Summary
Confluent closed the second quarter of fiscal 2022 with revenue of $139.4 million, up 57.8% from $88.3 million in the prior-year quarter. Year to date, revenue reached $265.5 million, up 60.6%. Confluent Cloud, the managed service at the center of the growth story, generated $47.0 million in the quarter, up 139% year over year, and it keeps taking a larger share of subscription revenue. Remaining performance obligations were $591.3 million at June 30, 2022, up 80.7%, and deferred revenue was $285.7 million, up 50.0%. Management cautions that RPO excludes pay-as-you-go arrangements and says nothing definitive about the timing of customer consumption.
Profitability moved in two directions on a GAAP basis. Gross profit rose 54.1% to $89.9 million, yet gross margin slipped to 64.5% from 66.0% a year earlier. Stock-based compensation expense of $68.9 million, up from $34.5 million, and a revenue mix tilting toward cloud and services explain most of that pressure. The operating loss widened to $117.3 million from $86.0 million, and the net loss widened to $117.6 million from $88.2 million. Diluted net loss per share narrowed to $0.42 from $0.74 because the share count roughly doubled after the June 2021 IPO. Operating margin was negative 84.1%, up 13.3 percentage points from negative 97.4%. The non-GAAP picture is much narrower: non-GAAP operating loss was $46.8 million and non-GAAP operating margin was negative 33.5%.
Customer metrics held up. Confluent ended the quarter with roughly 4,120 customers, up 46% year over year, and 857 customers spending at least $100,000 in annual recurring revenue, up 39%. Dollar-based net retention came in above 130% for the fifth quarter in a row. Cash generation improved at the margin but stays negative. Net cash used in operating activities was $33.5 million for the quarter, up 22.5% from $43.2 million used a year earlier, and capital expenditures were $1.2 million. Free cash flow, a non-GAAP measure, was negative $36.9 million. The balance sheet held $1,957.5 million in cash, cash equivalents, and marketable securities at June 30, 2022, against $1.1 billion of 0% convertible notes due 2027 and an accumulated deficit of $979.5 million.
Guidance points to more of the same growth at a still-negative margin. Confluent issued third-quarter 2022 guidance that pairs its revenue outlook with a non-GAAP operating margin of about negative 33% and a non-GAAP net loss per share of $0.17 to $0.19. For the full fiscal year 2022, the company guided to a non-GAAP operating margin of negative 35% to negative 34% and a non-GAAP net loss per share of $0.69 to $0.73, alongside a full-year revenue outlook. Management still points to reaching positive non-GAAP operating margin as it exits the fourth quarter of fiscal 2024.
The risks are mostly external. Confluent cites inflationary conditions, economic uncertainty, recessionary risks, and exchange rate fluctuations that could push customers to cut information technology spending, lengthen sales cycles, shrink contract sizes, or consume less Confluent Cloud. Some could drift toward open source alternatives, and competition in the data streaming market remains intense. The business also leans on third-party cloud infrastructure, carries a full valuation allowance against U.S. and U.K. deferred tax assets, and expects to keep reporting operating losses and negative operating cash flow. Seasonality cuts both ways: the fourth quarter is historically the strongest for new sales and renewals, while collections tend to land one to two quarters later.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $139.4M | $126.1M | +10.5% | $88.3M | +57.8% |
| Gross profit | $89.9M | $80.4M | +11.9% | $58.3M | +54.1% |
| Gross margin | 64.5% | 63.7% | +0.8 pp | 66.0% | -1.5 pp |
| Research & development | $64.5M | $57.7M | +11.8% | $33.2M | +94.0% |
| Sales & marketing | $112.8M | $106.7M | +5.7% | $73.2M | +54.0% |
| General & administrative | $30.0M | $27.5M | +9.1% | $37.9M | -21.0% |
| Total operating expenses | $207.2M | $191.8M | +8.0% | $144.4M | +43.5% |
| Operating income (loss) | -$117.3M | -$111.5M | -5.2% | -$86.0M | -36.3% |
| Operating margin | -84.2% | -88.4% | +4.2 pp | -97.4% | +13.3 pp |
| Net income (loss) | -$117.6M | -$113.0M | -4.1% | -$88.2M | -33.4% |
| Net margin | -84.4% | -89.6% | +5.2 pp | -99.8% | +15.4 pp |
| Diluted EPS | -$0.42 | — | — | — | — |
| Customers | 4,120 | 4,120 | ±0.0% | 2,830 | +45.6% |
| Net retention rate | 130.0% | 130.0% | ±0.0 pp | 130.0% | ±0.0 pp |
Risks
The filing notes limited experience operating at current scale under high inflation or in recessionary or uncertain economic environments, which could cause longer sales cycles, reduced contract sizes, and increased scrutiny on IT spending. The risk factors also cite the Russian military operations in Ukraine and related geopolitical situation as sources of economic uncertainty.
Confluent Cloud runs on AWS, Azure, and GCP, which are also primary actual and potential competitors; these providers could embed competing capabilities, bundle their own offerings, or provide unfavorable pricing. The filing warns that public cloud providers could develop a data-in-motion offering operating across multiple public clouds or on premise.
Subscription revenue mix shifted toward Confluent Cloud (36% of subscription revenue in the six months ended June 30, 2022 vs 23% in the prior-year period), which has historically had lower average prices and usage-based variability. The company intends to invest significantly in Confluent Cloud, and failure to achieve further market adoption could harm growth and financial condition.
Total gross margin declined to 64% for the quarter ended June 30, 2022 from 66% in the prior-year quarter, and to 64% for the six months ended June 30, 2022 from 67% in the prior-year period. The decline was driven by higher stock-based compensation expense, revenue mix shift, and increased third-party cloud infrastructure costs.
The company disclosed the Codecov Breach, in which a malicious third party gained unauthorized read-only access to and copied private Github repositories containing source code and internal documents referencing customers. The full extent of impact may not be known, and exfiltrated source code could be used to identify vulnerabilities in the offering.
Confluent Platform contributed 64% of subscription revenue for the six months ended June 30, 2022, down from 77% in the prior-year period, but the business remains substantially dependent on Confluent Platform. Loss in market acceptance, reduced renewals, or limited use case expansion would harm results.
The company depends on effectively developing and expanding its sales and marketing organization and improving sales productivity. The filing notes that hiring reductions in the sales and marketing organization negatively impacted near- to medium-term growth rate and revenue, and that new sales personnel require time to achieve desired productivity levels.
Stock-based compensation expense increased to $68.9 million for the quarter ended June 30, 2022 from $34.5 million in the prior-year quarter, and to $126.2 million for the six months ended June 30, 2022 from $47.9 million in the prior-year period, reflecting increased headcount and equity awards. The company relies heavily on equity compensation to attract and retain talent, and stock price volatility could impair retention.
The company markets to heavily regulated verticals such as banking and financial services and to government entities, bringing additional regulatory scrutiny and compliance burdens. Failure to obtain or maintain FedRAMP certification for Confluent Cloud would prevent sales to certain Federal government and public sector customers.
The company has $1.1 billion aggregate principal amount of 0% convertible senior notes due 2027. Risks include the inability to raise funds to settle conversions in cash or repurchase notes upon a fundamental change, and the conditional conversion feature could require reclassifying the notes as a current liability, reducing net working capital.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Total Customers
Customers with $100,000 or Greater in ARR
Confluent Cloud Revenue
Free Cash Flow
Dollar-Based Net Retention Rate
Non-GAAP Total Gross Margin
Summary, forecast, risks and KPIs are extracted from Confluent, Inc.'s SEC filings for Q2 FY2022 (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.