Business intelligence platform Domo (NASDAQ: DOMO) met Wall Streets revenue expectations in Q3 CY2025, but sales were flat year on year at $79.4 million. On the other hand, next quarter’s revenue guidance of $78.5 million was less impressive, coming in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.01 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Domo's third quarter results were met with a negative market reaction, as the company reported flat year-over-year sales alongside revenue that aligned with Wall Street expectations. Management pointed to the increased length and complexity of partner-driven sales cycles as a primary factor affecting billings, emphasizing that larger, multi-stakeholder deals now require more time to close. CEO Josh James highlighted that these ecosystem-focused transactions involve higher-level decision makers, leading to longer but ultimately more durable customer relationships. The transition to a consumption-based pricing model was also a key theme, with management noting accelerating adoption and its impact on user engagement.

Looking ahead, Domo’s forward guidance reflects both optimism about billings growth and caution around the pace of deal closures. Management stressed that improvements in gross and net retention are expected as a greater share of customers move to multiyear contracts and consumption pricing. CFO Tod Crane noted, “We expect gross retention to improve to approximately 87% in Q4, the highest in six quarters,” while also flagging some uncertainty due to the timing of partner-driven renewals. The company remains focused on deepening its ecosystem relationships, expanding AI capabilities, and maintaining disciplined cost control.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to a mix of partner ecosystem expansion, rapid adoption of consumption pricing, and increased AI integration, while highlighting the impact of longer sales cycles on billings.

• Partner ecosystem expansion: Domo continued to deepen relationships with major cloud data warehouse providers, such as Snowflake and Databricks, through its Cloud Amplifier platform. Management highlighted that over 350 customer accounts now use Cloud Amplifier, with unique user growth up 450% year-over-year, supporting a shift from competition to collaboration with these partners.
• Consumption model adoption: The company accelerated its transition to consumption-based contracts, with 80% of annual recurring revenue now tied to this pricing approach. Management stated that this model removes licensing constraints, enabling broader platform usage and driving a 10% year-over-year increase in monthly active users.
• Longer sales cycles: The shift to partner-led deals has introduced more stakeholders and complexity, extending the timeline for closing new business. While these deals are stickier and involve CIO-level engagement, the timing of billings has become less predictable, impacting short-term revenue recognition.
• AI integration progress: Domo reported a 60% increase in accounts using its AI features and more than doubled the number of unique AI users year-over-year. The company believes its integrated platform enables customers to operationalize AI use cases at scale, distinguishing Domo from competitors facing challenges in bringing AI projects to production.
• Profitability improvements: Management cited ongoing cost discipline and operational efficiency as drivers of improved operating margin and positive adjusted free cash flow. They emphasized that targeted investments in R&D and go-to-market initiatives will be balanced against profitability goals, with a focus on scaling areas showing strong return on investment.

Drivers of Future Performance

Domo’s outlook is shaped by its emphasis on ecosystem partnerships, broader adoption of consumption pricing, and continued investment in AI capabilities, balanced by the risks of elongated sales cycles.

• Ecosystem partnership focus: Management believes that deepening relationships with cloud data warehouse providers will unlock larger, multiyear contracts and drive durable growth. They expect that joint go-to-market initiatives will result in higher retention and broader adoption, although the associated complexity could further extend deal cycles.
• Consumption model momentum: The ongoing shift to consumption-based contracts is expected to improve both gross and net retention. CFO Tod Crane pointed out that customers on consumption contracts have shown higher retention rates, and as more renewals fall under this model, overall retention metrics should benefit.
• AI-led product differentiation: The company is prioritizing the development and rollout of advanced AI features, aiming to address customer demand for real-world, operationalized AI use cases. Management cited strong early adoption as a leading indicator for future growth, but acknowledged that industry-wide challenges in AI deployment could pose headwinds.

Catalysts in Upcoming Quarters

In the quarters ahead, our analysts will closely monitor (1) the pace and consistency of billings growth as delayed partner-led deals are recognized, (2) improvements in gross and net retention driven by the ongoing shift to consumption pricing and multiyear contracts, and (3) further progress in customer adoption of AI-driven features. Execution in these areas will be key to validating Domo’s strategic priorities and operational discipline.

Domo currently trades at $10.52, down from $11.59 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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