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What changed in Confluent, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Confluent, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+265 added−393 removedSource: 10-K (2026-02-11) vs 10-K (2025-02-18)

Top changes in Confluent, Inc.'s 2025 10-K

265 paragraphs added · 393 removed · 212 edited across 2 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

209 edited+53 added−15 removed412 unchanged
Biggest changeWe can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. 58 Table of Contents While we have policies and procedures to address compliance with such laws, our employees and agents may take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
Biggest changeIn addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
Confluent Cloud and WarpStream customers may purchase subscriptions either without a commitment contract, which we refer to as pay-as-you-go, or on a usage-based commitment contract of at least one year in duration. Pay-as-you-go customers are billed, and revenue from them is recognized, based on usage.
Confluent Cloud and Confluent WarpStream customers may purchase subscriptions either without a commitment contract, which we refer to as pay-as-you-go, or on a usage-based commitment contract of at least one year in duration. Pay-as-you-go customers are billed, and revenue from them is recognized, based on usage.
We expect that any additional channel partners we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our products. As our channel partnerships come to an end or terminate, we may be unable to renew or replace them on comparable terms, or at all.
We expect that any additional partners we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our products. As our channel partnerships come to an end or terminate, we may be unable to renew or replace them on comparable terms, or at all.
Our current and future international business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of cloud infrastructure or cloud-native products by international businesses; • changes in a specific country’s or region’s political or economic conditions, including in the UK as a result of Brexit; • the need to adapt and localize our offerings for specific countries; • greater difficulty collecting accounts receivable and longer payment cycles; • potential changes in trade relations, regulations, or laws; • unexpected changes in laws, regulatory requirements, or tax laws; • interest rates, as well as changes in existing and expected interest rates, which may vary across the jurisdictions in which we do business; • more stringent regulations relating to data privacy, security, and data localization requirements and the unauthorized use of, or access to, commercial and personal information; • differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; • potential changes in laws, regulations, and costs affecting our UK operations and local employees due to Brexit; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and challenges to international customers in the event of a rise in the value of the U.S. dollar; • the cost and risk of entering into hedging transactions; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • limited or insufficient intellectual property protection or difficulties obtaining, maintaining, protecting, or enforcing our intellectual property rights, including our trademarks and patents; • political instability, economic sanctions, terrorist activities, or international conflicts, including the ongoing conflicts between Russia and Ukraine and in the Middle East, which have impacted and may continue to impact the operations of our business or the businesses of our customers; • inflationary pressures, such as those the global market is currently experiencing, which have increased and may continue to increase costs for certain services; • health epidemics or pandemics, such as the COVID-19 pandemic; • actual or perceived risk of economic recession; 56 Table of Contents • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Our current and future international business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of cloud infrastructure or cloud-native products by international businesses; • changes in a specific country’s or region’s political or economic conditions, including in the UK as a result of Brexit; • the need to adapt and localize our offerings for specific countries; • greater difficulty collecting accounts receivable and longer payment cycles; • potential changes in international trade relations, regulations, or laws; • unexpected changes in laws, regulatory requirements, or tax laws; • interest rates, as well as changes in existing and expected interest rates, which may vary across the jurisdictions in which we do business; • more stringent regulations relating to data privacy, security, and data localization requirements and the unauthorized use of, or access to, commercial and personal information; • differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; • potential changes in laws, regulations, and costs affecting our UK operations and local employees due to Brexit; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and challenges to international customers in the event of a rise in the value of the U.S. dollar; • the cost and risk of entering into hedging transactions; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • limited or insufficient intellectual property protection or difficulties obtaining, maintaining, protecting, or enforcing our intellectual property rights, including our trademarks and patents; • political instability, economic sanctions, terrorist activities, or international conflicts, including the ongoing conflicts between Russia and Ukraine and in the Middle East, which have impacted and may continue to impact the operations of our business or the businesses of our customers; • inflationary pressures, such as those the global market is currently experiencing, which have increased and may continue to increase costs for certain services; • health epidemics or pandemics, such as the COVID-19 pandemic; • actual or perceived risk of economic recession; 61 Table of Contents • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Business Metrics.” While we believe this ARR methodology aligns with how our management assesses ARR internally and better reflects actual customer behavior compared to other methodologies, it assumes Confluent Cloud consumption trends over 12-month periods based on three months of actual consumption, which does not account for future fluctuations and unpredictability in consumption rates (which we have experienced in recent periods and expect to continue to experience) or reflect trends in the growth or contraction of subscriptions over time.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Business Metrics.” While we believe this ARR methodology aligns with how our management assesses ARR internally and better reflects actual customer behavior compared to other methodologies, it assumes Confluent Cloud and Confluent WarpStream consumption trends over 12-month periods based on three months of actual consumption, which does not account for future fluctuations and unpredictability in consumption rates (which we have experienced in recent periods and expect to continue to experience) or reflect trends in the growth or contraction of subscriptions over time.
To expand usage of and our potential customer and sales pipeline for Confluent Cloud, we will need to increase brand awareness, increase customer awareness and adoption of our Data Streaming Platform, successfully demonstrate the value of Confluent Cloud over alternatives, including open source alternatives, successfully partner with customers to help them realize increased value in our offerings in an efficient and sustainable manner for consumption expansion over time, particularly in uncertain macroeconomic environments and with continuing customer focus on cloud cost controls and increased efficiency, cultivate relationships with potential customers in key industries and sectors, rapidly convert the sales pipeline into new customers and continue to expand and improve the productivity and incentive alignment of our sales and marketing organization.
To expand usage of and our potential customer and sales pipeline for Confluent Cloud, we will need to increase brand awareness, increase customer awareness and adoption of our Data Streaming Platform products, successfully demonstrate the value of Confluent Cloud over alternatives, including open source alternatives, successfully partner with customers to help them realize increased value in our offerings in an efficient and sustainable manner for consumption expansion over time, particularly in uncertain macroeconomic environments and with continuing customer focus on cloud cost controls and increased efficiency, cultivate relationships with potential customers in key industries and sectors, rapidly convert the sales pipeline into new customers and continue to expand and improve the productivity and incentive alignment of our sales and marketing organization.
Overall growth of our revenue depends on a number of factors, including our ability to: • market and price our offerings effectively so that we are able to attract new customers and expand sales to our existing customers, including ensuring that customers can realize the full potential of our Data Streaming Platform in a cost-effective manner; • invest in the growth of our business while adjusting our cost structure to focus on operating efficiency and improved margins; • successfully develop a substantial customer and sales pipeline for our products; • expand the features and functionality of our offerings to enable additional use cases for our customers; • continue investing in our sales and marketing function to support our growth and reduce the time for new sales personnel to achieve desired productivity levels; • extend our product leadership to expand our addressable market; • differentiate our offerings from open source alternatives and products offered by our competitors; • maintain and expand the rates at which new customers purchase and existing customers renew subscriptions and committed use of our offerings and increase consumption of our offerings, including in light of the evolving macroeconomic environment; 22 Table of Contents • provide our customers with support that meets their needs; • expand our partner ecosystem, including with major cloud providers, independent software vendors (ISVs), regional and global systems integrators, and original equipment manufacturers (OEMs); • increase awareness of our brand on a global basis to successfully compete with other companies; and • expand to new international markets and grow within existing markets.
Overall growth of our revenue depends on a number of factors, including our ability to: • market and price our offerings effectively so that we are able to attract new customers and expand sales to our existing customers, including ensuring that customers can realize the full potential of our Data Streaming Platform in a cost-effective manner; • invest in the growth of our business while adjusting our cost structure to focus on operating efficiency and improved margins; • successfully develop a substantial customer and sales pipeline for our products; • expand the features and functionality of our offerings to enable additional use cases for our customers; • continue investing in our sales and marketing function to support our growth and reduce the time for new sales personnel to achieve desired productivity levels; • extend our product leadership to expand our addressable market; • differentiate our offerings from open source alternatives and products offered by our competitors; • maintain and expand the rates at which new customers purchase and existing customers renew subscriptions and committed use of our offerings and increase consumption of our offerings, including in light of the evolving macroeconomic environment; 27 Table of Contents • provide our customers with support that meets their needs; • expand our partner ecosystem, including with major cloud providers, independent software vendors (ISVs), global and regional systems integrators, and original equipment manufacturers (OEMs); • increase awareness of our brand on a global basis to successfully compete with other companies; and • expand to new international markets and grow within existing markets.
In particular, attrition in our sales organization has adversely impacted and may continue to adversely impact our ability to meet our sales, consumption and revenue forecasts, cause delays in our sales cycle, and result in increased costs, any of which would harm our growth, business, results of operations, and financial condition. • If we are unable to attract new customers or expand our potential customer and sales pipeline, our business, financial condition, and results of operations will be adversely affected. • Our business depends on our existing customers renewing their subscriptions and usage-based commitments, purchasing additional subscriptions and usage-based commitments, and expanding their use of our offerings. 21 Table of Contents • If we fail to maintain and enhance our brand, including among developers, our ability to expand our customer base will be impaired and our business, financial condition, and results of operations may suffer. • The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed. • We expect fluctuations in our financial results and key metrics, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline. • If we, or third parties with whom we work, experience a security incident compromising the confidentiality, integrity, or availability of our information technology, software, services, communications, or data, we could experience adverse consequences resulting from such compromise, including but not limited to, reputational harm, a reduction in the demand for our offerings, regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, or other adverse consequences. • We rely on third-party providers of cloud-based infrastructure to host Confluent Cloud.
In particular, attrition in our sales organization has adversely impacted and may continue to adversely impact our ability to meet our sales, consumption and revenue forecasts, cause delays in our sales cycle, and result in increased costs, any of which would harm our growth, business, results of operations, and financial condition. • If we are unable to attract new customers or expand our potential customer and sales pipeline, our business, financial condition, and results of operations will be adversely affected. • Our business depends on our existing customers renewing their subscriptions and usage-based commitments, purchasing additional subscriptions and usage-based commitments, and expanding their use of our offerings. • If we fail to maintain and enhance our brand, including among developers, our ability to expand our customer base will be impaired and our business, financial condition, and results of operations may suffer. • The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed. • We expect fluctuations in our financial results and key metrics, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline. • If we, or third parties with whom we work, experience a security incident compromising the confidentiality, integrity, or availability of our information technology, software, services, communications, or data, we could experience adverse consequences resulting from such compromise, including but not limited to, reputational harm, a reduction in the demand for our offerings, regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, or other adverse consequences. • We rely on third-party providers of cloud-based infrastructure to host Confluent Cloud and our other cloud-based offerings.
Our competitors or members of the open source community may also develop a new open source project or a closed-source proprietary product that is similar to or superior to Apache Kafka or Apache Flink in terms of features or performance, in turn gaining popularity or replacing Apache Kafka as the new standard for data-in-motion technology among developers and other users.
Our competitors or members of the open source community may also develop a new open source project or a closed-source proprietary product that is similar to or superior to Apache Kafka, Apache Flink, or Apache Iceberg in terms of features or performance, in turn gaining popularity or replacing Apache Kafka as the new standard for data-in-motion technology among developers and other users.
With open source software, competitors can also develop competing products without the amount of overhead and lead time required for traditional proprietary software development. In addition, if competing products are also based on or compatible with Apache Kafka or Apache Flink, existing customers may also be able to easily transfer their applications to competing products.
With open source software, competitors can also develop competing products without the amount of overhead and lead time required for traditional proprietary software development. In addition, if competing products are also based on or compatible with Apache Kafka, Apache Flink, or Apache Iceberg, existing customers may also be able to easily transfer their applications to competing products.
In addition, we do not control the content that our customers transmit, process, and maintain using our offerings. Since some of our customers use our offerings for the transmission or storage of personal information and our security measures are, or are believed to have been, breached, our business may suffer, and we could incur significant liability.
In addition, we do not control the content that our customers transmit, process, and maintain using our offerings. Since some of our customers use our offerings for the transmission or storage of personal information, if our security measures are, or are believed to have been, breached, our business may suffer, and we could incur significant liability.
As a result, the future of Apache Kafka, Apache Flink and other open source software could change dramatically and such change in trajectory, use and acceptance in the marketplace and resulting competitive pressure could result in reductions in the prices we charge for our offerings, loss of market share, and adversely affect our business operations and financial outlook.
As a result, the future of Apache Kafka, Apache Flink, Apache Iceberg and other open source software could change dramatically and such change in trajectory, use and acceptance in the marketplace and resulting competitive pressure could result in reductions in the prices we charge for our offerings, loss of market share, and adversely affect our business operations and financial outlook.
Our dollar-based net retention rate has historically declined or fluctuated, and may further decline or fluctuate, as a result of a number of factors, including loss of one or more customers, the timing and size of any such losses, including as a result of a customer not renewing, business strength or weakness of our customers, customer usage of our offerings, customer satisfaction with the capabilities of our offerings and our level of customer support, our prices, the capabilities and prices of competing products, decisions by customers to use open source alternatives, mergers and acquisitions affecting our customer base, the effects of global economic conditions, including high interest rates and inflation, currency exchange rate fluctuations, or reductions in our customers’ spending on IT solutions or their spending levels generally.
Our dollar-based net retention rate has historically declined or fluctuated, and may further decline or fluctuate, as a result of a number of factors, including loss of one or more customers, the timing and size of any such losses, including as a result of a customer not renewing, business strength or weakness of our customers, customer usage of our offerings, customer satisfaction with the capabilities of our offerings and our level of customer support, our prices, the capabilities and prices of competing products, decisions by customers to use open source alternatives, mergers and acquisitions affecting our customer base, the effects of global economic conditions, including high interest rates and inflation, currency exchange rate fluctuations, reductions in our customers’ spending on IT solutions or their spending levels generally, or the pendency of the Merger.
Online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. States or local governments may interpret existing laws, or have adopted or may adopt new laws, requiring us to calculate, collect and remit taxes on sales in their jurisdictions.
Online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. State or local governments may interpret existing laws, or have adopted or may adopt new laws, requiring us to calculate, collect and remit taxes on sales in their jurisdictions.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer, or our president (in the absence of a chief executive officer); • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of at least a majority of our outstanding shares of voting stock; 65 Table of Contents • provide that vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office, even though less than a quorum, or by a sole remaining director; and • require the approval of our board of directors or the holders of at least 66 2/3% of the voting power of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer, or our president (in the absence of a chief executive officer); • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of at least a majority of our outstanding shares of voting stock; • provide that vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office, even though less than a quorum, or by a sole remaining director; and • require the approval of our board of directors or the holders of at least 66 2/3% of the voting power of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Class A common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that holders of our Class A common stock would receive a premium for their shares of our Class A common stock in an acquisition. 66 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the exclusive forums for certain disputes between us and our stockholders, which restricts our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Class A common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that holders of our Class A common stock would receive a premium for their shares of our Class A common stock in an acquisition. 71 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the exclusive forums for certain disputes between us and our stockholders, which restricts our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Additionally, the development and growth of our proprietary offerings may result in the perception within the open source community of a diminution of our commitment to Apache Kafka, Apache Flink and other open source platforms. Such perceptions may negatively affect our reputation within the developer community, which may adversely affect market acceptance and future sales of our offerings.
Additionally, the development and growth of our proprietary offerings may result in the perception within the open source community of a diminution of our commitment to Apache Kafka, Apache Flink, Apache Iceberg and other open source platforms. Such perceptions may negatively affect our reputation within the developer community, which may adversely affect market acceptance and future sales of our offerings.
We plan to continue expanding our direct sales force, both domestically and internationally. We also plan to dedicate significant resources to sales and marketing programs, including to decrease the time required for our sales personnel to achieve desired productivity levels. Historically, newly hired sales personnel have needed several quarters to achieve desired productivity levels.
We plan to continue expanding our direct and indirect sales force, both domestically and internationally. We also plan to dedicate significant resources to sales and marketing programs, including to decrease the time required for our sales personnel to achieve desired productivity levels. Historically, newly hired sales personnel have needed several quarters to achieve desired productivity levels.
We believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with our existing and potential channel partners that can drive revenue growth in more geographies and market segments, particularly for government customers, and provide additional features and functionality to our customers.
We believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with our existing and potential partners that can drive revenue growth in more geographies and market segments, particularly for government customers, and provide additional features and functionality to our customers.
If we are unsuccessful in these and our other efforts to drive market adoption of and expand usage of and the customer base for Confluent Cloud, or if we do so in a way that is not profitable, fails to compete successfully against our current or future competitors, or fails to adequately differentiate Confluent Cloud from open source alternatives, our growth, business, results of operations, and financial condition could be harmed. 27 Table of Contents We have historically derived a substantial portion of our revenue from Confluent Platform, and any loss in market acceptance or reduction in sales of Confluent Platform would harm our business, results of operations, financial condition, and growth prospects.
If we are unsuccessful in these and our other efforts to drive market adoption of and expand usage of and the customer base for Confluent Cloud, or if we do so in a way that is not profitable, fails to compete successfully against our current or future competitors, or fails to adequately differentiate Confluent Cloud from open source alternatives, our growth, business, results of operations, and financial condition could be harmed. 32 Table of Contents We have historically derived a substantial portion of our revenue from Confluent Platform, and any loss in market acceptance or reduction in sales of Confluent Platform would harm our business, results of operations, financial condition, and growth prospects.
We have also historically targeted larger enterprise customers as part of our overall sales and marketing strategy, but expect to refine that strategy from time to time, including in connection with our shift to a consumption-oriented model for our sales motion.
We have also historically targeted larger enterprise customers as part of our overall sales and marketing strategy, but expect to refine that strategy from time to time, including in connection with our prior shift to a consumption-oriented model for our sales motion.
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. 67 Table of Contents Risks Related to Our Convertible Senior Notes We may not have the ability to raise the funds necessary to settle conversions of the notes in cash or to repurchase the notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. 72 Table of Contents Risks Related to Our Convertible Senior Notes We may not have the ability to raise the funds necessary to settle conversions of the notes in cash or to repurchase the notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.
Our agreements with our existing channel partners are non-exclusive, meaning our channel partners may offer customers the products of several different companies, including products that compete with ours. They may also cease marketing our products with limited or no notice and with little or no penalty.
Our agreements with our existing partners are non-exclusive, meaning our partners may offer customers the products of several different companies, including products that compete with ours. They may also cease marketing our products with limited or no notice and with little or no penalty.
Competitors with greater resources than ours or members of the Apache Kafka or Apache Flink communities may create similar or superior offerings, or modify Apache Kafka or Apache Flink with different, superior features, and could make such products available to the public free of charge.
Competitors with greater resources than ours or members of the Apache Kafka, Apache Flink, or Apache Iceberg communities may create similar or superior offerings, or modify Apache Kafka, Apache Flink, or Apache Iceberg with different, superior features, and could make such products available to the public free of charge.
In the event that our service agreements with our third-party cloud service providers are terminated or amended, or there is a lapse o f service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, access to Confluent Cloud could be interrupted and result in significant delays and additional expense as we arrange or create new facilities and services or re-architect our Confluent Cloud service for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition, and results of operations.
In the event that our service agreements with our third-party cloud service providers are terminated or amended, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, access to Confluent Cloud could be interrupted and result in significant delays and additional expense as we arrange or create new facilities and services or re-architect our Confluent Cloud service for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition, and results of operations.
When we enter into channel partnerships, our partners may be required to undertake some portion of sales, marketing, implementation services, engineering services, support services, or software configuration that we would otherwise provide, including due to regulatory constraints.
When we enter into partnerships, our partners may be required to undertake some portion of sales, marketing, implementation services, engineering services, support services, or software configuration that we would otherwise provide, including due to regulatory constraints.
The growth rate of our Confluent Cloud revenue is also expected to fluctuate over time, including due to the usage-based nature of Confluent Cloud, customer adoption trends, and our shift to a consumption-oriented sales model for Confluent Cloud.
The growth rate of our Confluent Cloud revenue is also expected to fluctuate over time, including due to the usage-based nature of Confluent Cloud, customer adoption trends, and our prior shift to a consumption-oriented sales model for Confluent Cloud.
Our sales strategy for Confluent Cloud also involves landing customers at low entry points, including starting with our free Confluent Cloud trial and with pay-as-you-go, which have no commitments.
Our sales strategy for Confluent Cloud involves landing customers at low entry points, including starting with our free Confluent Cloud trial and with pay-as-you-go, which have no commitments.
If we or such partners do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our sales to existing and new customers could suffer, and our reputation with existing or potential customers could suffer. 47 Table of Contents Incorrect implementation or use of our offerings, or our customers’ failure to update Confluent Platform, could result in customer dissatisfaction and negatively affect our reputation, business, operations, financial results, and growth prospects.
If we or such partners do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our sales to existing and new customers could suffer, and our reputation with existing or potential customers could suffer. 52 Table of Contents Incorrect implementation or use of our offerings, or our customers’ failure to update Confluent Platform, could result in customer dissatisfaction and negatively affect our reputation, business, operations, financial results, and growth prospects.
In certain cases where our customers choose not to implement, or incorrectly implement, those features or measures, misuse our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure or security incidents, even if we are not the cause of a resulting customer security issue or incident, our customer relationships, reputation, and revenue could be adversely impacted. 39 Table of Contents If we, or a third party with whom we work, experience a security incident that results in the compromise of the co nfidentiality, integrity, or availability of our systems or the sensitive, proprietary, or confidential information that we own, process, or control, or the perception that one has occurred, this could result in a loss of customer confidence in the security of our platform and damage to our brand, reduce the demand for our offerings, disrupt business operations, result in the exfiltration of proprietary data and information, including source code, require us to spend material resources to investigate or correct the incident and to prevent future security incidents, expose us to legal liabilities, including litigation, regulatory enforcement (including investigations, fines, penalties, audits, and inspections), additional oversight, restrictions or bans on processing personal information, indemnity obligations, claims by our customers or other relevant parties that we have failed to comply with contractual obligations to implement specified security measures, and adversely affect our business, financial condition, and results of operations.
In certain cases where our customers choose not to implement, or incorrectly implement, those features or measures, misuse our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure or security incidents, even if we are not the cause of a resulting customer security issue or incident, our customer relationships, reputation, and revenue could be adversely impacted. 44 Table of Contents If we, or a third party with whom we work, experience a security incident that results in the compromise of the confidentiality, integrity, or availability of our systems or the sensitive, proprietary, or confidential information that we own, process, or control, or the perception that one has occurred, this could result in a loss of customer confidence in the security of our platform and damage to our brand, reduce the demand for our offerings, disrupt business operations, result in the exfiltration of proprietary data and information, including source code, require us to spend material resources to investigate or correct the incident and to prevent future security incidents, expose us to legal liabilities, including litigation, regulatory enforcement (including investigations, fines, penalties, audits, and inspections), additional oversight, restrictions or bans on processing personal information, indemnity obligations, claims by our customers or other relevant parties that we have failed to comply with contractual obligations to implement specified security measures, and adversely affect our business, financial condition, and results of operations.
These mechanisms are subject to legal challenges and there is no assurance that we can satisfy or rely on these mechanisms to lawfully transfer personal information to the United States.
These mechanisms are subject to legal challenges and there is no assurance that we can satisfy or continue to rely on these mechanisms to lawfully transfer personal information to the United States.
As a result of these and other factors, we may be unable to attract new customers or expand our potential customer and sales pipeline, which may have an adverse effect on our business, financial condition, and results of operations. 46 Table of Contents Our business depends on our existing customers renewing their subscriptions and usage-based commitments, purchasing additional subscriptions and usage-based commitments, and expanding their use of our offerings.
As a result of these and other factors, we may be unable to attract new customers or expand our potential customer and sales pipeline, which may have an adverse effect on our business, financial condition, and results of operations. 51 Table of Contents Our business depends on our existing customers renewing their subscriptions and usage-based commitments, purchasing additional subscriptions and usage-based commitments, and expanding their use of our offerings.
In particular, we have experienced and expect to continue to experience longer sales cycles, reduced IT budgets, slowdowns in customer consumption expansion and growth rates, including fewer new use cases adopted by customers, lower consumption from some of our larger enterprise customers, and generally increased scrutiny on IT spending and budgets from existing and potential customers, due in part to the effects of macroeconomic uncertainty and challenges and the geopolitical situation in Ukraine and in the Middle East. • Failure of our offerings to satisfy customer demands or achieve continued market acceptance over competitors, including open source alternatives, would harm our business, results of operations, financial condition, and growth prospects. • We intend to continue investing significantly in Confluent Cloud, our DSP capabilities and our BYOC offering, and if these fail to achieve further market adoption or increased consumption, our growth, business, results of operations, and financial condition could be harmed.
In particular, we have experienced and expect to continue to experience longer sales cycles, reduced IT budgets, slowdowns in customer consumption expansion and growth rates, including fewer new use cases adopted by customers, lower consumption from some of our larger enterprise customers, and generally increased scrutiny on IT spending and budgets from existing and potential customers, due in part to the effects of macroeconomic uncertainty and challenges and the geopolitical situation in Ukraine and in the Middle East. • Failure of our offerings to satisfy customer demands or achieve continued market acceptance over competitors, including open source alternatives, would harm our business, results of operations, financial condition, and growth prospects. • We intend to continue investing significantly in Confluent Cloud, our Data Streaming Platform capabilities and our BYOC offering, and if these fail to achieve further market adoption or increased consumption, our growth, business, results of operations, and financial condition could be harmed.
We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry. 25 Table of Contents Failure of our offerings to satisfy customer demands or achieve continued market acceptance over competitors, including open source alternatives, would harm our business, results of operations, financial condition, and growth prospects.
We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry. 30 Table of Contents Failure of our offerings to satisfy customer demands or achieve continued market acceptance over competitors, including open source alternatives, would harm our business, results of operations, financial condition, and growth prospects.
For example, Confluent Cloud consumption and growth, as well as our forecasts for Confluent Cloud, have been negatively impacted from time to time, and may be negatively impacted in the future, by lower than expected consumption from larger enterprise customers from time to time, including due to external factors such as continued scrutiny of IT spending and macroeconomic uncertainty as well as reorganizations, acquisitions, or strategic reprioritizations of such customers.
For example, Confluent Cloud consumption and growth, as well as our forecasts for Confluent Cloud, have been negatively impacted from time to time, and may be negatively impacted in the future, by lower than expected consumption from larger enterprise customers from time to time, including due to external factors such as customer optimization and continued scrutiny of IT spending and macroeconomic uncertainty as well as reorganizations, acquisitions, or strategic reprioritizations of such customers.
If we are unable to respond to evolving customer needs, requirements, or preferences in a cost-effective manner, our offerings may become less marketable and less competitive or obsolete, and our business, financial condition, and results of operations could be adversely affected. 33 Table of Contents The market for our offerings may develop more slowly or differently than we expect.
If we are unable to respond to evolving customer needs, requirements, or preferences in a cost-effective manner, our offerings may become less marketable and less competitive or obsolete, and our business, financial condition, and results of operations could be adversely affected. 38 Table of Contents The market for our offerings may develop more slowly or differently than we expect.
In addition, if the resulting business from such a transaction fails to meet our expectations, our business, financial condition, and results of operations may be adversely affected or we may be exposed to unknown risks or liabilities. 36 Table of Contents We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
In addition, if the resulting business from such a transaction fails to meet our expectations, our business, financial condition, and results of operations may be adversely affected or we may be exposed to unknown risks or liabilities. 41 Table of Contents We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
As a result, our shifts in sales strategy focused on customer acquisition for Confluent Cloud and a consumption-oriented sales model have resulted and could continue to result in near term fluctuations in our financial results as compared to prior periods, particularly if previous Confluent Platform customers shift to Confluent Cloud, given that subscriptions to Confluent Cloud have historically had a lower average price compared to subscriptions to Confluent Platform.
As a result, our shifts in sales strategy focused on customer acquisition and a consumption-oriented sales model have resulted and could continue to result in near term fluctuations in our financial results as compared to prior periods, particularly if previous Confluent Platform customers shift to our cloud offerings, given that subscriptions to Confluent Cloud have historically had a lower average price compared to subscriptions to Confluent Platform.
Our financial statements could fail to reflect adequate reserves to cover such a contingency. 59 Table of Contents Changes in tax laws or tax rulings could harm our financial position, results of operations and cash flows. The tax regimes we are subject to or operate under, including income and non-income taxes, are unsettled and may be subject to significant change.
Our financial statements could fail to reflect adequate reserves to cover such a contingency. 64 Table of Contents Changes in tax laws or tax rulings could harm our financial position, results of operations and cash flows. The tax regimes we are subject to or operate under, including income and non-income taxes, are unsettled and may be subject to significant change.
In addition, if public cloud providers develop a data-in-motion offering that operates across multiple public clouds or on premise, we would face increased competition from these providers. Further, they have the resources to acquire or partner with existing and emerging providers of competing technologies and thereby accelerate adoption of those competing technologies.
In addition, if public cloud providers develop a data-in-motion offering that operates across multiple public clouds or on premises, we would face increased competition from these providers. Further, they have the resources to acquire or partner with existing and emerging providers of competing technologies and thereby accelerate adoption of those competing technologies.
Such developments could adversely affect our business, financial condition, and results of operations. 43 Table of Contents Risks Related to Our Sales and Marketing Efforts and Brand Failure to effectively develop and expand our sales and marketing capabilities or improve the productivity of our sales and marketing organization could harm our ability to expand our potential customer and sales pipeline, increase our customer base, and achieve broader market acceptance of our offerings.
Such developments could adversely affect our business, financial condition, and results of operations. 48 Table of Contents Risks Related to Our Sales and Marketing Efforts and Brand Failure to effectively develop and expand our sales and marketing capabilities or improve the productivity of our sales and marketing organization could harm our ability to expand our potential customer and sales pipeline, increase our customer base, and achieve broader market acceptance of our offerings.
In addition to the other risks described herein, factors that have in the past and may in the future affect our results of operations include the following: • changes in our revenue mix as Confluent Cloud’s contribution to subscription revenue increases over time, and related changes in revenue recognition; • changes in actual and anticipated growth rates of our revenue, customers, and key business metrics, including due to changes in methodology for calculating certain of our key business metrics; • strategic shifts in focus on growth versus operating efficiency and profitability; • fluctuations in demand for, and our ability to effectively and competitively price, our offerings; • fluctuations in usage of Confluent Cloud under usage-based commitments and pay-as-you-go arrangements; • our ability to attract new customers; • our ability to retain our existing customers, particularly large customers, secure renewals of subscriptions and usage-based commitments, as well as the timing of customer renewals or non-renewals, and drive their increased consumption of Confluent Cloud; • customer retention rates and the pricing and quantity of subscriptions renewed, as well as our ability to accurately forecast customer consumption, expansions, and renewals; • downgrades in customer subscriptions or decreased consumption; • customers and potential customers opting for alternative products, including developing their own in-house solutions or opting to use only the free version of our offerings; • timing and amount of our investments to expand the capacity of our third-party cloud service providers; • seasonality in sales, customer implementations, and results of operations (including Confluent Cloud revenue); • investments in new offerings, features, and functionality; • fluctuations or delays in development, release, or adoption of new features and functionality for our offerings; 30 Table of Contents • delays in closing sales, including the timing of renewals, which may result in revenue being pushed into the next quarter, particularly because a large portion of our sales occur toward the end of each quarter; • fluctuations or delays in purchasing decisions by existing or future customers, including due to geopolitical or economic conditions such as inflation or in anticipation of new offerings or enhancements by us or our competitors; • changes in customers’ budgets, consumption, and timing of their budget cycles and purchasing decisions, including due to macroeconomic factors and currency exchange rate fluctuations; • our ability to control costs, including hosting costs associated with Confluent Cloud and our operating expenses; • the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; • timing of hiring personnel for our research and development and sales and marketing organizations; • the amount and timing of non-cash expenses, including stock-based compensation expense and other non-cash charges; • the amount and timing of costs associated with recruiting, educating, and integrating new employees and retaining and motivating existing employees; • the effects of acquisitions and their integration, including our acquisition of WarpStream; • general geopolitical or economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • fluctuations in foreign currency exchange rates; • the impact of new accounting pronouncements; • changes in revenue recognition policies that impact our subscriptions and services revenue; • changes in regulatory or legal environments that may cause us to incur, among other things, expenses associated with compliance; • the impact of changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period; • health epidemics or pandemics, such as the COVID-19 pandemic; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; and • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our offerings. 31 Table of Contents The calculation methodology of our key metrics, including adjustments in methodologies from time to time, may also result in fluctuations in period-over-period results that may not be indicative of our long-term performance or that result in differing interpretations of trends in our business.
In addition to the other risks described herein, factors that have in the past and may in the future affect our results of operations include the following: • changes in our revenue mix as Confluent Cloud’s contribution to subscription revenue increases over time, and related changes in revenue recognition; • changes in actual and anticipated growth rates of our revenue, customers, and key business metrics, including due to changes in methodology for calculating certain of our key business metrics; • strategic shifts in focus on growth versus operating efficiency and profitability; • fluctuations in demand for, and our ability to effectively and competitively price, our offerings; • fluctuations in usage of Confluent Cloud under usage-based commitments and pay-as-you-go arrangements; • our ability to attract new customers; • our ability to retain our existing customers, particularly large customers, secure renewals of subscriptions and usage-based commitments, as well as the timing of customer renewals or non-renewals, and drive their increased consumption of Confluent Cloud; • customer retention rates and the pricing and quantity of subscriptions renewed, as well as our ability to accurately forecast customer consumption, expansions, and renewals; • downgrades in customer subscriptions or decreased consumption; 35 Table of Contents • customers and potential customers opting for alternative products, including developing their own in-house solutions or opting to use only the free version of our offerings; • timing and amount of our investments to expand the capacity of our third-party cloud service providers; • seasonality in sales, customer implementations, and results of operations (including Confluent Cloud revenue); • investments in new offerings, features, and functionality; • fluctuations or delays in development, release, or adoption of new features and functionality for our offerings; • delays in closing sales, including the timing of renewals, which may result in revenue being pushed into the next quarter, particularly because a large portion of our sales occur toward the end of each quarter; • fluctuations or delays in purchasing decisions by existing or future customers, including due to geopolitical or economic conditions such as inflation or in anticipation of new offerings or enhancements by us or our competitors; • changes in customers’ budgets, consumption, and timing of their budget cycles and purchasing decisions, including due to macroeconomic factors and currency exchange rate fluctuations; • our ability to control costs, including hosting costs associated with Confluent Cloud and our operating expenses; • the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; • timing of hiring personnel for our research and development and sales and marketing organizations; • the amount and timing of non-cash expenses, including stock-based compensation expense and other non-cash charges; • the amount and timing of costs associated with recruiting, educating, and integrating new employees and retaining and motivating existing employees; • the pendency of the Merger or the failure to complete the Merger in a timely manner or at all; • the effects of acquisitions and their integration, including our acquisition of WarpStream; • general geopolitical or economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • fluctuations in foreign currency exchange rates; • the impact of new accounting pronouncements; • changes in revenue recognition policies that impact our subscriptions and services revenue; • changes in regulatory or legal environments that may cause us to incur, among other things, expenses associated with compliance; • the impact of changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period; • health epidemics or pandemics, such as the COVID-19 pandemic; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; and • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our offerings. 36 Table of Contents The calculation methodology of our key metrics, including adjustments in methodologies from time to time, may also result in fluctuations in period-over-period results that may not be indicative of our long-term performance or that result in differing interpretations of trends in our business.
Our c ustomers rely on our or our channel partners’ support personnel to resolve issues and realize the full benefits that our offerings provide. High-quality support is also important for the continuation and expansion of our relationships with existing customers. The importance of these support functions will increase as we expand our business and pursue new customers.
Our customers rely on our or our channel partners’ support personnel to resolve issues and realize the full benefits that our offerings provide. High-quality support is also important for the continuation and expansion of our relationships with existing customers. The importance of these support functions will increase as we expand our business and pursue new customers.
Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, or required to rebrand our offerings or prevented from selling our offerings if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other inte llectual property rights.
Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, or required to rebrand our offerings or prevented from selling our offerings if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other intellectual property rights.
For all o f these reasons, we may not be able to compete successfully against our current or future competitors, and this competition could result in the failure of our offerings to continue to achieve or maintain market acceptance, any of which would harm our business, results of operations, and financial condition.
For all of these reasons, we may not be able to compete successfully against our current or future competitors, and this competition could result in the failure of our offerings to continue to achieve or maintain market acceptance, any of which would harm our business, results of operations, and financial condition.
Any of these outcomes or failures could also adversely affect our business, financial condition, and results of operations. 48 Table of Contents Risks Related to Our Intellectual Property We use third-party open source software in our offerings, which could negatively affect our ability to sell our offerings or subject us to litigation or other actions.
Any of these outcomes or failures could also adversely affect our business, financial condition, and results of operations. 53 Table of Contents Risks Related to Our Intellectual Property We use third-party open source software in our offerings, which could negatively affect our ability to sell our offerings or subject us to litigation or other actions.
We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business. 51 Table of Contents Our success depends, in part, on our ability to develop and commercialize our offerings without infringing, misappropriating or otherwise violating the intellectual property rights of third parties.
We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business. 56 Table of Contents Our success depends, in part, on our ability to develop and commercialize our offerings without infringing, misappropriating or otherwise violating the intellectual property rights of third parties.
We typically provide service-level commitments under our customer agreements. If we fail to meet these commitments, we could face customer terminations, a reduction in renewals, and damage to our reputation, which would lower our revenue and harm our business, financial condition, and results of operations. Our agr eements with our customers contain uptime and response service-level commitments.
We typically provide service-level commitments under our customer agreements. If we fail to meet these commitments, we could face customer terminations, a reduction in renewals, and damage to our reputation, which would lower our revenue and harm our business, financial condition, and results of operations. Our agreements with our customers contain uptime and response service-level commitments.
If we fail to successfully promote and maintain our brand, our business, financial condition, and results of operations may suffer. 44 Table of Contents We have a limited history with pricing models for our offerings, and we may need to adjust the pricing terms of our offerings, which could have an adverse effect on our revenue and results of operations.
If we fail to successfully promote and maintain our brand, our business, financial condition, and results of operations may suffer. 49 Table of Contents We have a limited history with pricing models for our offerings, and we may need to adjust the pricing terms of our offerings, which could have an adverse effect on our revenue and results of operations.
Although our agreements with our customers typically contain provisions that seek to limit our exposure to such claims, it is possible t hat these provisions may not be effective or enforceable under the laws of some jurisdictions. While we seek to insure against these types of claims, our insurance policies may not adequately limit our exposure to such claims.
Although our agreements with our customers typically contain provisions that seek to limit our exposure to such claims, it is possible that these provisions may not be effective or enforceable under the laws of some jurisdictions. While we seek to insure against these types of claims, our insurance policies may not adequately limit our exposure to such claims.
Patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our offerings are available. 50 Table of Contents The value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks.
Patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our offerings are available. 55 Table of Contents The value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks.
In addition, the European Union an d other countries (including those in which we operate) have enacted or have committed to enacting the Organisation for Economic Co-operation and Development/G20 Framework’s Pillar Two 15% global minimum tax, which may increase our tax expense in future years.
In addition, the European Union and other countries (including those in which we operate) have enacted or have committed to enacting the Organisation for Economic Co-operation and Development/G20 Framework’s Pillar Two 15% global minimum tax, which may increase our tax expense in future years.
Certain of our agreements with our customers and other third parties include indemnification provisions under which we ag ree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of infringement, misappropriation or other violation of intellectual property rights, data protection, compliance with laws, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services, platform, our acts or omissions under such agreements, or other contractual obligations.
Certain of our agreements with our customers and other third parties include indemnification provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of infringement, misappropriation or other violation of intellectual property rights, data protection, compliance with laws, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services, platform, our acts or omissions under such agreements, or other contractual obligations.
As a result, there may be fluctuations in revenue period over period as revenue is dependent on varying patterns of customer consumption and timing of sales and renewals of Confluent Platform, which can result in larger upfront revenue recognition upon delivery of the term-based licenses, as well as revenue mix.
As a result, there may be fluctuations in revenue period over period as revenue is dependent on varying patterns of customer consumption and timing of sales and renewals of Confluent Platform and Confluent Private Cloud, which can result in larger upfront revenue recognition upon delivery of the term-based licenses, as well as revenue mix.
If we are unable to successfully manage the growth of this business and improve our profit margin from these services, our business, financial condition, and results of operations will be harmed. 34 Table of Contents We face risks associated with the growth of our business with certain heavily regulated industry verticals.
If we are unable to successfully manage the growth of this business and improve our profit margin from these services, our business, financial condition, and results of operations will be harmed. 39 Table of Contents We face risks associated with the growth of our business with certain heavily regulated industry verticals.
Any of the foregoing could be harmful to our business, results of operations or financial condition, and could help our competitors develop products and services that are similar to or better than ours. 49 Table of Contents Our offerings have evolved from Apache Kafka, Apache Flink and other open source software, which are widely available, and therefore, we do not own the exclusive rights to the use of Apache Kafka, Apache Flink and other open source software, nor are we able to control the evolution, enhancement, and maintenance of Apache Kafka, Apache Flink and other open source software.
Any of the foregoing could be harmful to our business, results of operations or financial condition, and could help our competitors develop products and services that are similar to or better than ours. 54 Table of Contents Our offerings have evolved from Apache Kafka, Apache Flink, Apache Iceberg and other open source software, which are widely available, and therefore, we do not own the exclusive rights to the use of Apache Kafka, Apache Flink, Apache Iceberg and other open source software, nor are we able to control the evolution, enhancement, and maintenance of Apache Kafka, Apache Flink, Apache Iceberg and other open source software.
There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes.
There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOL carryforwards could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes.
Holders of the notes have the right, subject to certain conditions and limited exceptions, to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid special interest.
Holders of the notes have the right, subject to certain conditions and limited exceptions, to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid special interest, if any.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Tax Act; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the effects of acquisitions and their integrations; • the outcome of current and future tax audits, examinations or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the One Big Beautiful Bill Act and the Tax Act; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the effects of acquisitions and their integrations; • the outcome of current and future tax audits, examinations or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business and results of operations will suffer. 55 Table of Contents We are subject to risks inherent in international operations that can harm our business, results of operations, and financial condition.
If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business and results of operations will suffer. 60 Table of Contents We are subject to risks inherent in international operations that can harm our business, results of operations, and financial condition.
We cannot assure you that there will not be material weaknesses in our internal control ov er financial reporting in the future. Failure to maintain internal control over financial reporting, including historical or future control deficiencies, could severely inhibit our ability to accurately report our financial condition or results of operations.
We cannot assure you that there will not be material weaknesses in our internal control over financial reporting in the future. Failure to maintain internal control over financial reporting, including historical or future control deficiencies, could severely inhibit our ability to accurately report our financial condition or results of operations.
In particular, we have limited experience operating our business at current scale under economic conditions characterized by high inflation or in recessionary or uncertain economic environments. • Macroeconomic uncertainty, unfavorable conditions in our industry or the global economy, including those caused by the ongoing conflicts around the world, reductions in information technology spending, or inflation, have impacted and may continue to impact our ability to grow our business and negatively affect our results of operations.
In particular, we have limited experience operating our business at current scale under economic conditions characterized by high inflation or in recessionary or uncertain economic environments. • Macroeconomic uncertainty and unfavorable conditions in our industry or the global economy, including those caused by the ongoing conflicts around the world, international trade relations, reductions in information technology spending, or inflation, have impacted and may continue to impact our ability to grow our business and negatively affect our results of operations.
Future fluctuations in our revenue and results across periods, including due to further changes in our revenue mix, may make it difficult to assess our future growth and performance. 32 Table of Contents Downturns or upturns in our sales may not be immediately reflected in our financial position and results of operations.
Future fluctuations in our revenue and results across periods, including due to further changes in our revenue mix, may make it difficult to assess our future growth and performance. 37 Table of Contents Downturns or upturns in our sales may not be immediately reflected in our financial position and results of operations.
We believe that maintaining and enhancing the Confluent brand, including among developers, is important to support the marketing and sale of our existing and future offerings to new customers and expansion of sales to existing cust omers. We believe that the importance of brand recognition will increase as competition in our market increases.
We believe that maintaining and enhancing the Confluent brand, including among developers, is important to support the marketing and sale of our existing and future offerings to new customers and expansion of sales to existing customers. We believe that the importance of brand recognition will increase as competition in our market increases.
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights. We enter into confidentiality and invention assignment agreements with our employees and consultants and ente r into confidentiality agreements with other third parties, including suppliers and other partners.
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights. We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other third parties, including suppliers and other partners.
To the extent that we do not effectively anticipate capacity demands, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and results of operations may be adversely affected. 53 Table of Contents If we are unable to develop and maintain successful relationships with partners to distribute our products and generate sales opportunities, our business, results of operations, and financial condition could be harmed.
To the extent that we do not effectively anticipate capacity demands, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and results of operations may be adversely affected. 58 Table of Contents If we are unable to develop and maintain successful relationships with partners to distribute our products and services and generate sales opportunities, our business, results of operations, and financial condition could be harmed.
Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors. 68 Table of Contents General Risk Factors Any future litigation against us could be costly and time-consuming to defend.
Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors. 73 Table of Contents General Risk Factors Any future litigation against us could be costly and time-consuming to defend.
If data-in-motion technology does not achieve market acceptance, including from rapidly evolving markets or industries, such as GenAI, or there is a reduction in consumption or demand caused by a lack of customer acceptance, technological challenges, economic conditions, data privacy and security concerns, governmental regulation, competing technologies and products, decreases in information technology spending or otherwise, the market for our offerings might not continue to develop or might develop more slowly than we expect, which would adversely affect our business, financial condition, and results of operations.
If data-in-motion technology does not achieve market acceptance, including from rapidly evolving markets or industries, such as GenAI, or there is a reduction in consumption or demand caused by a lack of customer acceptance, technological challenges, economic conditions, data privacy and security concerns, shifts in customers’ data streaming strategies, governmental regulation, competing technologies and products, decreases in information technology spending or otherwise, the market for our offerings might not continue to develop or might develop more slowly than we expect, which would adversely affect our business, financial condition, and results of operations.
Our pro fessional services business, which engages with customers to help them in their strategy, architecture, and adoption of a data streaming platform, has grown as we have scaled our business. We believe our investment in professional services facilitates the adoption of our offerings, especially with larger customers.
Our professional services business, which engages with customers to help them in their strategy, architecture, and adoption of a data streaming platform, has grown as we have scaled our business. We believe our investment in professional services facilitates the adoption of our offerings, especially with larger customers.
We market and sell our offerings to customers in heavily regulated industry verticals, including the banking and financial services industries. As a result, we face additional regulatory scrutiny, risks, and burdens from the governmental entities and agencies which regulate those industries.
We market and sell our offerings to customers in heavily regulated industry verticals, including the telecom, healthcare, banking and financial services industries. As a result, we face additional regulatory scrutiny, risks, and burdens from the governmental entities and agencies which regulate those industries.
These claims, even if unsuccessful, could be costly and time consuming to defend and could harm our business, financial condition, results of operations, and cash flows. 40 Table of Contents Interruptions or performance problems associated with our offerings may adversely affect our business, financial condition, and results of operations.
These claims, even if unsuccessful, could be costly and time consuming to defend and could harm our business, financial condition, results of operations, and cash flows. 45 Table of Contents Interruptions or performance problems associated with our offerings may adversely affect our business, financial condition, and results of operations.
Our comp etitors vary in size and in the breadth and scope of the products offered. Many of our competitors and potential competitors have greater name recognition, longer operating histories, more established customer relationships and installed customer bases, larger marketing budgets and greater resources than we do.
Our competitors vary in size and in the breadth and scope of the products offered. Many of our competitors and potential competitors have greater name recognition, longer operating histories, more established customer relationships and installed customer bases, larger marketing budgets and greater resources than we do.
Additio nally, we cannot be certain that our insurance coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, penalties, business loss, data loss, litigation, regulatory actions, or other impacts arising out of security incidents, particularly if we experience an event that impacts multiple customers, that such coverage will continue to be available on acceptable terms or at all, or that such coverage will pay future claims.
Additionally, we cannot be certain that our insurance coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, penalties, business loss, data loss, litigation, regulatory actions, or other impacts arising out of security incidents, particularly if we experience an event that impacts multiple customers, that such coverage will continue to be available on acceptable terms or at all, or that such coverage will pay future claims.
To date, we have not completed an end-to-end test of all recovery scenarios for the Confluent Cloud offering and, as such, our recovery plans may not resolve disruptions, outages o r other performance problems as quickly or as fully as we intend.
To date, we have not completed an end-to-end test of all recovery scenarios for the Confluent Cloud offering and, as such, our recovery plans may not resolve disruptions, outages or other performance problems as quickly or as fully as we intend.
Reduced consumption by, or the loss or expected loss of, certain customers has historically negatively impacted and may continue to negatively impact our growth, business, results of operations, and financial condition. • Failure to effectively develop and expand our sales and marketing capabilities or improve the productivity of our sales and marketing organization could harm our ability to expand our potential customer and sales pipeline, increase our customer base, and achieve broader market acceptance of our offerings.
Reduced consumption by, or the loss or expected loss of, certain customers has historically negatively impacted and may continue to negatively impact our growth, business, results of operations, and financial condition. 23 Table of Contents • Failure to effectively develop and expand our sales and marketing capabilities or improve the productivity of our sales and marketing organization could harm our ability to expand our potential customer and sales pipeline, increase our customer base, and achieve broader market acceptance of our offerings.
Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful. • We have a history of operating losses and may not achieve or sustain profitability in the future.
Our recent growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful. • We have a history of operating losses and may not achieve or sustain profitability in the future.
Our ability to increase our customer base, achieve broader market adoption and acceptance of our offerings, and expand our potential customer and sales pipeline and brand awareness will depend to a significant extent on our ability to expan d and improve the productivity and effectiveness of our sales and marketing organization.
Our ability to increase our customer base, achieve broader market adoption and acceptance of our offerings, and expand our potential customer and sales pipeline and brand awareness will depend to a significant extent on our ability to expand and improve the productivity and effectiveness of our sales and marketing organization.
All of the foregoing could make it difficult or impossible for us to provide subscriptions and services that compete favorably with those of the public cloud providers. 28 Table of Contents With the introduction of new technologies, market entrants, and open source alternatives, including those based on Apache Kafka, we expect that the competitive environment will remain intense going forward.
All of the foregoing could make it difficult or impossible for us to provide subscriptions and services that compete favorably with those of the public cloud providers. With the introduction of new technologies, market entrants, and open source alternatives, including those based on Apache Kafka, we expect that the competitive environment will remain intense going forward.
We also are dependent on the continued service of our existing software engineers because of the complexity of our offerings. 54 Table of Contents In addition, to execute our growth plan, we must attract and retain highly qualified personnel.
We also are dependent on the continued service of our existing software engineers because of the complexity of our offerings. 59 Table of Contents In addition, to execute our growth plan, we must attract and retain highly qualified personnel.
The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed. Our Da ta Streaming Platform combines and expands upon functionality from numerous traditional product categories, and hence we compete in each of these categories with products from a number of different vendors.
The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed. Our Data Streaming Platform combines and expands upon functionality from numerous traditional product categories, and hence we compete in each of these categories with products from a number of different vendors.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe audit committee receives regular reports from the Chief Information Security Officer concerning the Company’s significant cybersecurity threats and risks and the processes the Company has implemented to address them. The audit committee also receives various reports, summaries or presentations related to cybersecurity threats, risks, and mitigation measures. It em 2.
Biggest changeThe audit committee receives regular reports from the Chief Information Security Officer concerning the Company’s significant cybersecurity threats and risks and the processes the Company has implemented to address them. The audit committee also receives various reports, summaries or presentations related to cybersecurity threats, risks, and mitigation measures. 76 Table of Contents
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part I, Item 1A.
Risk Factors in this Annual Report on Form 10-K, including “Risks Related to Cybersecurity.” 70 Table of Contents Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
Risk Factors in this Annual Report on Form 10-K, including “Risks Related to Cybersecurity”. 75 Table of Contents Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
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Properties Our headquarters are located in Mountain View, California, where we lease approximately 75,475 square feet pursuant to a lease which terminates in 2026. We also lease other offices including in London, England, Bengaluru, India, Dubai, United Arab Emirates, and Singapore. Additionally, we hold many office service memberships in numerous other locations globally. We do not own any real property.
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We believe that our facilities are adequate to meet our current needs. Ite m 3. Legal Proceedings From time to time, we have been and will continue to be subject to legal proceedings and claims.
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We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows. Defending such legal proceedings is costly and can impose a significant burden on management and employees.
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The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. It em 4. Mine Safety Disclosures None. 71 Table of Contents PART II It em 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “CFLT” since June 24, 2021. Prior to that date, there was no public trading market for our Class A common stock.
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Holders of Record As of February 4, 2025, there were 64 stockholders of record of our Class A common stock and 27 stockholders of record of our Class B common stock.
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The actual number of holders of our Class A common stock is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees.
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The number of holders of record presented here also does not include stockholders whose shares may be held in trust by other entities. Dividends We have never declared or paid any cash dividends on our capital stock.
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We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.
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Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant.
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In addition, our ability to pay dividends may be restricted by agreements we may enter into in the future. Recent Sales of Unregistered Securities None.
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Use of Proceeds On June 28, 2021, we closed our IPO of 23,000,000 shares of Class A common stock at an offering price of $36.00 per share, resulting in aggregate gross proceeds to us of $828.0 million, before deducting underwriting discounts and commissions and offering expenses.
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All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-256693), which was declared effective by the SEC on June 23, 2021.
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There has been no material change in the planned use of proceeds from our IPO from those disclosed in our final prospectus for our IPO dated as of June 23, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on June 25, 2021.
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Issuer Purchases of Equity Securities None. 72 Table of Contents Stock Performance Graph The following shall not be deemed “soliciting material” or to be “filed” with the SEC, for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act.
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The performance graph below compares the cumulative total return on our Class A common stock from June 24, 2021 (the date our Class A common stock commenced trading on the Nasdaq Global Select Market) through December 31, 2024 with (i) the Nasdaq Composite Index and (ii) the Nasdaq Computer Index, assuming the investment of $100 in our Class A common stock and in both of the other indices on June 24, 2021 and the reinvestment of dividends.
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The stock price performance on this performance graph is not necessarily indicative of future stock price performance. It em 6. Reserved 73 Table of Contents It em 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
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This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note About Forward-Looking Statements” in this Annual Report on Form 10-K.
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You should review the disclosure under the heading “Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
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Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “we,” “us,” “our,” “our company,” and “Confluent” refer to Confluent, Inc. and its consolidated subsidiaries. Unless otherwise indicated, references to our “common stock” include our Class A common stock and Class B common stock.
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A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below.
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A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 21, 2024.
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Overview Confluent is pioneering the Data Streaming Platform category, setting data in motion to power the world’s real-time operations and analytics. We have established a new category of data infrastructure and built a comprehensive platform that enables organizations to stream, connect, process, and govern data in motion across their enterprise.
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The Data Streaming Platform is designed to serve as the intelligent connective tissue linking all of the applications, systems, and data layers within the company into a single central nervous system of real-time streams of data.
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This Data Streaming Platform is emerging as one of the most strategic parts of the next-generation technology stack, enabling modern companies to serve their customers, improve their offerings, outpace their competition, and win in the digital-first and AI-powered world.
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Confluent is designed to act as the nexus of real-time data, from every source, allowing it to stream across the organization and enabling applications to harness it to power real-time customer experiences and data-driven business operations.
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The Data Streaming Platform delivers four key capabilities, Stream, Connect, Process, and Govern, that reinforce each other to create a comprehensive platform for data in motion. Streaming is the foundation, enabling data to continuously move in real-time to power modern business operations and applications.
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As companies implement more and more data streams they must connect a growing number of systems, applications, and data sources with the ultimate goal of building a complete network that spans the entire technology stack of the company.
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Once the network of connected systems and applications begins to grow, companies increasingly need to process data in real-time in order to transform, clean, and augment the data as it moves from one system to another.
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Finally, as the scale and scope of streaming increases, companies need to govern these data assets to ensure they are discoverable, secure, compliant, and trustworthy as they power a growing number of critical applications within the company.
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As the adoption of Confluent’s Data Streaming Platform grows within an organization, the network effects we generate create even more value to the organization as a whole. We believe that Confluent, over time, will become the central nervous system for modern digital enterprises, providing ubiquitous real-time connectivity and powering real-time applications across the enterprise.
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We generate our revenue primarily from the sale of subscriptions to our Data Streaming Platform, designed to span across all environments. Confluent Cloud is a fully-managed, cloud-native software-as-a-service (“SaaS”) offering available on all of the leading cloud providers. Confluent Platform is an enterprise-ready, self-managed software offering that can be deployed in our customers’ on-premise, private cloud, and public cloud environments.
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WarpStream is a Bring Your Own Cloud (“BYOC”) managed service offering where the raw data resides inside a customer’s own cloud environment.
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All of these offerings can be leveraged both individually in their respective environments and collectively as a single unified Data Streaming Platform. 74 Table of Contents Confluent Cloud and WarpStream customers may purchase subscriptions either without a commitment contract on a month-to-month basis, which we refer to as pay-as-you-go, or under a usage-based commitment contract of at least one year in duration, in which customers commit to specified per-usage rates.
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Pay-as-you-go customers are billed, and revenue from them is recognized, based on usage. Customers with usage-based commitments are typically billed annually in advance or monthly in arrears, and we recognize revenue from such subscriptions based on usage by the customer. As a result, our revenue may fluctuate from period to period due to varying patterns of customer consumption.
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Confluent Platform customers receive access to our proprietary features and various tiers of customer support. Our subscriptions primarily have one-year terms and are generally billed annually in advance. We are focused on the acquisition of new customers and expanding within our current customers.
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Our “consumption-oriented” go-to-market model benefits from our self-service motions driven by our cloud-native platform offerings, our widespread mindshare among developers through Apache Kafka®, Apache Flink®, and Apache Iceberg®, community downloads, and our enterprise sales force. We acquire new customers through seamless and frictionless self-service cloud adoption and free cloud trials, as well as community downloads.
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For example, after users get started with our free cloud trial, they can easily convert to become paying customers either online on a pay-as-you-go model or with a commitment contract. Once customers see the benefits of our platform for their initial use cases, we believe that they will expand into other use cases and lines of business, divisions, and geographies.
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Our deep technical expertise, coupled with our product capabilities and laser focus on customer outcomes, enable us to form strategic partnerships with our customers to guide and accelerate this journey.
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This expansion often generates a natural network effect in which the value of our Data Streaming Platform to a customer increases as more use cases are adopted, more users and teams are onboarded, more applications and systems are connected, and more data is added.
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We had approximately 5,800 and 4,960 customers as of December 31, 2024 and 2023, respectively, representing year-over-year growth of 17%. We have experienced significant growth, with revenue of $963.6 million and $777.0 million for the years ended December 31, 2024 and 2023, respectively, representing year-over-year growth of 24%.
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Business and Macroeconomic Conditions Our business and financial condition have been, and we believe will continue to be, impacted by adverse and uncertain macroeconomic conditions, including high inflation, high interest rates, fluctuations or volatility in capital markets or foreign currency exchange rates, and geopolitical events around the world, such as the ongoing conflicts between Russia and Ukraine and in the Middle East.
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We have experienced, and expect to continue to experience, negative impacts from these factors, including longer sales cycles, reduced IT budgets, slowdowns in customer consumption expansion and growth rates, including fewer new use cases adopted by customers, and generally increased scrutiny on IT spending from existing and potential customers.
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In addition, we have experienced and expect to continue to experience volatility in consumption from some of our larger enterprise customers, resulting in lower consumption expansion from time to time, primarily due to continued customer focus on near-term cloud cost controls and driving efficiencies and resulting impacts on expansion in new use cases.
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We typically experience more consumption volatility during periods of increased customer scrutiny on IT spending. We cannot be certain how long these uncertain macroeconomic conditions, geopolitical events, and IT spending and consumption patterns, and their resulting effects on our industry, our financial results, our business strategy, and customers, will persist.
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To navigate the current economic environment and its effects, we have taken actions to streamline our operating expenses by adjusting our cost structure and real estate footprint, including a workforce reduction in January 2023, while prudently investing in growth.
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The full extent to which uncertain macroeconomic and geopolitical conditions and other factors and dynamics discussed above will directly or indirectly impact our business, results of operations, cash flows, and financial condition remains uncertain and cannot be accurately predicted.
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We will continue to monitor and evaluate the actual and potential impacts of general macroeconomic conditions and related factors on our business and operations. 75 Table of Contents Key Factors Affecting Our Performance Developing Innovative, Market-Leading Offerings and Expanding Developer Mindshare We are focused on delivering market-leading offerings.
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We believe it is critical for us to maintain our product leadership position and further increase the strength of our brand and reputation to drive revenue growth. We have made significant investments in our Data Streaming Platform to enable customers to stream, connect, process, and govern their data.
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For example, we significantly re-architected the technologies underlying data in motion, including open source Apache Kafka, with our purpose-built Kora engine, which powers Confluent Cloud to be a fully-managed cloud service.
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Additionally, our acquisition of immerok GmbH, an Apache Flink stream processing managed services company, enabled us to re-architect Flink as a cloud-native service on Confluent Cloud and release Confluent Platform for Apache Flink, while our Stream Governance suite establishes trust in real-time data movement and maintains stream quality, security, and regulatory compliance.
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We have also expanded to include support to materialize data streams as Apache Iceberg tables, which has rapidly become the open source standard for open table formats across numerous analytics compute engines. We expect our future growth to depend in large part on increased customer adoption and usage expansion of our Data Streaming Platform products.
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While customer adoption of our Data Streaming Platform products remains in early stages, we believe we have a robust opportunity to help our customers understand and realize the benefits of our complete Data Streaming Platform.
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We intend to continue to invest efficiently in our engineering capabilities, including through acquisitions, and marketing activities to maintain our strong position within the developer community. Our results of operations may fluctuate as we make these investments to drive increased customer adoption and usage.
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Increasing Adoption of Confluent Cloud We believe our cloud-native Confluent Cloud offering continues to represent an important growth opportunity for our business. Organizations are increasingly looking for a fully-managed offering to seamlessly leverage data in motion across a variety of environments. In some cases, customers that have been self-managing deployments through Confluent Platform subsequently have become Confluent Cloud customers.
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We offer users a free cloud trial and a pay-as-you-go arrangement to encourage adoption and expand via new use cases to increase usage over time. We will continue to leverage our cloud-native differentiation to drive our growth. We expect Confluent Cloud’s contribution to our revenue to continue to increase over time.
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Our Confluent Cloud revenue represented 51% and 45% of our total revenue for the years ended December 31, 2024 and 2023, respectively.
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As we recognize revenue from Confluent Cloud based on usage, our revenue and results of operations have in the past fluctuated and may continue to fluctuate from period to period due to the usage-based nature of Confluent Cloud, our shift to a consumption-oriented sales model for Confluent Cloud, and varying patterns of customer consumption and adoption trends, including due to impacts from macroeconomic uncertainty and related effects on customer IT spending, as described above. 76 Table of Contents Growing Our Customer Base We are intensely focused on continuing to grow our customer base.
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We have invested and will continue to invest in our sales and marketing efforts, including pipeline generation and execution, and developer community outreach, which are critical to driving customer acquisition. We historically focused on large enterprise customers with significant expansion opportunities and built a go-to-market motion around this approach.
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As we grew our cloud offering and increasingly prioritized consumption over commitments, including by creating more self-serve opportunities and completing our shift to a consumption-oriented sales model for Confluent Cloud, we have broadened our reach of customers and are able to attract a greater array of customers, including those in the earlier stages of data streaming adoption.
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Our ability to attract new customers will depend on and has historically been impacted by a number of factors, including our success in recruiting and scaling our sales and marketing organization, our ability to accelerate ramp time of our sales force, expansion and refinement of our go-to-market strategies to reach additional customer opportunities and to focus on consumption over commitments, our ability to enhance our brand and educate potential customers about the benefits and reduced total cost of ownership of our offerings compared to alternatives for data in motion, such as Apache Kafka, Apache Flink, and Apache Iceberg, our ability to effectively and competitively price our offerings, our ability to expand features and functionalities of our offerings, our ability to grow and harness our partner ecosystem, macroeconomic uncertainty and challenges, and competitive dynamics in our target markets.
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We had approximately 5,800 and 4,960 customers as of December 31, 2024 and 2023, respectively, spanning organizations of all sizes and industries. Our customer count treats affiliated entities with the same parent organization as a single customer and includes pay-as-you-go customers, and may fluctuate due to acquisitions, consolidations, spin-offs, and other market activity.
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Retaining and Expanding Revenue from Existing Customers Our business model and future growth are driven by customer renewals and increasing existing customer consumption and subscriptions over time, referred to as land-and-expand.
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Our ability to retain and expand revenue from existing customers, including through increased consumption of our offerings and contractual commitments and renewals, will depend on and has historically been impacted by a number of factors, including market acceptance of our offerings compared to data-in-motion alternatives, such as Apache Kafka, Apache Flink, and Apache Iceberg pricing of our offerings, customer satisfaction, expansion of features and functionalities of our offerings, competition, macroeconomic conditions, and overall changes in our customers’ spending levels.
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In particular, we have experienced and expect to continue to experience volatility in consumption from some of our larger enterprise customers, resulting in lower consumption expansion from time to time, primarily due to continued customer focus on near-term cloud cost controls and driving efficiencies and resulting impacts on expansion in new use cases.
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Despite the continuing uncertain economic backdrop and consumption volatility, we believe we have significant opportunities to partner with our customers to help them realize increased value in Confluent in an efficient and sustainable manner, including through expansion of new use cases to drive their strategic goals.
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While these dynamics are expected to continue to result in reduced or fluctuating consumption expansion over the near term, we believe they can lead to more durable consumption expansion over time.
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Investing in Growth and Scaling our Business We believe our market opportunity is significant, and we are focused on continuing to make disciplined investments in our long-term revenue and profitability potential. We believe it is critical to scale across all organizational functions in order to capture this opportunity.
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Investments we make in our research and development and sales and marketing organizations will occur in advance of experiencing the benefits from such investments, and it may be difficult for us to determine if we are efficiently allocating resources.
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Our revenue growth potential is dependent on the effectiveness of such investments, which include the development of new product features and enhancements, and the continued refinement of our go-to-market strategies, including for our Data Streaming Platform products and our shift to a consumption-oriented sales model for Confluent Cloud.
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To navigate more challenging macroeconomic conditions, we intend to take a disciplined approach in investing to grow our business to take advantage of our expansive market opportunity while also optimizing for improvements in profitability, margins, and cash flow, including by streamlining our operating expenses. 77 Table of Contents Key Business Metrics We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure our performance, and make strategic decisions.
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The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors. Subscription Revenue We believe subscription revenue reflects the performance of our business because it captures both delivery of contractual commitments from Confluent Platform and consumption from Confluent Cloud and WarpStream.
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We discuss subscription revenue under “Components of Results of Operations.” Customers with $100,000 or Greater in Annual Recurring Revenue (“ARR”) We define ARR as (1) with respect to Confluent Platform customers, the amount of revenue to which our customers are contractually committed over the following 12 months assuming no increases or reductions in their subscriptions, and (2) with respect to Confluent Cloud and WarpStream customers, the amount of revenue that we expect to recognize from such customers over the following 12 months, calculated by annualizing actual consumption of Confluent Cloud and WarpStream in the last three months of the applicable period, assuming no increases or reductions in usage rate.
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Services arrangements are excluded from the calculation of ARR. Large customer relationships lead to scale and operating leverage in our business model. Compared with smaller customers, large customers present a greater opportunity for us because they have larger budgets, greater potential for migrating more applications over time, and a wider range of potential use cases for data in motion.
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As a measure of our ability to scale with our customers and attract large enterprises to our offerings, we count the number of customers that contributed $100,000 or greater in ARR as of period end. Our customer count may also fluctuate due to acquisitions, consolidations, spin-offs, and other market activity.
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We had 1,381 and 1,229 customers with $100,000 or greater in ARR as of December 31, 2024 and 2023, respectively. Dollar-Based Net Retention Rate (“NRR”) We calculate our dollar-based NRR as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end, or Prior Period Value.

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Other CFLT 10-K year-over-year comparisons