Summary
Confluent's first quarter of fiscal 2024 showed a larger gross profit base and a much smaller operating loss. Total revenue reached $217.24 million, up 24.6% from the prior-year quarter. Gross profit was $156.02 million, up 34.3%. Gross margin was 71.8%, up 5.2 percentage points. The operating loss was $111.35 million, up 33.0% from the prior-year quarter as the loss narrowed. Operating margin was -51.3%, up 44.0 percentage points. The net loss was $92.97 million, up 39.1% from the prior-year quarter as the loss narrowed. Diluted loss per share was -$0.30, up 42.3% from the prior-year quarter. On a non-GAAP basis, operating loss was $3.3 million and non-GAAP operating margin was negative 1.5%. Non-GAAP net income per diluted share was $0.05.
The quarter's operating metrics point to steady customer expansion. Confluent ended the quarter with 1,260 customers that each contributed $100,000 or greater in annual recurring revenue, up 17% year over year. Total customers were approximately 5,120, up 9% from about 4,690 a year earlier. Management called this the largest sequential increase in total customers since the first quarter of 2023. Dollar-based net retention rate was between 120% and 125%. Confluent Cloud accounted for 49% of total revenue, up from 42% a year earlier, and 52% of subscription revenue. The company said its consumption transformation is showing early signs of success. Its DSP products, which include connect, process, and govern, grew substantially faster than the cloud business. This mix shift matters because Confluent Cloud carries a lower gross margin than Confluent Platform, though the overall gross margin still expanded.
Guidance for the second quarter of 2024 calls for subscription revenue between $217 million and $218 million. Non-GAAP operating margin is expected to be approximately negative 1%, and non-GAAP net income per diluted share is expected between $0.04 and $0.05. For fiscal year 2024, Confluent expects subscription revenue of approximately $910 million. Full-year non-GAAP operating margin is expected at approximately 0%, with non-GAAP net income per diluted share between $0.19 and $0.20. The company is transitioning its revenue outlook from total revenue to subscription revenue. The second quarter of 2024 will be the final quarter for total revenue outlook, and only total subscription revenue outlook will be provided starting with the third quarter of 2024.
Cash generation improved sharply. Operating cash flow was -$25.95 million, up 66.6% from the prior-year quarter. Free cash flow, a non-GAAP measure, was negative $31.7 million. Capital expenditures were $0.19 million, down 65.9%. Deferred revenue was $347.70 million, up 7.1%. Remaining performance obligations were $840.20 million, up 13.1%. The company noted that seasonality, timing of billings, and collections can affect operating cash flow from period to period, with the fourth quarter historically its strongest for sales.
The quarter came with familiar macro warnings. Confluent said its business has been and will continue to be affected by adverse and uncertain macroeconomic conditions. These include high inflation, high interest rates, volatility in capital markets or foreign currency exchange rates, and geopolitical conflicts such as the ongoing conflicts between Russia and Ukraine and in the Middle East. Management said these factors have led to longer sales cycles, reduced IT budgets, slower customer consumption expansion, fewer new use cases, and greater scrutiny on IT spending. The company also said it has experienced reduced growth rates in subscription revenue and RPO. Other named risks include limited operating history, the challenge of sustaining rapid growth, competition, reliance on third-party cloud infrastructure, security breaches, and the ability to attract and retain highly qualified personnel. The consumption-oriented go-to-market shift could temper dollar-based net retention rate in the near term. Confluent also expects sales and marketing expenses to increase in coming quarters as it changes its sales compensation plan toward consumption for Confluent Cloud.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $217.2M | $213.2M | +1.9% | $174.3M | +24.6% |
| Gross profit | $156.0M | $156.1M | -0.1% | $116.2M | +34.3% |
| Gross margin | 71.8% | 73.2% | -1.4 pp | 66.6% | +5.2 pp |
| Research & development | $97.6M | $86.9M | +12.2% | $84.9M | +14.9% |
| Sales & marketing | $131.4M | $119.9M | +9.5% | $128.6M | +2.1% |
| General & administrative | $38.4M | $33.9M | +13.2% | $35.4M | +8.7% |
| Total operating expenses | $267.4M | $240.8M | +11.0% | $282.3M | -5.3% |
| Operating income (loss) | -$111.4M | -$84.7M | -31.5% | -$166.1M | +33.0% |
| Operating margin | -51.3% | -39.7% | -11.5 pp | -95.3% | +44.0 pp |
| Net income (loss) | -$93.0M | -$94.1M | +1.2% | -$152.6M | +39.1% |
| Net margin | -42.8% | -44.1% | +1.3 pp | -87.5% | +44.7 pp |
| Diluted EPS | -$0.30 | -$0.31 | +$0.01 | -$0.52 | +$0.22 |
| Customers | 4,690 | — | — | 4,120 | +13.8% |
| Net retention rate | 120.0% | 125.0% | -5.0 pp | 130.0% | -10.0 pp |
Risks
Macroeconomic uncertainty and geopolitical conflicts, including the conflicts in Ukraine and the Middle East and operations in Israel, have caused longer sales cycles, reduced IT budgets, slower customer consumption expansion, fewer new use cases, and increased scrutiny on IT spending. MD&A states these factors have reduced growth rates in subscription revenue and RPO, even as Q1 FY2024 revenue rose 24.6% to $217.24M and RPO rose 13.1% to $840.20M.
The shift to a consumption-oriented sales model for Confluent Cloud has caused and may continue to cause attrition in the sales organization, may adversely impact sales forecasts, delay the sales cycle, and increase costs. Customers have been reluctant to make large long-term commitments, and Confluent Cloud subscriptions historically have a lower average price than Confluent Platform.
Confluent competes with public cloud providers that also host Confluent Cloud, including Microsoft Azure Event Hubs, Amazon Kinesis and Amazon MSK, and Google Cloud Pub/Sub and Dataflow, which could bundle competing products, provide unfavorable pricing, or exclude Confluent from opportunities. Open source Apache Kafka alternatives and internal IT teams also reduce demand.
Confluent Cloud relies on third-party public cloud infrastructure, and costs and gross margins are significantly influenced by prices negotiated with providers that are often competitors. Any disruption, capacity limitation, or unfavorable pricing could harm results.
The company has experienced cybersecurity incidents resulting in inadvertent disclosures of confidential information, including source code, caused by authorized personnel actions or inactions. A security incident compromising confidentiality, integrity, or availability could cause reputational harm, regulatory investigations, litigation, fines, and business disruption.
Failure to develop and expand sales and marketing capabilities or improve sales productivity could harm customer acquisition and market acceptance. The consumption-oriented shift has caused sales organization attrition and may delay sales cycles and increase costs.
The business depends on existing customers renewing subscriptions and usage-based commitments and expanding consumption. Reduced consumption by, or loss or expected loss of, customers has historically negatively impacted growth, including lower than expected consumption from large enterprise customers due to reorganizations, acquisitions, or strategic reprioritizations.
Confluent Cloud represented 49% of total revenue in Q1 FY2024, up from 42% in Q1 FY2023, and has a lower gross margin than Confluent Platform. Increasing cloud mix and third-party cloud infrastructure costs may pressure gross margins despite total gross margin rising to 71.8% in Q1 FY2024.
Historically, a higher percentage of new customer subscriptions and renewals occur in the fourth quarter, causing seasonality in RPO and bookings. This may become more pronounced as Confluent targets larger enterprise customers.
Sales to U.S. federal, state, local, and foreign government entities require compliance with government contracting rules and certifications such as FedRAMP for Confluent Cloud. Failure to obtain FedRAMP authorization would prevent selling Confluent Cloud to certain federal and public sector customers, and government shutdowns or budget delays can reduce demand.
The 0% convertible senior notes due 2027 may require cash settlement upon conversion or repurchase upon a fundamental change, and Confluent may not have sufficient available cash or financing. The conditional conversion feature, if triggered, could require cash settlement or reclassify principal as a current liability.
ARR for Confluent Cloud annualizes actual consumption from the last three months, which may not reflect future fluctuations and can increase NRR volatility. Dollar-based NRR was between 120% and 125% as of March 31, 2024, and is expected to be tempered by the shift to a consumption-oriented sales model.
The professional services business has grown, and sales efforts focus on larger customers rather than profitability of these services. Services gross margin decreased to (24)% in Q1 FY2024 from (11)% in Q1 FY2023, and failure to improve margins could harm results.
The dual class structure gives Class B common stock 10 votes per share, and holders of Class B, including executive officers and directors, held approximately 75.0% of voting power as of March 31, 2024. This concentrates control and limits Class A stockholders' ability to influence corporate matters.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Total Customers
Customers with $100,000 or Greater in ARR
Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Confluent, Inc.'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.