Confluent, Inc. (NASDAQ:CFLT) Q3 2023 Earnings Call Transcript
Confluent, Inc. (NASDAQ:CFLT) Q3 2023 Earnings Call Transcript November 1, 2023
Confluent, Inc. misses on earnings expectations. Reported EPS is $-0.30494 EPS, expectations were $-0.01.
Shane Xie: Hi, everyone. Welcome to the Confluent Q3 2023 Earnings Conference Call. I'm Shane Xie from Investor Relations, and I'm joined by Jay Kreps, Co-Founder and CEO; and Rohan Sivaram, CFO. During today's call, management will make forward-looking statements regarding our business, operations, sales strategy, financial performance and future prospects, including statements regarding our financial guidance for the fiscal fourth quarter of 2023, fiscal year 2023 and fiscal year 2024. 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-Q filed with the SEC.
A close-up of a software programmer typing rapidly at a large monitor.
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 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. 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 our IR website at investors.confluent.io.
And with that, I'll hand the call over to Jay.
Jay Kreps: Thanks, Shane. Good afternoon, everyone, and welcome to our third quarter earnings call. We delivered a solid Q3, exceeding the high end of total revenue, operating margin and EPS guided range in a still challenging macroeconomic environment. Total revenue grew 32% to $200 million. Non-GAAP operating margin improved 22 percentage points, and non-GAAP EPS turned positive for the first time, a key milestone. We've now driven 36 percentage points of operating margin improvement over the last two years. I want to thank our entire employee base for the tremendous progress here. The Confluent Cloud remains the fastest-growing part of our business, with revenue up 61% to $92 million. It fell slightly below our guidance. Our Q4 revenue outlook is impacted as well.
We expect revenue growth of 21% to 22% with cloud revenue sequential add of $6 million, representing growth of 43%. The lower cloud revenue this quarter impact to guidance for Q4 is primarily driven by two factors: First, the impact from two large digital native customers. One online gaming company moved workloads back to their own data center, and one of our largest customers ramped slower as they are in the process of being acquired. We believe consumption from these two customers was impacted by their company-specific events and accounts for roughly 50% of the expected consumption shortfall for Q4. Second, the continuing macro pressure, including the ongoing conflict in the Middle East, where Israel is a top 10 country for us and the possible U.S. government shutdown, both of which add uncertainty and disruption in particular segments.
See also 11 Best Organic Food and Farming Stocks To Buy and 12 Best Asian Stocks To Buy Now.
To continue reading the Q&A session, please click here.
