think within that term licenses up like 60% year on year, and if I listened carefully to your comments ROE Honda in the prepared remarks.

Brian: You've mentioned the OEM relationships in international I don't typically think of you guys as a strong OEM company, maybe not like Microsoft, but maybe I'm just not listening well enough could you just expand a little bit more on the nature of these types of relationships. The visibility you have to these deals the typical term length and what is the better together together story with these types of.

Rohan Sivaram: Can you just expand a little bit more on the nature of these types of relationships, the visibility you have to these deals, the typical term length, and what is the better together story with these types of relationships? Yeah.

Brian: Our relationships.

Speaker Change: Yes happy to.

Rohan Sivaram: Happy to take that, Brad. From an overall CP business perspective, as you rightly called out, Q1 was a strong quarter, 18% growth. But I've said this before, for CP, I think looking at this business over a 12-month period is actually a much better indicator. Typically, timing of some of these larger deals, timing of these renewals, which are large, could have an impact on in-quarter revenue. But if you look at it from a 12-month lens, you'll see consistency in the CP performance. And historically, we've called out strength from regulated industries. And over the last couple of quarters, we've been talking about our focus around the partner ecosystem.

Brian.

Speaker Change: From an overall CPU business perspective, as you rightly called out Q1 was a strong quarter, 18% growth, but I've said this before.

Speaker Change: I think looking at this business over a 12 month view here is actually a much better indicator typically timing on some of these larger deals and timing of these renewals, which are large could have an impact on any quarter revenue, but if you look at it from a 12 month plans, you'll see consistency in the CP performance and <unk>.

Speaker Change: I believe you called out Australia from regulated industries and over the last couple of quarters, we've been talking about our focus around the partner ecosystem.

Rohan Sivaram: And some of these OEM deals, I think, in a very simple manner, it just helps us amplify our message and, you know, send basically sell through as well through a lot of our OEM partners. So this particular OEM deal that we called out was primarily on the international side, which was strength, but it's not just from OEM. It's also from multi-year deals that we've also had in Q1. And as we look at the rest of the year, I think the visibility is, you know, we'll see a good momentum in GDP for the rest of the year, primarily because of the reasons that Jay just laid out.

Speaker Change: Some of these OEM deals I think in a very simple manner. It just helps us amplify our message and you know.

Speaker Change: And basically sell through as well and through a lot of our OEM partners. So this particular OEM deal that we called out was primarily on the international side, which was strength, but it's not just from OEM. It's also from Montana multiyear deals, but we also have in Q1 and as we look at rest of the year I think.

Speaker Change: Our visibility as you know we will see a good momentum in CPE for rest of the year, primarily because of the reasons that you just laid out.

Speaker Change: That's very helpful. If I could just follow up thank you.

Rohan Sivaram: That's very helpful.

Rohan Sivaram: If I could just follow up. Thank you for, you know, continuing to call out the impact from the change in comp on free cash flow. Anything else, Rohan, at this point in the year as we think about the, you know, the remainder that would, you know, swing the growth and trajectory of free cash flow versus net income growth that we might want to keep in mind? Thanks so much. Now our adjusted free cash flow goals for the year is approximately 6%. And you know, outside of this one time impact, we don't see any kind of adjustments out of our free cash flow number for the rest of the year.

Speaker Change: To call out the impact from the change in the comp on free cash flow anything else draw on at this point in the year as we think about that.

Speaker Change: The remainder that would swing the growth and trajectory of free cash flow.

Speaker Change: Versus net income growth that we might want to keep in mind. Thanks, so much.

Speaker Change: Our adjusted free cash flow.

Speaker Change: Goals for the year is approximately 6% and outside of this one time impact we don't see any kind of adjustments out of our free cash flow number for the rest of the year. So historically, what we've said outside of these.

Rohan Sivaram: So historically, what we've said outside of these timing of comp payments or timing of commission payments, generally, the free cash flow tends to go in line with operating margin. And for the full year for sure, kind of they're pretty closely related. And that's what you're going to see for the rest of the year.

Speaker Change: Turning off comp payments or timing of commission payments generally the free cash flow tends to go in line with the operating margin and for the full year for sure are kind of they are pretty closely related and thats, what youre going to see for rest of the year excellent. Thank you again guys. Thanks.

Operator: Excellent. Thank you again, guys.

Speaker Change: Thanks, Craig. Thank you we will take our next question from Jason Ader with William Blair followed by Nida.

Operator: Thank you.

Jason Ader: We'll take our next question from Jason Ader with William Blair, followed by Nita. Yeah, thanks, Shane. Good afternoon, guys. How do you explain the strong net ads in Q1? Is it just the go to market changes that you made last year? Or is there anything else going on? Yeah, there's a set of things, you know, you have to look at it a little bit, as Rohan said, by the tier of customers, you know, the folks entering the million dollar plus is obviously a different explanation from that kind of top of the funnel total customer account ads.

Speaker Change: Yes, Thanks, Shane and good afternoon guys.

Speaker Change: How do you explain the strong net adds in Q1 is it just the go to market changes that you made last year or is there anything else going on yes.

Speaker Change: There's a set of things you have to look at it a little bit as Ron said by the tier of customers. The folks entering the million dollar plus is obviously a different explanation from that kind of top of the funnel total customer count adds.

Jay Kreps: You know, at that top of the funnel side, I would say we've made a set of improvements in the product led side of the business. And we feel like that is kind of picked up a little bit of steam. On the million dollar plus side, it really is just, you know, customers continuing to progress in their streaming journey and helping them along, you know, it's rare that companies start there, they usually start a bit smaller and grow into it.

At the top of the funnel side I would say we've made a set of improvements in the product side of the business and we feel like that is kind of.

Speaker Change: Picked up a little bit of steam on the million dollar plus side. It really is just.

Speaker Change: Customers continuing to progress in their streaming journey and helping them along it's rare that companies start there they usually start a bit smaller and grow into it. So that's just an evolution usually of work we've been doing with them over you know.

Jay Kreps: So that's just an evolution, usually of work we've been doing with them over, you know, a year, multi year really depending on the Okay, and then a quick follow up on for you, Jay, just do you think the macro uncertainty will actually stretch out AI deployment timelines for customers? Yeah, you know, it's a good question. It's a hard one to answer. You know, we like what have we actually seen so far? So, you know, it's not the case that we've seen a bunch of projects put on hold or some, you know, sizable change yet. But it definitely is on the minds of customers, you know, we have customers who are car companies or retailers, and they're thinking about this.

Speaker Change: A year multiyear really depending on the case.

Speaker Change: Okay and then.

Speaker Change: Quick follow up.

Speaker Change: For you Jay just do you think the macro uncertainty will actually stretch out.

Speaker Change: <unk> deployment timelines for our customers.

Speaker Change: Yeah. It's a good question, it's a hard one to answer.

Speaker Change: We like what do we actually seen so far so it's not the case that we've seen a bunch of projects put on hold or some you know.

Speaker Change: Sizable change yet, but it definitely is on the minds of customers. We have customers who are car companies are retailers and they're thinking about this and I think the answer is theyre not sure and I haven't seen the action yet.

Jay Kreps: And I think the answer is, they're not sure. And I haven't seen the action yet. But certainly, when we're thinking about, you know, our guidance, the trajectory for the rest of the year, it makes us, you know, more cautious and conservative in what we're doing.

Speaker Change: But certainly when we're thinking about.

Speaker Change: Our guidance the trajectory for the rest of the year it makes us more cautious and conservative in what we're doing.

Speaker Change: Thank you alright.

Operator: Thank you. All right, thanks, Jason.

Speaker Change: Alright, Thanks, Jason we'll take our next question from Mike <unk> with Needham followed by Mr. Huh.

Mike Cikos: We'll take our next question from Mike Cikos with Maidan followed by Misuha. Thanks, Shane, for getting me on, and thanks for taking the questions here, guys. Jay, if I just come back to the consumption dynamics that we're talking to here, I know we've seen typical oscillations from larger customers before. With what played out in 1Q, just curious, can you give us any more color on when that started to evidence itself? Was it towards the back half of March? Was it the final couple of days? And then now that April is essentially in the rearview mirror, has that in any way deteriorated further, or are we kind of stable from where we were ending March?

Mike: Great. Thanks, Jane Forget me on and thanks for taking my questions here guys.

Mike: J S. I'd just come back to the consumption dynamics that we're talking to here I know, we've seen typical oscillations from larger customers before.

Mike: With what played out in <unk>, just curious can you give us.

Mike: Any more color on when that started to evidence itself was it towards the back half of March was at the final couple of days and then now that April is essentially in the rearview mirror has that in any way deteriorate further or are we kind of stable from where we were ending March.

Mike: Yes. So we saw this in March what wasn't just the last few days and we certainly saw some impact through March.

Jay Kreps: Yeah, so we saw this in March. It wasn't just the last few days. We certainly saw some impact through March. And then we've seen stability, but not an immediate rebound in April. And that's kind of thinking about that, thinking about just the larger environment, that's what made us more cautious overall.

Mike: And then we've seen stability, but not an immediate rebound in April and Thats.

Mike: Kind of thinking of thinking about that thinking about just the larger environment. That's what made us more cautious overall on the clock.

Mike: And for the follow up I think it went to a rollout with the prepared comments, but one of the reasons you attributed some of that strength for confluent platform was specifically tied to the partners and international is it fair to think that.

Rohan Sivaram: And for the follow up, I think it went to Rohan with the prepared comments. But one of the reasons you attributed some of the strength for Confluent platform was specifically tied to the partners in international. Is it fair to think that With the traction you're seeing with your Puerto Rico system, CP, this is called an incremental growth vector here, just because certain geographies have a preference or a greater desire to go for CP over class. Yeah, Mike, I mean, when I when I think about the growth drivers for us, called out four growth drivers, the streaming opportunity, ESP, which is not only net new, but also expansion to our existing customers, AI, as well as the partner ecosystem, which includes SIs, GSIs, OEMs, These are all not only Confluent cloud, but they're also Confluent platform opportunities.

Mike: With your the traction youre seeing with your partner ecosystem.

Mike: C. P. This is colin and incremental growth vector here, just because certain geographies have a preference or a greater desire to go for CP over club.

Speaker Change: Yeah, Mike I mean, when I when I think about the growth drivers for us are called out for growth drivers.

Speaker Change: <unk> opportunity ESP, which is not only net new but also expansion to an existing customers.

Speaker Change: AI as well as the partner ecosystem, which includes the <unk> Oems.

Speaker Change: These are all not only confluence cloud, but then also confluent platform opportunities.

Rohan Sivaram: So I think that's that's probably one thing that I wanted to call out. I also called out in my prepared remarks. So short answer to your question is yes, it's across the board. And our strategy around being the Puerto Rico or the Switzerland where, you know, multi-data destination, multi-cloud and also, you know, multi-form factor is helping win the current environment.

Speaker Change: I think that that's probably one thing that I wanted to call out it was called out in my prepared remarks. So short answer to your question is yes, it's across the board and our strategy around being the Puerto Rico over Switzerland, where my DVD and destination multi cloud and also you know multiple form factor is helping with the current <unk>.

Speaker Change: Environment.

Speaker Change: Thank you guys alright, Thanks, Mike We will take our next question for Gregg Moskowitz with Mizuho followed by Colin.

Operator: Thank you, guys. All right. Thanks, Mike.

Gregg Moskowitz: We'll take our next question from Gregg Moskowitz with Misuha followed by Colin. Great. Thank you for taking the questions.

Speaker Change: Great. Thank you for taking the question Jay wondering if you could give us an update on work stream.

Jay Kreps: Jay, wondering if you could give us an update on Warpstream. Since acquiring the company, have you been able to close any meaningful transactions? And if so, has all of that come from the Warpstream pipe? Or was some of this Confluent generated as you start to integrate it into the folds of the rest of the go-to-markets? Yeah, yeah, so we've definitely had some really nice customer wins. I think we've shared a few of those. We've mentioned Cursor, but there's been a set of others that we brought forward in some of the past earnings. And yeah, those are a mixture of some things that were, you know, a few that were already in the pipeline, but we're actually seeing great activity and a set of wins, you know, across the larger team.

Speaker Change: Acquiring the company have you been able to close any meaningful transactions and if so has all of that come from that work stream type or with some of this confluent generated as you start to integrate it into the fold.

Speaker Change: The rest of the go to market so to speak yeah. Yeah. So so we've definitely had some really nice customer wins I think we've shared a few of those we'd mentioned cursor, but theres been set of others that we brought forward in some of the past earnings.

Speaker Change: And yes, those are a mixture of some things that were a few that were already in the pipeline, but we're actually seeing great activity in a set of wins across the larger team.

Rohan Sivaram: And it's not surprising, you know, this is something that was very close to home, filled a kind of natural niche in our product portfolio, and was ready to sell. And so we kind of knew coming in, this would be one that could potentially hit the ground running. And that's what we've Yeah, I think The way we thought about it was, again, make sure that we have a prudent setup for the rest of the year. So, you know, what are the two big assumptions behind it? We spoke about it, but I'll reiterate it because it's important.

Speaker Change: It's not surprising that this is something that was very close to home fill that kind of natural niche in our product portfolio and was ready to sell and so we kind of knew coming and this will be one that could potentially hit the ground running and that's what we've seen.

Speaker Change: Alright, Fantastic and then just for Johan as part of their revised 2025 Guide you mentioned youre not assuming a near term rebound in consumption, but maybe if we were to look at the other side of the coin I'm. Just curious if any thought was given to assuming a further weakening of these trends just given greater and predictability of the macro.

Speaker Change: Or from where you said from your perspective does it just seem difficult to envision things degrading from here.

Speaker Change: Yes, I think.

Speaker Change: The way, we talk about it once again.

Speaker Change: Beyond that we have accrued and set up the rest of the year. So you know what is the what are the two big assumptions behind it.

Speaker Change: We spoke about it but I'll reiterate it because it's important.

Rohan Sivaram: First, for our larger cloud customers, where, you know, we did see some cost optimization slow down in net new use cases, you know, we are not assuming an immediate near-term rebound in that consumption pattern. If you compare and contrast that with history, we've seen that, you know, historically, we've seen a rebound after optimization pattern. And, you know, you've heard us call out the sawtooth pattern that we see. We're not assuming that same shape. That by itself provides some prudence to our guide as we look for the rest of the year. For Confluent Platform, it's slightly different because, of course, as Jay mentioned, you know, these are deals that are already in the works, you have visibility into the pipeline, you have, so, so our guide is based on a lot of visibility in the pipeline that we have from Confluent Platform.

Speaker Change: First for our.

Speaker Change: Our larger cloud customers, where you know we did see some cost optimization slowdown in net new use cases.

We are not assuming an immediate near term rebound in their consumption items if.

Speaker Change: If you compare and contrast that with the history. We've seen that you know historically, we've seen a rebound after optimization pattern and you put us on a historical pattern that we see we're not.

Speaker Change: Assuming that same shape that by itself provides some programs to our guide as we look for rest of the year.

Speaker Change: For gunflint platform, it's slightly different because of course as Jay mentioned you don't these are.

Speaker Change: Deals that are already in the works you have visibility into the pipeline you have so so our guidance based on a lot of visibility in the pipeline that we have from online platform and I think the final takeaway from my perspective is if you take a step back and you look at our guide, we're accounting for 19% to 20% at a greater than $1 billion run.

Derek Wood: And I think the final takeaway from my perspective is, if we take a step back, and you look at our guide, we're calling for 19 to 20% at a greater than a billion dollar runway. But we're not assuming any form of acceleration in the back half of the year. I think that setup makes us feel good as we, you know, head into what I'd call uncertain times. Very helpful. Thanks, Rohan. All right. Thanks, Greg. We'll take our next question from Derek Wood with T.D. Collins, followed by Barkley. Great. Thanks for taking my questions. Start with Jay.

Speaker Change: Great.

Speaker Change: We're not assuming any acceleration in the back half of the year I think that makes us feel good as we are.

Speaker Change: Head into what I'd call uncertain times, yes.

Speaker Change: Very helpful. Thanks, Ron Alright, Thanks, Greg we'll take our next question from Derrick Wood with TD, calling followed by Barclays.

Derrick Wood: Great. Thanks for taking my questions start with Jay anything to share around what kind of demand reception, you've seen from table flow sense.

Jay Kreps: Anything to share around what kind of demand reception you've seen from TableFlow since it went GA? And just curious how to think about the revenue benefits. Is there a separate charge for TableFlow? Or is it more about just bringing new workloads onto the core platform? Yeah, it's a great question. So the reception has been extremely strong. Now, you know, it's difficult, of course, for new products to figure out exactly how fast it will ramp and, you know, exactly to what size. So we're always cautious when we try and, you know, forecast anything around it. But I would say overall, it's about as strong as we've ever seen for any new product.

Derrick Wood: And just curious how to think about the revenue benefits is there a separate charge for cable flow or is it more about is bringing new workloads onto the core platform.

Derrick Wood: Yes, it's a great question. So the reception has been extremely strong now it's difficult of course for new products to figure out exactly how fast it will ramp and you know exactly to what size. So we're always cautious when we try and.

Derrick Wood: Forecast anything around it but I would say overall, it's not as strong as we've ever seen for any new product and we're very excited about it it will take us sometimes you get it across all the clouds and across all the different formats to fully open up and capitalize on the opportunity that will happen over the course of this year.

Rohan Sivaram: And we're very excited about it. It'll take us some time to get it across all the clouds and across all the different formats to fully open up and capitalize on the opportunity that will happen over the course of this year. It is priced separately. So there's additional charges directly for the TableFlow usage. But actually, the bigger opportunity in what we've seen with customers is, yeah, they actually start to bring new data sets on entirely, right? So they'll spend some on TableFlow, but they'll spend some on Connect and Kafka and Flink along with that. And so, you know, so the opportunity is really on both sides.

Derrick Wood: It is priced separately, so theres additional charges directly from the table flow usage.

Derrick Wood: But actually the bigger opportunity than what we've seen with customers as they actually start to bring new data sets on entirely right.

Derrick Wood: Spend some on tables love with those spend some on connecting Kafka and flank along with that.

Derrick Wood: And so.

Derrick Wood: So the opportunity is really on both sides and I think one of the reasons, we're particularly excited about it is it's a very easy product to enable.

Rohan Sivaram: And, you know, I think one of the reasons we're particularly excited about it is it's a very easy product to enable for existing data. You know, you can kind of just turn it on. It doesn't require a ton of development work. And so we feel like, hey, as we really crack this and, you know, learn how to take it to market, it will be something that we can, you know, ramp relatively quickly. But of course, we have to first get it to GA and all the clouds and make it fully available over the course of this year to Great, thanks.

Derrick Wood: For existing data you can kind of just turn it on it doesn't require a ton of development work and so we feel like as.

Derrick Wood: As we really crack this and learn how to take it to market. It will be something that we can ramp relatively quickly.

Derrick Wood: But of course, we have to first get it T J and all the clouds and make it fully available over the course of this year should be able to do that.

Speaker Change: Great. Thanks, and then.

Rohan Sivaram: And then, Rohan, I mean, thanks for the color on the on the change and guidance assumptions.

Speaker Change: ROE on I mean, thanks for the color on the on the change in guidance assumptions I wanted to ask about the government side of things.

Rohan Sivaram: I wanted to ask about the government side of things. First, could you give us a sense of kind of how big of a business public sector or US Fed is? And then maybe talk about pipelines and how you may have changed your assumptions in the second half of this year, given all the new developments on the on the dough side of Yeah, Derek, thanks for your question.

Speaker Change: First could you give us a sense of how big of a business public sector or U S. Fed is.

Speaker Change: And then maybe talk about pipelines and how you may have changed your assumptions in the second half of this year given all the new developments on the on the dose side of things.

Speaker Change: Yeah.

Derek Thanks for your question when you think about the government opportunity.

Rohan Sivaram: When we think about the government opportunity, I always put the government opportunity in the category of, you know, the opportunity is ahead of us, because it's fairly underpenetrated. You know, for context, our exposure to the federal government is in the low single digits, so not material. And, you know, the shape of the business is consistent with what you see in other companies, you know, Q3 tends to be a stronger Fed order. And, you know, and some of these data points are baked into the guidance that we set.

Speaker Change: I always put the government opportunity in the category of.

Speaker Change: The opportunities ahead of us because it's fairly Underpenetrated forgone.

Speaker Change: For context our.

Speaker Change: Exposure to the federal government is in the low single digits, so not material.

Speaker Change: And the shape of the business is consistent with what <unk> seen other companies Q3 tends to be a stronger quarter.

Speaker Change: And some of these data points are baked into the guidance that we've set so short answer yes.

Rohan Sivaram: So, short answer, it's obviously fairly underpenetrated, big opportunity. And, you know, we spoke about getting FedRAMP status from a technology perspective. Now, we are working with our government partner to get formal FedRAMP status that will obviously open up the cloud business for us with the government as well. So that's how we're thinking about it, small, small benefit. And I think it's fair to say that in the current environment, you know, very modest expectations for that area this year, right? That's right. Very modest expectation. Perfect. Thank you. All right. Thanks, Derek.

Speaker Change: Obviously fairly underpenetrated big opportunity and we spoke about getting federal standards from a technology perspective, now we are working with our government partner to get formal background scatter that'll obviously opening up the cloud business for us with the government as well. So that's how we're thinking about it small small button.

Speaker Change: I think fair to say that in the current environment very modest expectations for that area. This year right.

Speaker Change: That's right very modest expectations.

Speaker Change: Perfect. Thank you alright.

Speaker Change: Alright, Thanks, Derek well take our next question from Raimo <unk> with Barclays followed by Stifel.

Raimo Lenschow: We'll take our next question from Raimo Lenschow with Barclays, followed by Stiefel. Hey, thanks for squeezing in. Two quick questions. One, Rohan, as you thought about the guidance, you mentioned more the larger accounts have the issues. How do I think about that? Like, you know, in theory, this could play out two ways. So the larger accounts just do a little bit, and then it's all good again, or it kind of goes down deeper and the larger accounts are first, and then SMB has a problem. So when you thought about guidance, how did you kind of thought about kind of reflecting that?

Raimo: Hey, Thanks for squeezing me in and two quick questions one.

Speaker Change: Ron.

Speaker Change: Have you thought about the guidance.

Speaker Change: You mentioned more to larger accounts.

Speaker Change: Issues.

Speaker Change: How do I think about that.

Speaker Change: In theory, this could play out to wait though that the larger accounts through a little bit and then it's all good again or kind of goes down deeper into larger accounts. Our first in F&B has a problem.

Speaker Change: When you thought about guidance, how would you kind of thought about that kind of reflecting that and then one for Jay if.

Rohan Sivaram: And then one for Jay, if you think about, obviously, there were kind of movements from other players in this broader ecosystem to think more about acquisitions in your space. Did you see anything in customer conversations that they realized, okay, real-time is a lot more important? You know, people are trying to beef it out. Are you seeing the benefit in that conversation that they realized, okay, you are actually the real-time company, so I should talk more with you? Thank you. Yeah, to the second part of the question, you know, I do think that there's definitely been a change in the perception of streaming, but I wouldn't say it's a step change.

Speaker Change: If you think about obviously there were kind of movements from other players in the broader ecosystem more about.

Speaker Change: Acquisitions in your space.

Speaker Change: You see anything any customer conversations that they realize okay. We just having a lot more important.

Speaker Change: People are trying to beef it out.

Speaker Change: Seeing the benefit in that conversation they realize okay youre actually the company. So I should talk more with you. Thank you.

Speaker Change: Yes to the second part of the question I do think that there's definitely been a.

Speaker Change: Change in the perception of streaming, but I wouldn't say, it's a step change I mean the.

Jay Kreps: I mean, the, you know, in our space, I feel like people always expect there to be a single Event that triggers it. But what we've actually seen is a real build, where this went for something that was viewed as kind of niche and on the side, like, what could you really do with it, to something that, of course, every company is doing, but isn't necessarily part of the top line strategy to something that's really like a major part of data strategy. And I think, you know, these kind of things always help that along. But there's no one event that kind of, you know, goes from zero to 100%.

Speaker Change: In our space I feel like people always expect there to be a single.

Speaker Change: Event that triggers it but what we've actually seen is a real bill where this went for something that was viewed as kind of niche and on the side like what can you really do with it to something that of course every company is doing but isn't necessarily part of the top line strategy to something that is really like a major part of data strategy and I think these kind of things always helped that along but theres no one.

Speaker Change: Event that kind of.

Speaker Change: Goes from zero to 100% and so yes, it's certainly something that comes up in conversations with customers out of isn't huge catalyst on that.

Jay Kreps: And so yeah, certainly that comes up in conversations with customers. I don't think it's a huge catalyst on their side in terms of how they're thinking about things. But there's no question that just, you know, if I were to just kind of go back on two year increments, and describe what is a conversation with the average CIO seem like, you know, kind of went from nothing, what is any of this stuff to like, okay, Apache Kafka, yes, but like, why does it matter? And what is Confluent to like, really a broader appreciation of what's possible with streaming, you know, what Confluent is, what could potentially be doable in the stream processing world as they think about kind of the real time use of data.

Speaker Change: In terms of how they're thinking about things, but but theres. No question that just you know if I were to just kind of go back on to year increments and can you.

Speaker Change: Describe what we are what is the conversation with the average CIO seem like kind of went from nothing what is any of this stuff to lag okay. Apache Kafka, yes, but like why does it matter and when as confluent to like really a broader appreciation of what's possible with streaming what confluence is what could potentially.

Speaker Change: It would be doable in the stream processing world as they think about kind of the real time use of data and that's not universal.

Jay Kreps: And, you know, that's not universal. You know, it's not everybody has that understanding, but just more broadly across the industry that's changing. And I think it's a really powerful thing when you think about, you know, there's a certain inevitability to the move to, you know, streaming and real time data, you know, it's a certain just aspect of how companies are changing. And I do think that that is a really powerful thing. Thank you. Yeah, and Raimo, to your first part of the question, you know, for our smaller customers are not larger customers. Our consumption patterns have been fairly steady.

Speaker Change: It's not everybody has that understand it and then just more broadly across the industry that is changing.

Speaker Change: And I asked a really powerful thing when you think about you know theres, a certain inevitability to the move to streaming and real time data surges aspects of how companies are changing and I do think that that benefits us.

Speaker Change: Yeah, Great room to your first part of the question Forever.

Speaker Change: Smaller customers are not the larger customers are.

Speaker Change: Our consumption patterns have been fairly steady.

Rohan Sivaram: And that's the good news. And also, when you look at the net new customer ads that we have, a vast majority of our top of the funnel net new ads come on the cloud side. So you know, there is a steady stream of consumption customers flowing in. So the variation in that little segment is a lot less. So you know, that's why we feel good with the outlook that we have for rest of the year. Yeah, yeah. And kind of adding to that a little color, you know, it's like when you look behind the curtains, kind of customer by customer, and the large customers, it's like, okay, is there some pattern or some big, you know, event that's taking place?

Speaker Change: And.

Speaker Change: That's a good news and also when you look at the net new customer adds that we have a vast majority of our top of the final net new ads on the cloud side. So that is a steady stream of consumption customers growing in sort of the variation in that middle segment, there's a lot less so.

Speaker Change: That's why we feel good with the outlook that we have for rest of the year, yeah, yeah, and kind of adding to that a little color.

Speaker Change: When you look behind the curtain as kind of customer by customer and the large customers as they go in case, there is some pattern or some big.

Speaker Change: And Thats, taking place is there any reason to believe that was kind of spread there is really not you know, it's just kind of the normal like customer activity, you would see around infrastructure and optimization and of course, the smaller customers do just have a certain law of large numbers in terms of how they operate so so yeah, we don't see any kind of emerging trend there.

Jay Kreps: Is there any reason to believe that would kind of spread? There's really not, you know, it's just kind of the normal, like customer activity you would see around infrastructure and optimization. And of course, the smaller customers do just have a certain law of large numbers in terms of how they operate. So yeah, we don't see any kind of emerging trend there. When we put the pattern together, you know, we certainly saw very strong pipe gen in the quarter. So kind of that top of funnel of what's coming in is really good. So we didn't see some kind of overall systematic softening of, you know, the demand environment.

Speaker Change: When we put the pattern together, we certainly saw very strong pipeline in a quarter or so kind of that top of funnel of what's coming in is really good. So we didn't we didn't see some kind of overall systematic softening of the demand environment or anything like that.

Jay Kreps: Perfect. Very good. Thank you.

Speaker Change: Alright. Thank you alright, Thanks, Brian. Our next question comes from Brad Reback with Stifel with our final question coming from Raymond James.

Operator: All right. Thanks, Raimo.

Brett Rebeck: Our next question comes from Brett Rebeck with Steve-O with our final question coming from Raymond James. Brett. Thanks. Just had to get the audio there. Appreciate the opportunity. You know, as you kind of look at the business going forward in the dynamic macro, have you made any changes to your OPEX plans internally? Are you cutting back on travel? Are you spending a little less? And if you haven't done that yet, what potentially would cause you to do that? Yeah, we haven't done anything particularly aggressive, but we always manage expenses, you know, along with the top line.

Speaker Change: Thanks, just had to get the audio there.

Speaker Change: I appreciate the opportunity.

Speaker Change: As you kind of look at the business going forward.

Speaker Change: Dynamic macro have you made any changes to your Opex plans internally are you cutting back on travel or you're spending a little less.

Speaker Change: And if you haven't done that yet what potentially would cause you to do that.

Speaker Change: Yeah, we haven't done anything, particularly aggressive, but we always manage expenses.

Jay Kreps: So, you know, we would obviously watch what happens throughout the year and make adjustments. You know, we've certainly operated over the life of the company through very dynamic times and done all kinds of things around that. So, so yeah, there's not been any big adjustments. Great, thank you. All right, thanks, Brad.

Speaker Change: Along with the top line. So we would obviously watch what happens throughout the year and make adjustments. We've certainly operated edge over the life of the company through a very dynamic time.

Speaker Change: Are things around that.

Speaker Change: So yeah theres not been any big adjustment at this point.

Speaker Change: Great. Thank you.

Speaker Change: Alright, Thanks, Brian Our final question today comes from Mark cash with Raymond James.

Operator: Our final question today comes from Mark Cash with the Raymond James. All right, thanks, Shane. For Jay, you mentioned how last year a lot more go-to-market adjustments with the quota alignment, and now thinking about this year and having more products and employment options to sell. So how would you characterize sales productivity? And I think in particular, can most reps and partners go out and incrementally sell DSP use cases or sell workstream and freight versus on cloud and platform previously? Thank you. Yeah, yeah, you know, it's certainly the case that we feel that the addition to the product portfolio, both the other Kafka SKUs that kind of fill in gaps and DSP, you know, that over time, that's a tailwind, because we can, you know, land and convert more of the existing Kafka, we can turn these into a, you know, bigger use cases, bigger platforms and bigger spend customer by customer, you know, the new product things are still smaller.

Speaker Change: Alright, Thanks Shane.

Speaker Change: Jay you mentioned, how last year, a lot more go to market share things of the quota alignment and now thinking about this year and adding more products and deployment options to sell so how would you characterize sales productivity and I think in particular in most racks and partner Scott incorrectly felt DSP use cases, our cell works Shannon freight versus stock items.

Speaker Change: Biopharm previously thank you yeah yeah.

Speaker Change: It's certainly the case that we feel that the addition to the product portfolio of both the other kafka skus that kind of filling gaps and DSP that <unk>.

Speaker Change: Over time, that's a tailwind because we can land and convert more of the existing Kafka. We can turn these into a bigger use cases speaker platforms, a bigger spend customer by customer.

Speaker Change: New product things are still smaller so they move they move the overall number is a little bit.

Jay Kreps: So they move, you know, they move the overall numbers a little bit, and grow fast on a percentage basis. As they get to scale, they move the overall numbers a lot. And we've been through a few of those curves before with the ramp of our cloud product and other And so yeah, that's kind of the way we look at it. We watch these new things very closely to make sure that they're, you know, on the ramp that we want. And, you know, we would expect to see that kind of have broad impact as they get Great.

Speaker Change: And grow fast on a percentage basis as they get to scale. They move the overall numbers a lot and we've been through a few of those curves before with the ramp of our cloud product and other things and so that's kind of the way we look at it we watch these new things very closely to make sure that they're.

Speaker Change: On the ramp that we launched and we would expect to see that kind of a broad impact as they get to scale.

Speaker Change: Okay.

Speaker Change: Great. Thanks, Mark and this concludes our earnings call. Thanks, again for joining us and have a nice evening, we'll see you soon.

Operator: Thanks, Mark.

Operator: And this concludes our earnings call. Thanks again for joining us. Have a nice evening. We'll see you soon. Thanks, everyone. Thank you, everyone.

Thanks, everyone. Thank you everyone.

Speaker Change: Yeah.

Speaker Change: [noise].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].