"“In Q3, we exceeded our billings, revenue, and non-GAAP EPS guidance, and I'm particularly excited to report that we grew our subscription RPO by 3% year over year, and our subscription RPO beyond 12 months grew 14% year over year.”" - Josh James
Domo delivered a modest year-over-year revenue uptick in Q3 FY2025, highlighted by a marked shift toward consumption-based contracts and a rapidly expanding partner ecosystem. Total revenue stood at $79.8 million, with subscription revenue comprising 89% and billings of $73.4 million. The company reported total subscription RPO of $354.1 million, up 3% YoY, and subscription RPO beyond 12 months grew 14% YoY, underscoring durable, long-term demand and a growing premium for AI-enabled use cases. Management stressed that consumption-based arrangements now represent 55% of ARR and that 100% of Q3 new logos are consumption contracts, signaling a deliberate pivot toward value-aligned pricing that should accelerate expansion and retention as customers scale usage. The combined momentum from AI investments (Agentic AI, Workflows, AI service layer) and ecosystem partnerships (notably CDW) is driving larger, faster deals and higher-quality pipeline, with partner-sourced opportunities up meaningfully and close rates outperforming non-partner deals. While the near-term financials reflect continued profitability pressure (GAAP loss, negative free cash flow), Domo provided a constructive Q4 outlook and remains focused on building a durable, repeatable growth engine that should begin to show stronger revenue growth in FY2026 as the partner channel matures and AI monetization scales. Investors should monitor retention trends, the rate of ARR expansion from consumption, and the velocity of partner-driven deals as leading indicators of a multiyear upswing.
Key Performance Indicators
Revenue
79.76M
QoQ: 1.73% | YoY:0.11%
Gross Profit
59.80M
74.97% margin
QoQ: 2.61% | YoY:-1.80%
Operating Income
-11.08M
QoQ: 23.49% | YoY:1.23%
Net Income
-18.76M
QoQ: 3.74% | YoY:-14.31%
EPS
1.17
QoQ: 329.41% | YoY:360.00%
Revenue Trend
Margin Analysis
Key Insights
Total revenue: $79.8 million in Q3 FY2025, up slightly YoY (per management). QoQ, revenue rose to $79.8 million from $78.4 million in Q2, reflecting a modest sequential improvement.
Gross margin: 74.97% in reported terms (gross profit $59.803 million on revenue $79.764 million) with EBITDA of -$8.83 million for the quarter.
Operating income and net income: Operating loss of -$11.084 million; net income of -$18.761 million (GAAP) for Q3. Non-GAAP net loss of -$3.2 million, or -$0.08 per share on 38.8 million weighted shares.
Non-GAAP vs GAAP: The company reiterated the use of non-GAAP measures in disclosures; reconciliation is available in the press release. GAAP EPS is not provided in the transcript, while non-GAAP EPS was negative at -$0.08.
Subscription dependence and pricing mix: Subscription revenue accounted for 89% of total revenue, underscoring a high-margin, recurring base.
Financial Highlights
Revenue and profitability dynamics:
- Total revenue: $79.8 million in Q3 FY2025, up slightly YoY (per management). QoQ, revenue rose to $79.8 million from $78.4 million in Q2, reflecting a modest sequential improvement.
- Gross margin: 74.97% in reported terms (gross profit $59.803 million on revenue $79.764 million) with EBITDA of -$8.83 million for the quarter.
- Operating income and net income: Operating loss of -$11.084 million; net income of -$18.761 million (GAAP) for Q3. Non-GAAP net loss of -$3.2 million, or -$0.08 per share on 38.8 million weighted shares.
- Non-GAAP vs GAAP: The company reiterated the use of non-GAAP measures in disclosures; reconciliation is available in the press release. GAAP EPS is not provided in the transcript, while non-GAAP EPS was negative at -$0.08.
- Subscription dependence and pricing mix: Subscription revenue accounted for 89% of total revenue, underscoring a high-margin, recurring base.
- RPO and ARR mix:
• Total subscription RPO: $354.1 million, +3% YoY (best RPO growth in two years).
• Subscription RPO beyond 12 months: +14% YoY.
• Average contract length across the customer base increased 13% YoY and 10% QoQ, reflecting longer commitments and higher stickiness.
- Cash flow and liquidity:
• Operating cash flow: -$13.7 million; free cash flow: -$16.22 million (Q3).
• Delayed cash receipts related to consumption migrations of $8–$10 million in Q3, majority collected in Q4, implying a timing issue rather than a structural cash flow deterioration.
• Cash and cash equivalents: $40.93 million; total debt: $129.205 million; net debt: $88.28 million; accumulated deficit reflected in negative stockholders’ equity (-$171.17 million).
- Guidance (Q4’25 and full-year):
• Q4 billings guidance: $98–$104 million; GAAP revenue: $77.5–$78.5 million; non-GAAP net loss per share: -$0.13 to -$0.17 (assuming ~39.3 million weighted shares).
• Full-year billings: $305.5–$311.5 million; GAAP revenue: $315.5–$316.5 million; non-GAAP net loss per share: -$0.60 to -$0.64 (assuming ~38.5 million weighted shares).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
79.76M
0.11%
1.73%
Gross Profit
59.80M
-1.80%
2.61%
Operating Income
-11.08M
1.23%
23.49%
Net Income
-18.76M
-14.31%
3.74%
EPS
1.17
360.00%
329.41%
Key Financial Ratios
currentRatio
0.53
grossProfitMargin
75%
operatingProfitMargin
-13.9%
netProfitMargin
-23.5%
returnOnAssets
-9.86%
returnOnEquity
11%
debtEquityRatio
-0.76
operatingCashFlowPerShare
$-0.35
freeCashFlowPerShare
$-0.42
priceToBookRatio
-1.8
priceEarningsRatio
-4.11
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from the Q3 FY2025 earnings call:
- Strategy and AI leadership:
• Josh James emphasized ecosystem-led growth, consumption pricing, and AI as the right long-term trajectory for Domo. “We grew our subscription RPO by 3% YoY, and subscription RPO beyond 12 months grew 14% YoY.”
• The AI framework and Agentic AI capabilities are central to the value proposition, enabling rapid, governance-enabled AI-driven data products. James highlighted a customer delivering an analytics report in under 2.5 minutes via AI agents.
- Partner ecosystem and go-to-market:
• CDW and partner channels are driving acceleration: “partner-sourced contribution to billings up more than 20% QoQ” and ~400 partner opportunities with ~80 partners (30 new in six months). Deals sourced via partners closed faster (80 days vs 100 days non-partner).
• Nearly half of new logos were created and closed in Q3 through partner channels; management signaled a material uplift in ecosystem-driven growth and greater enterprise deal velocity as partnerships mature.
- Consumption model and ARR mix:
• 100% of new logo deals in Q3 were consumption contracts, now representing 55% of ARR; Domo expects consumption to exceed 60% ARR by year-end and ~90% over the next year.
- Retention and churn dynamics:
• Gross retention in Q3 was 85%, with ARR net retention at 90% YoY and up sequentially—the first sequential increase in nearly three years. Management framed churn as partly macro-driven but noted tailwinds from larger churn events aging out and partner-driven pulls.
- Financials and near-term posture:
• The company acknowledged near-term profitability pressure with negative GAAP net income and negative free cash flow, driven in part by timing issues in consumption migrations. They expect Q4 positive adjusted free cash flow ($4–$5 million) and a higher cash balance next quarter.
• Margins are stabilizing: subscription gross margin around 82% target and long-term improvement towards mid-80s; non-GAAP operating margin around +2.5%.
“In Q3, we exceeded our billings, revenue, and non-GAAP EPS guidance, and I'm particularly excited to report that we grew our subscription RPO by 3% year over year, and our subscription RPO beyond 12 months grew 14% year over year.”
— Josh James
“100% of our new logo deals were structured as consumption contracts, which now represent 55% of our ARR. This is almost an unbelievable transformation of our business model that in a little over 18 months we've gone from 5% to what we expect to be over 60% by year end.”
— Josh James
Forward Guidance
Outlook and catalysts going into the next 12–18 months:
- Base guidance and expectations:
• Q4 2025 billings of $98–$104 million and GAAP revenue of $77.5–$78.5 million, with a non-GAAP net loss per share of -$0.13 to -$0.17.
• Full-year guidance implies continued investment in AI and ecosystem expansion, with a plan to maintain consumption-led growth while managing profitability imperatives.
- Growth drivers to watch:
• Consumption-based model expansion: 55% of ARR in consumption contracts in Q3, targeting >60% by year-end and ~90% over the next year. This should improve ARR quality, drive usage, and accelerate expansion through the product-led growth model.
• AI and Agentic AI monetization: early customer wins and faster time-to-value (e.g., minutes rather than weeks) suggest upside from AI-driven data products, workflows, and governance layers. Expect acceleration in ARR/retention as customers deploy AI agents broadly.
• Ecosystem expansion: partner-driven pipeline growth (e.g., CDW) and an expanding network of 80+ partners with 400+ opportunities; management indicated near-term billings may be lumpy but with strong long-term contribution as the ecosystem scales.
- Risks and considerations:
• Short-term profitability and cash flow volatility due to macro pressures and timing of consumption migrations; management guided to positive Q4 FCF but overall profitability remains a multi-quarter objective.
• Retention volatility within a tight budget environment; gross retention guided in a band of 85–90% near term, with a long-term goal of ≥90% gross retention.
• Competition and vendor consolidation dynamics (e.g., larger incumbents with broader ecosystems) could influence pricing power and market share gains.
- Key monitoring factors for investors:
• Rate of ARR growth and RPO expansion, including longer-tenure contracts and longer contract lengths.
• Conversion rates and deal velocity from the partner ecosystem, especially enterprise deals sourced via CDW and SI partners.
• Net and gross retention trends, particularly as churn events age out and AI adoption accelerates.
• The pace of AI monetization and its impact on revenue mix, gross margins, and overall profitability.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
DOMO Focus
74.97%
-13.90%
11.00%
-4.11%
DT
81.10%
10.90%
14.20%
11.22%
ESTC
74.60%
-1.21%
-1.99%
-171.76%
PD
83.00%
-8.65%
-5.31%
-70.52%
MNDY
89.70%
-10.90%
-1.24%
-289.50%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Bottom line: Domo sits at a juncture of AI-enabled data platform expansion and a strategically important pivot to consumption-based pricing powered by a growing partner ecosystem. The QQ3 2025 results demonstrate meaningful progress in RPO, ARR mix, and enterprise deal velocity, driven by AI innovations and partner-driven demand. The near-term financials reflect structural investments and timing-related cash flow effects rather than an erosion of core value. The key catalyst is the maturation of the ecosystem (CDW and other partners) and the monetization of Agentic AI capabilities that can convert consumption into durable revenue growth. Investors should consider: (1) the trajectory of ARR growth and retention improvements as consumption scales, (2) the speed and size of partner-driven deals, (3) AI monetization progress and its impact on gross margins, and (4) the path to sustainable profitability given the leverage implied by the consumption model. Given the current level of ARR mix and partner momentum, a constructive long-term stance is warranted, with a focus on execution milestones for 2026 and beyond. Valuation remains sensitive to the pace of revenue growth re-acceleration and margin expansion.
Key Investment Factors
Growth Potential
Significant upside from AI-enabled product expansion (Agentic AI, Workflows, AI service layer) and consumption-led pricing. Expect acceleration in ARR growth as partner-driven deals mature, with consumption contracts driving higher adoption and stickiness. Management notes a growing pipeline with ~400 partner-related opportunities across ~80 partners, plus faster close rates for partner-sourced deals (80 days vs 100 days non-partner).
Profitability Risk
Near-term profitability and cash flow headwinds persist (GAAP net loss, negative FCF) due to timing (consumption migrations) and macro volatility. Churn variance (85–90% gross retention band mid-term) remains a monitoring risk. Dependency on partner channels exposes the model to partner execution, integration cycles, and potential partner-related concentration risk in select geographies or partners.
Financial Position
Solid liquidity discipline but levers remain: cash of ~$40.9m vs debt of $129.2m and a negative stockholders’ equity of ~$-171.2m. Deferred revenue is sizable (~$153.9m), reflecting a strong backlog and future revenue recognition. The company is transitioning toward a durable growth engine, with margins stabilizing (subscription gross margin ~82% and non-GAAP operating margin ~2.5%), but long-term cash flow improvements depend on higher consumption mix and AI monetization.
SWOT Analysis
Strengths
Robust AI-focused platform with Agentic AI, Workflows, and an integrated AI service layer.
Consumption-based pricing aligns with customer value, driving faster adoption and broader deployment.