Summary
Confluent posted total revenue of $298.5 million for its fiscal 2025 third quarter, up 19.3% from $250.2 million in the prior-year quarter. Subscription revenue of $286.3 million grew 19%, and Confluent Cloud revenue of $161 million rose 24% as the fully managed offering took a larger share of the mix. Confluent Cloud accounted for 54% of total revenue in the quarter, up from 52% a year earlier. Revenue for the nine months ended September 30, 2025 was $851.9 million, up 21.3% from $702.4 million.
Profitability improved even though the company stayed unprofitable on a GAAP basis. Gross profit was $221.6 million in the quarter, up 18.8%, and gross margin was 74.2%, down 0.3 percentage points from 74.5%. The operating loss narrowed to $83.3 million from $93.7 million, and operating margin moved to -27.9% from -37.4%, a 9.5 point improvement. Net loss was $66.5 million, or -$0.19 per diluted share, against $74.1 million and -$0.23 a year earlier. Non-GAAP operating income was $29.1 million at a 9.7% margin, up from $15.8 million and 6.3%, and non-GAAP net income was $47.4 million, or $0.13 per diluted share, versus $0.10. For the nine months, net loss narrowed to $216.0 million, or -$0.63 per share, from $257.0 million and -$0.80. Gross margin for the nine months was 74.1%, up 1.2 percentage points from 73.0%.
Cash generation stood out. Operating cash flow was $30.8 million in the quarter, up 97.3% from $15.6 million, and it reached $22.2 million for the nine months compared with $1.8 million used in operations a year earlier. Capital expenditures were $0.8 million in the quarter and $3.2 million year to date. Free cash flow was $24.6 million and free cash flow margin was 8.2%, up from 3.7%; adjusted free cash flow was also $24.6 million for the quarter versus $9.3 million, while nine-month adjusted free cash flow of $40.5 million includes a non-recurring benefit from a change in the timing of cash compensation payments that lifted it above nine-month free cash flow of $2.6 million. Deferred revenue of $475.3 million rose 26.9%, and remaining performance obligations of $1.26 billion climbed 42.6% from $883.0 million. Cash, cash equivalents and marketable securities totaled $1,989.8 million on September 30, 2025, against an accumulated deficit of $2,205.2 million.
Customer metrics held steady. Confluent ended the quarter with 1,487 customers contributing $100,000 or more in annual recurring revenue, up 10% from 1,346 a year earlier, and dollar-based net retention was 114% as of September 30, 2025. Management guided to fourth quarter subscription revenue of $295.5 million to $296.5 million with a 7% non-GAAP operating margin and non-GAAP net income per diluted share of $0.09 to $0.10. For the full fiscal year 2025, the outlook calls for subscription revenue of $1,113.5 million to $1,114.5 million, a 7% non-GAAP operating margin, and non-GAAP net income per diluted share of $0.39 to $0.40.
The risks are the usual ones for a consumption-based infrastructure vendor. Management cited adverse macroeconomic conditions, including inflation, interest rates, tariffs, trade tensions and geopolitical conflicts, that drive longer sales cycles, tighter IT budgets and slower consumption expansion. Volatility in consumption from larger enterprise customers, continued customer focus on cloud cost optimization, and shifts in data streaming strategies all weighed on growth, and dollar-based net retention is expected to stay tempered near term by the shift to a consumption-oriented sales model. Competition, a limited operating history, dependence on third-party cloud infrastructure and cybersecurity exposure round out the list. Confluent also carries $1.1 billion of 0% convertible senior notes due 2027 and a $125.0 million non-cancelable services commitment payable through June 2030, which keep fixed claims on cash in place while GAAP losses persist.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $298.5M | $282.3M | +5.8% | $250.2M | +19.3% |
| Gross profit | $221.6M | $208.1M | +6.5% | $186.5M | +18.8% |
| Gross margin | 74.2% | 73.7% | +0.5 pp | 74.5% | -0.3 pp |
| Research & development | $121.8M | $121.2M | +0.4% | $102.7M | +18.5% |
| Sales & marketing | $142.8M | $143.6M | -0.6% | $138.0M | +3.5% |
| General & administrative | $40.3M | $39.7M | +1.5% | $39.5M | +2.1% |
| Total operating expenses | $304.9M | $304.6M | +0.1% | $280.2M | +8.8% |
| Operating income (loss) | -$83.3M | -$96.4M | +13.6% | -$93.7M | +11.1% |
| Operating margin | -27.9% | -34.2% | +6.2 pp | -37.4% | +9.5 pp |
| Net income (loss) | -$66.5M | -$82.0M | +18.8% | -$74.1M | +10.3% |
| Net margin | -22.3% | -29.0% | +6.8 pp | -29.6% | +7.3 pp |
| Diluted EPS | -$0.19 | -$0.24 | +$0.05 | -$0.23 | +$0.04 |
| Net retention rate | 114.0% | 114.0% | ±0.0 pp | 117.0% | -3.0 pp |
Risks
Macroeconomic uncertainty and IT spending scrutiny have caused longer sales cycles, reduced IT budgets, slower customer consumption expansion, and fewer new use cases. MD&A states these dynamics have negatively impacted and may continue to negatively impact revenue, including through lower consumption from larger enterprise customers.
The shift to a consumption-oriented sales model for Confluent Cloud has led to new customers with lower initial consumption and slower usage ramp, and customers remain reluctant to make large long-term commitments. Dollar-based NRR was 114% as of September 30, 2025, but management expects it to be tempered by consumption volatility and reduced consumption expansion from certain customers.
Attrition in the sales organization has adversely impacted and may continue to adversely impact the ability to meet sales, consumption, and revenue forecasts, delay the sales cycle, and increase costs. MD&A also notes sales and marketing expenses increased 4% in the three months ended September 30, 2025.
Confluent faces competition from public cloud providers' managed streaming services such as Azure Event Hubs, Amazon MSK and Kinesis, and Google Pub/Sub, as well as open source Apache Kafka. Cloud providers that also host Confluent Cloud could bundle competing products, provide unfavorable pricing, or exclude Confluent from opportunities.
Confluent Cloud operates on third-party public cloud infrastructure, and costs and gross margins are significantly influenced by prices negotiated with providers that are also competitors. Gross margin was 74.2% in FY2025 Q3, down 0.3 percentage points from FY2024 Q3, and an increasing cloud revenue mix could pressure margins.
Increasing prominence of AI and GenAI may require significant resources for new products and features, while customer adoption may lag investments and the market for GenAI applications may not develop as anticipated. This could reduce demand for Confluent's offerings.
Sales to government entities require compliance with FedRAMP, CMMC, and other federal requirements. Failure to obtain FedRAMP authorization for Confluent Cloud would prevent sales to certain federal and public sector customers, and public sector revenue is concentrated in a small number of resellers.
The mix between Confluent Platform upfront term licenses and usage-based Confluent Cloud creates period-to-period revenue fluctuations and makes future growth difficult to assess. Confluent Platform contributed 44% of subscription revenue in the nine months ended September 30, 2025, down from 47% in the prior-year period.
The company has a history of operating losses and an accumulated deficit of $2,205.2 million as of September 30, 2025. Net loss was $216.0 million year to date, though it narrowed from $257.0 million in the prior-year period, and additional capital may be required.
The 0% convertible senior notes due 2027 may require cash settlement upon conversion or repurchase upon a fundamental change. If the conditional conversion feature is triggered, Confluent could face reduced liquidity or be required to reclassify principal as a current liability.
Confluent has experienced seasonality in new customer bookings, with a higher percentage of subscriptions typically sold in the fourth quarter. This seasonality may become more pronounced as the company continues to target larger enterprise customers.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Customers with $100,000 or Greater in ARR
Confluent Cloud Revenue
Dollar-Based Net Retention Rate
Subscription Revenue
Adjusted Free Cash Flow Margin
Adjusted Free Cash Flow
Summary, forecast, risks and KPIs are extracted from Confluent, Inc.'s SEC filings for Q3 FY2025 (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.