Couchbase delivered a solid QQ2 2025 performance with meaningful ARR growth and a strategic pivot toward Capella-driven monetization, underpinned by rapid product innovation aimed at AI-enabled, real-time data applications. Total ARR reached $214 million, up 18% year-over-year and 19% in constant currency, while quarterly revenue rose 20% YoY to $51.6 million. The mix shift toward Capella continued, with Capella ARR at $28.9 million (13.5% of total ARR) and Capella representing 31% of Couchbase’s customer base, up 2 percentage points sequentially. Management highlighted a robust pipeline of strategic opportunities and accelerated Capella migrations, including the largest Capella land in company history and early positive feedback for Capella Columnar, Capella Free Tier, and Capella Columnar integration with vector search. On the flip side, the quarter featured an outsized churn/downsell headwind, with two large accounts driving losses beyond typical quarterly guidance, which tempered ARR growth despite a very strong gross new ARR result. Management reaffirmed full-year ARR guidance and emphasized a back-half concentration of net-new ARR driven by renewals, Capella migrations, and large strategic deals. The company continues to emphasize efficiency, targeting a Rule of 40 trajectory, and remains confident in achieving free cash flow positive status in fiscal 2026. This reflects a well-defined AI-enabled data platform strategy that aims to be the single source of truth for modern applications, with Capella Columnar and vector search extending Couchbase’s appeal to enterprise developers and architects.
Key Performance Indicators
Revenue
51.59M
QoQ: 0.51% | YoY:19.59%
Gross Profit
45.13M
87.47% margin
QoQ: -1.14% | YoY:21.21%
Operating Income
-21.05M
QoQ: 6.62% | YoY:3.75%
Net Income
-19.90M
QoQ: 5.24% | YoY:3.66%
EPS
-0.39
QoQ: 7.14% | YoY:11.36%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $51.6 million in Q2 2025, up 20% YoY and 1% QoQ.
Gross margin: 88.3% (vs. 87.2% YoY; 89.9% in prior quarter).
ARR: $214.0 million, up 18% YoY and 3% sequentially; Capella ARR: $28.9 million, up 20% sequentially and 13.5% of total ARR (up 2pp).
Capella customer base: 31% of customers; Capella represents 13.5% of total ARR.
Financial Highlights
- Revenue: $51.6 million in Q2 2025, up 20% YoY and 1% QoQ.
- Gross margin: 88.3% (vs. 87.2% YoY; 89.9% in prior quarter).
- Operating loss: -$4.1 million; operating margin: -8.0%.
- ARR: $214.0 million, up 18% YoY and 3% sequentially; Capella ARR: $28.9 million, up 20% sequentially and 13.5% of total ARR (up 2pp).
- Capella customer base: 31% of customers; Capella represents 13.5% of total ARR.
- Net new logos: 62 in Q2; total customers: 869.
- ARR per customer: $246k, down from $257k in Q1 2025 (pressure from Capella mix).
- Net revenue retention (NRR): >115%.
- RPO: $215.8 million, up 27% YoY; ~63% (~$136.2 million) expected to be recognized in the next 12 months.
- Cash and equivalents/short-term investments: $156.1 million; cash end of period: $62.6 million.
- Free cash flow: -$5.9 million (FCF margin -11.5%); operating cash flow: -$4.85 million.
- Earnings per share (non-GAAP): -$0.06.
- Rule of 40: score improved 14 points YoY, signaling ongoing efficiency improvements.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
51.59M
19.59%
0.51%
Gross Profit
45.13M
21.21%
-1.14%
Operating Income
-21.05M
3.75%
6.62%
Net Income
-19.90M
3.66%
5.24%
EPS
-0.39
11.36%
7.14%
Key Financial Ratios
currentRatio
1.97
grossProfitMargin
87.5%
operatingProfitMargin
-40.8%
netProfitMargin
-38.6%
returnOnAssets
-8.43%
returnOnEquity
-15.7%
debtEquityRatio
0.03
operatingCashFlowPerShare
$-0.1
freeCashFlowPerShare
$-0.12
priceToBookRatio
7.7
priceEarningsRatio
-12.26
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategy and AI enablement:
- Matt Cain stated Capella Columnar is a transformative achievement driving AI-enabled capabilities and that Q2 saw fast adoption and positive feedback across industries. “Capella Columnar is a transformative achievement for us, and I am thrilled to share that Q2 saw fast adoption and positive feedback from early users across various industries.”
- He also framed Capella and Columnar as essential to unifying operational and analytical workloads, enabling zero ETL for JSON and real-time insights.
Product and portfolio momentum:
- Matt Cain highlighted the general availability of Couchbase Mobile with vector search and the Capella Free Tier, as well as Capella Columnar, reinforcing the company’s push to broaden developer access and accelerate AI-driven workloads.
- The company reported Capella landings such as a six-figure Capella deal and continued Capella migrations, underscoring Capella as a growth engine.
Operational performance and churn risk:
- Greg Henry acknowledged an unexpected loss and downsell headwind in Q2, noting two outsized accounts as the primary drivers and emphasizing it was not a common pattern: “there was just a few of them” and that the gross ARR addition was among the best in company history, offset by higher-than-expected losses.
- Matt and Greg stressed the renewal base remains healthy, with expectations for back-half acceleration driven by large strategic accounts and ongoing Capella momentum.
Go-to-market and partnerships:
- Matt Cain emphasized the breadth of partner-led sales, ISVs, and strategic collaborations as a key channel for new logos and Capella expansion, suggesting that partnership momentum is sustainable and crediting its role in enabling Capella adoption across geographies.
Guidance and outlook:
- Greg Henry outlined ARR dynamics: a substantial amount of contracted ARR with start dates in Q4 is contributing to strong second-half visibility, with net new ARR growth expected to be back half-weighted and particularly in Q4. He noted macro headwinds and the conservative framework guiding guidance.
- Management reaffirmed full-year ARR guidance and provided Q3/Q4 expectations, emphasizing Capella as a growth driver and a disciplined cost framework.
ARR was $214 million, representing growth of 18% year-over-year and 19% in constant currency.
— Matt Cain
Capella Columnar is a transformative achievement for us, and I am thrilled to share that Q2 saw fast adoption and positive feedback from early users across various industries.
— Matt Cain
Forward Guidance
Outlook is anchored by continued Capella-driven growth, expansion of Capella Columnar and vector search capabilities, and a strong enterprise renewal dynamic. Key elements of management’s guidance and their implications:
- Q3 2025 guidance: Revenue $50.3–$51.1 million (+11% YoY at midpoint); ARR $218.5–$221.5 million (+~17% YoY at midpoint); non-GAAP operating loss of -$5.5 to -$4.5 million.
- FY2025 guidance raised: Revenue $205.1–$209.1 million (+~15% YoY at midpoint); ARR $235.5–$240.5 million (+~17% YoY at midpoint); non-GAAP operating loss -$24.5 to -$19.5 million.
- ARR dynamics: A larger-than-normal amount of contracted ARR with start dates in Q4 is contributing to heightened visibility and back-half weighting of net new ARR. This is driven by large, multi-year strategic contracts that tend to realizable ARR in future periods, including some 2026 renewals.
- Macroeconomic conservatism: Management emphasized conservatism in the outlook to account for macro headwinds and potential shifts in upsell and migration timing, as well as consumption trends for the as-a-service offering.
- Strategic opportunities: A substantial pipeline of seven-figure (and potentially higher) strategic deals remains a core driver of the back-half growth trajectory; success here will be a major determinant of whether targets are achieved.
Overall assessment: The company appears to be transitioning toward a Capella-centric growth model with a multi-year, high-value ARR cadence. The back-half focus on renewals, migrations, and large strategic deals provides a plausible path to achieving ARR guidance, but execution risk remains tied to churn normalization and the pace of Capella adoption across enterprise accounts. Investors should monitor: (1) renewal composition and upsell timing, (2) progression of Capella migrations, (3) pace of Capella Columnar adoption, (4) macro-driven demand environment, and (5) the realization of contracted ARR in Q4.)
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
BASE Focus
87.47%
-40.80%
-15.70%
-12.26%
EVCM
65.40%
3.88%
-0.43%
-150.02%
AVDX
62.30%
-2.00%
0.06%
1,428.05%
INFA
71.40%
2.56%
0.21%
474.49%
LAW
74.20%
-34.40%
-6.34%
-8.06%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Couchbase is positioned for near-term acceleration driven by Capella growth, large strategic deals, and the AI-enabled Capella Columnar expansion. The projected ARR trajectory relies on continued renewal strength, successful migrations to Capella, and a robust pipeline of seven-figure ARR opportunities. However, the company faces near-term profitability headwinds and churn risk that could weigh on quarterly results if churn accelerates or macro conditions worsen. The company’s strategy to broaden the developer ecosystem (Capella Free Tier, Mobile with vector search) and strengthen partnerships should support sustainable ARR growth and a more efficient cost structure over time. Overall, the investment thesis hinges on: (1) material expansion in Capella adoption and Columnar analytics, (2) durable renewal and expansion across enterprise accounts, and (3) progressive free cash flow improvement toward 2026 targets, with an eye on long-term profitability and cash generation.
Key Investment Factors
Growth Potential
Capella remains Couchbase’s primary growth engine, with Capella ARR at $28.9m and Capella contributing 31% of the customer base and 13.5% of total ARR. The introduction of Capella Columnar and vector search, along with Capella Free Tier, expands developer reach and accelerates the AI-enabled data platform adoption. The company reports a record gross new ARR quarter and a growing Capella mix; large strategic multi-year deals offer significant upside potential (seven-figure to eight-figure ARR opportunities).
Profitability Risk
Churn and downsell headwinds in Q2 were outsized but characterized by management as non-recurring, driven by two accounts (one acquired and one other downturn). The ARR base remains heavily weighted toward the back half due to renewals, making results sensitive to renewal timing and upsell success. Macro headwinds could delay consumption of Capella or reduce migration pace. Competition from hyperscalers and the need to demonstrate differentiated value in enterprise data platforms remain ongoing considerations.
Financial Position
Balance sheet is solid with $156.1 million in cash and short-term investments; cash at end of period $62.6 million; RPO of $215.8 million (up 27% YoY). Net cash position of approximately -$58.8 million (net cash). Revenue growth is solid (Q2 revenue up 20% YoY) with gross margin at 88.3% and negative non-GAAP operating margin (-8%), reflecting ongoing investment in growth and Capella expansion. The company aims to reach Free Cash Flow positive in fiscal 2026 and maintain disciplined Opex despite go-to-market investments.