Summary
Confluent's fiscal 2024 second quarter, ended June 30, 2024, produced total revenue of $235.0 million, up 24.1% year over year. Gross profit was $170.0 million, up 29.4%, and gross margin improved 2.9 percentage points to 72.3%. The company still reported a GAAP operating loss of $108.3 million, though that loss narrowed 9.2%. Net loss was $89.9 million, a 13.1% improvement, and diluted EPS was -$0.28, better by $0.07. Operating margin was -46.1%, up 17.0 percentage points. For the first half, gross margin was 72.1%, up 4.0 percentage points, and operating margin was -48.6%, up 29.9 percentage points. The GAAP picture shows revenue and gross profit growing faster than the operating loss, but profitability remains negative.
Cloud and customer metrics point to where growth is coming from. Confluent Cloud revenue reached $117 million, up 40% year over year, and represented 50% of total revenue. Total customers were about 5,440, up 13%. Customers with $100,000 or greater in annual recurring revenue totaled 1,306, up 14%. Confluent called it the largest sequential increase in total customer count in two years. Dollar-based net retention rate was 118%. Confluent Cloud made up 52% of subscription revenue in the quarter, up from 47% a year earlier. The mix shift toward Confluent Cloud is central to the story, but management noted that Confluent Cloud carries a lower gross margin than Confluent Platform. That mix can pressure gross margin even as scale and efficiency improve.
Cash generation improved. Operating cash flow was $8.6 million, up 129.6% year over year. Free cash flow was $2.7 million, compared with negative $35.2 million in the prior-year quarter. Capital expenditures were $1.1 million, up 36.6%. Deferred revenue was $348.5 million, up 6.2%, and remaining performance obligations were $887.8 million, up 12.2%. For the first half of fiscal 2024, revenue was $452.2 million, up 24.4%; gross profit was $326.0 million, up 31.7%; operating loss was $219.7 million, narrowed 23.0%; net loss was $182.9 million, an improvement of 28.6%; diluted EPS was -$0.58, an improvement of $0.29; and operating cash flow was -$17.4 million, an improvement of 83.7%. The cash flow swing is notable because the prior-year quarter used cash in operations.
Non-GAAP profitability and guidance provide the forward view. Non-GAAP operating income was $1.3 million, compared with a non-GAAP operating loss of $17.3 million. Non-GAAP operating margin was 0.6%, compared with negative 9.2%. Non-GAAP net income per diluted share was $0.06. Free cash flow margin was 1.2%, compared with negative 18.6%. For the third quarter, Confluent guided subscription revenue to $233 million to $234 million, non-GAAP operating margin of 0%, and non-GAAP net income per share of $0.05. For the full fiscal year 2024, it guided subscription revenue to $910 million, non-GAAP operating margin of 0%, and non-GAAP net income per share of $0.20. The CFO said the company remains focused on efficient growth and delivering breakeven for non-GAAP operating margin and free cash flow margin for 2024. The company also aims to improve margins annually, though it notes that forward-looking non-GAAP reconciliations are not available without unreasonable effort because items such as stock-based compensation-related charges are hard to predict.
Risks remain in the background. Management pointed to uncertain macroeconomic conditions, high inflation, high interest rates, geopolitical events, longer sales cycles, reduced IT budgets, and increased scrutiny on IT spending. Consumption from larger enterprise customers can be volatile, especially as customers focus on near-term cloud cost controls and efficiency. That volatility has tempered and could continue to temper the dollar-based net retention rate. The shift to a consumption-oriented sales model for Confluent Cloud and changes to sales compensation could increase sales and marketing expenses in coming quarters. Competition, including open source Apache Kafka, and reliance on third-party cloud infrastructure also pose risks. Stock-based compensation-related charges remain a large reconciling item between GAAP and non-GAAP results, and the company still carries a significant accumulated deficit. The company's limited operating history, ability to sustain rapid growth, and need to attract and retain qualified personnel, including as it reorients its go-to-market strategy, are additional risk factors.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $235.0M | $217.2M | +8.2% | $189.3M | +24.1% |
| Gross profit | $170.0M | $156.0M | +9.0% | $131.4M | +29.4% |
| Gross margin | 72.3% | 71.8% | +0.5 pp | 69.4% | +2.9 pp |
| Research & development | $106.1M | $97.6M | +8.7% | $85.7M | +23.8% |
| Sales & marketing | $132.9M | $131.4M | +1.2% | $127.8M | +4.0% |
| General & administrative | $39.4M | $38.4M | +2.6% | $36.3M | +8.5% |
| Total operating expenses | $278.4M | $267.4M | +4.1% | $250.7M | +11.0% |
| Operating income (loss) | -$108.3M | -$111.4M | +2.7% | -$119.4M | +9.2% |
| Operating margin | -46.1% | -51.3% | +5.1 pp | -63.1% | +17.0 pp |
| Net income (loss) | -$89.9M | -$93.0M | +3.3% | -$103.4M | +13.1% |
| Net margin | -38.3% | -42.8% | +4.5 pp | -54.6% | +16.4 pp |
| Diluted EPS | -$0.28 | -$0.30 | +$0.02 | -$0.35 | +$0.07 |
| Customers | 4,830 | 4,690 | +3.0% | 4,120 | +17.2% |
| Net retention rate | 118.0% | 120.0% | -2.0 pp | 130.0% | -12.0 pp |
Risks
Macroeconomic uncertainty, high inflation and high interest rates, and geopolitical conflicts have caused and may continue to cause longer sales cycles, reduced IT budgets, and slower customer consumption expansion. MD&A says these dynamics have lowered consumption expansion from some larger enterprise customers and could continue to pressure results.
The shift to a consumption-oriented sales model for Confluent Cloud has caused sales organization attrition and may hurt sales productivity, forecast accuracy, and costs. MD&A says new customers acquired this year tend to have lower initial consumption and expects the shift to temper dollar-based net retention rate near term.
Dollar-based net retention rate was 118% as of June 30, 2024, but MD&A expects it to be tempered by consumption volatility from larger enterprise customers and reduced consumption expansion. Revenue may fluctuate because Confluent Cloud revenue is usage-based and customers increasingly prefer usage-based arrangements over large upfront commitments.
Competition is intense from public cloud providers such as AWS, Azure, and GCP and from open source Apache Kafka alternatives. AI and GenAI adoption may require significant new product investment and could change data infrastructure demand, and failure to differentiate may reduce market acceptance and limit growth.
Revenue mix is shifting toward Confluent Cloud, which has a lower gross margin, and third-party cloud infrastructure costs increased $5.1 million in the quarter compared with the prior-year quarter. MD&A says this mix shift offset subscription gross margin gains, while services gross margin was negative 18% in the quarter.
Substantially all revenue comes from the data-in-motion offering, and Confluent Platform still contributed 48% of subscription revenue in the six months ended June 30, 2024. Loss of market acceptance, reduced renewals, or limited use case expansion for Confluent Platform would harm growth.
Sales to government entities are subject to compliance, contracting, and certification requirements, including FedRAMP authorization for Confluent Cloud. Failure to obtain or maintain such approvals could exclude Confluent from public sector opportunities, and government shutdowns or budget delays could reduce demand.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Total Customers
Customers with $100,000 or Greater in ARR
Free Cash Flow
Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Confluent, Inc.'s SEC filings for Q2 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.