--- ticker: CFLT company: Confluent Inc. filing_type: 10-K year_current: 2025 year_prior: 2024 risks_added: 0 risks_removed: 0 risks_modified: 13 risks_unchanged: 62 source: SEC EDGAR url: https://riskdiff.com/cflt/2025-vs-2024/ markdown_url: https://riskdiff.com/cflt/2025-vs-2024/index.md generated: 2026-05-10 --- # Confluent Inc.: 10-K Risk Factor Changes 2025 vs 2024 > Source: U.S. Securities and Exchange Commission (EDGAR) > Generated: 2026-05-10 > All data extracted directly from official filings. No hallucinated content. > **[AI-Generated Summary]** The paragraph below was produced by a language > model and may contain errors. All other content on this page is deterministically > extracted from the original SEC filing. > Confluent substantially modified 13 of 75 total risk factors while maintaining 62 unchanged risks, with no new risks added or existing risks removed. The most significant modifications addressed growth sustainability, competitive positioning, and product implementation risks, suggesting the company refined its disclosure of challenges related to maintaining rapid growth trajectories, market competition intensity, and customer success with platform updates. These changes indicate Confluent's focus on providing more nuanced risk articulation around core business vulnerabilities without materially expanding or contracting its overall risk disclosure footprint. --- ## Summary | Status | Count | |--------|-------| | New risks added | 0 | | Risks removed | 0 | | Risks modified | 13 | | Unchanged | 62 | --- ## Modified: Our historical rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful. **Key changes:** - Reworded sentence: "Our revenue was $963.6 million, $777.0 million, and $585.9 million for the years ended December 31, 2024, 2023, and 2022, respectively." - Reworded sentence: "Our revenue growth rate has declined from time to time, and may decline in the future, as a result of a variety of factors, including our focus on operating efficiency and margin improvement, the effectiveness of our sales and marketing strategies and function, our ability to continue gaining market acceptance of our offerings, macroeconomic challenges and uncertainty, increased competition, and changes to technology." - Reworded sentence: "In addition, we expect to continue to expend substantial financial and other resources on: •expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption and consumption of our offerings; expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption and consumption of our offerings; •product development, including investments in our product development team and the development of new products and new features and functionality for our offerings to expand use cases and provide feature parity across third-party public cloud platforms, as well as investments in further differentiating our existing offerings; product development, including investments in our product development team and the development of new products and new features and functionality for our offerings to expand use cases and provide feature parity across third-party public cloud platforms, as well as investments in further differentiating our existing offerings; •our cloud infrastructure technology, including systems architecture, scalability, availability, performance, and security; our cloud infrastructure technology, including systems architecture, scalability, availability, performance, and security; •technology and sales channel partnerships, including cloud marketplaces; technology and sales channel partnerships, including cloud marketplaces; •international expansion; international expansion; •acquisitions or strategic investments; and acquisitions or strategic investments; and •general administration, including increased legal and accounting expenses associated with being a public company." - Reworded sentence: "23 23 23 Table of Contents Table of Contents Table of Contents These investments may not result in increased revenue in our business." - Removed sentence: "20 20 Table of Contents Table of Contents Table of Contents" **Prior (2024):** Our revenue was $777.0 million, $585.9 million, and $387.9 million for the years ended December 31, 2023, 2022, and 2021, respectively. You should not rely on the revenue growth of any prior period as an indication of our future performance. Our revenue growth rate has declined from time to time, and may decline in the future, as a result of a variety of factors, including our focus on operating efficiency and margin improvement, the effectiveness of our sales and marketing strategies and function, our ability to continue gaining market acceptance of our offering, macroeconomic challenges and uncertainty, increased competition, and changes to technology. Overall growth of our revenue depends on a number of factors, including our ability to: •market and price our offering effectively so that we are able to attract new customers and expand sales to our existing customers; market and price our offering effectively so that we are able to attract new customers and expand sales to our existing customers; •invest in the growth of our business while adjusting our cost structure to focus on operating efficiency and improved margins; 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; successfully develop a substantial customer and sales pipeline for our products; •expand the features and functionality of our offering to enable additional use cases for our customers; expand the features and functionality of our offering to enable additional use cases for our customers; •continue investing in our sales and marketing function to support our growth, reduce the time for new sales personnel to achieve desired productivity levels, and successfully shift to a consumption-oriented sales model; continue investing in our sales and marketing function to support our growth, reduce the time for new sales personnel to achieve desired productivity levels, and successfully shift to a consumption-oriented sales model; 19 19 Table of Contents Table of Contents Table of Contents •extend our product leadership to expand our addressable market; extend our product leadership to expand our addressable market; •differentiate our offering from open source alternatives and products offered by our competitors; differentiate our offering 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 offering and increase consumption of our offering, including in light of the evolving macroeconomic environment; maintain and expand the rates at which new customers purchase and existing customers renew subscriptions and committed use of our offering and increase consumption of our offering, including in light of the evolving macroeconomic environment; •provide our customers with support that meets their needs; provide our customers with support that meets their needs; •expand our partner ecosystem, including with major cloud providers, independent software vendors (ISVs), and regional and global systems integrators; expand our partner ecosystem, including with major cloud providers, independent software vendors (ISVs), and regional and global systems integrators; •increase awareness of our brand on a global basis to successfully compete with other companies; and 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. expand to new international markets and grow within existing markets. We may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of operations. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. As a result of our rapid revenue growth in prior periods, we expect our revenue growth rate to decline in future periods. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth. In addition, we expect to continue to expend substantial financial and other resources on: •expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption and consumption of our offering; expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption and consumption of our offering; •product development, including investments in our product development team and the development of new products and new features and functionality for our offering to expand use cases and provide feature parity across third-party public cloud platforms, as well as investments in further differentiating our existing offering; product development, including investments in our product development team and the development of new products and new features and functionality for our offering to expand use cases and provide feature parity across third-party public cloud platforms, as well as investments in further differentiating our existing offering; •our cloud infrastructure technology, including systems architecture, scalability, availability, performance, and security; our cloud infrastructure technology, including systems architecture, scalability, availability, performance, and security; •technology and sales channel partnerships, including cloud marketplaces; technology and sales channel partnerships, including cloud marketplaces; •international expansion; international expansion; •acquisitions or strategic investments; and acquisitions or strategic investments; and •general administration, including increased legal and accounting expenses associated with being a public company. general administration, including increased legal and accounting expenses associated with being a public company. These investments may not result in increased revenue in our business. If we are unable to maintain or increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our revenue does not meet our expectations in future periods, our business, financial position, and results of operations may be harmed. 20 20 Table of Contents Table of Contents Table of Contents **Current (2025):** Our revenue was $963.6 million, $777.0 million, and $585.9 million for the years ended December 31, 2024, 2023, and 2022, respectively. You should not rely on the revenue growth of any prior period as an indication of our future performance. Our revenue growth rate has declined from time to time, and may decline in the future, as a result of a variety of factors, including our focus on operating efficiency and margin improvement, the effectiveness of our sales and marketing strategies and function, our ability to continue gaining market acceptance of our offerings, macroeconomic challenges and uncertainty, increased competition, and changes to technology. 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; 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; 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; 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; 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; 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; extend our product leadership to expand our addressable market; •differentiate our offerings from open source alternatives and products offered by our competitors; 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; 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 22 22 Table of Contents Table of Contents Table of Contents •provide our customers with support that meets their needs; 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); 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 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. expand to new international markets and grow within existing markets. We may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of operations. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. As a result of our rapid revenue growth in prior periods, we expect our revenue growth rate to decline in future periods. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth. In addition, we expect to continue to expend substantial financial and other resources on: •expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption and consumption of our offerings; expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption and consumption of our offerings; •product development, including investments in our product development team and the development of new products and new features and functionality for our offerings to expand use cases and provide feature parity across third-party public cloud platforms, as well as investments in further differentiating our existing offerings; product development, including investments in our product development team and the development of new products and new features and functionality for our offerings to expand use cases and provide feature parity across third-party public cloud platforms, as well as investments in further differentiating our existing offerings; •our cloud infrastructure technology, including systems architecture, scalability, availability, performance, and security; our cloud infrastructure technology, including systems architecture, scalability, availability, performance, and security; •technology and sales channel partnerships, including cloud marketplaces; technology and sales channel partnerships, including cloud marketplaces; •international expansion; international expansion; •acquisitions or strategic investments; and acquisitions or strategic investments; and •general administration, including increased legal and accounting expenses associated with being a public company. general administration, including increased legal and accounting expenses associated with being a public company. 23 23 23 Table of Contents Table of Contents Table of Contents These investments may not result in increased revenue in our business. If we are unable to maintain or increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our revenue does not meet our expectations in future periods, our business, financial position, and results of operations may be harmed. --- ## Modified: 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. **Key changes:** - Reworded sentence: "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." - Reworded sentence: "These enterprises are developing and have released fully-managed data ingestion and data streaming products, such as Azure Event Hubs (Microsoft Corporation), Amazon Managed Streaming for Apache Kafka, Amazon Kinesis, and Amazon Managed Service for Apache Flink (AWS), and Google Cloud Pub/Sub, Cloud Managed Service for Apache Kafka, and BigQuery Engine for Apache Flink (Google)." - Reworded sentence: "28 28 28 Table of Contents Table of Contents 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." - Reworded sentence: "In addition, the data infrastructure market is large and continues to grow rapidly, and our future success will depend in part on differentiating our offerings from open source alternatives, including Apache Kafka, and other data-in-motion offerings." - Reworded sentence: "As we look to market and sell our offerings and platform capabilities to potential customers with existing solutions, we must convince their internal stakeholders that the capabilities of our offerings are superior to their current solutions." **Prior (2024):** 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. Our primary competition, especially on-premise, is internal IT teams that develop data infrastructure software using open source software, including Apache Kafka. Our principal competitors in the cloud are the well-established public cloud providers that compete in their respective clouds. These enterprises are developing and have released managed service offerings for real-time data ingestion and data streaming, such as Azure Event Hubs (Microsoft Corporation), Amazon Kinesis, Amazon MSK, and Google Cloud Pub/Sub and Dataflow. On premise, there are a number of vendors with legacy products that have pivoted into this space including Cloudera Dataflow, TIBCO Messaging, and Red Hat AMQ Streams. We currently offer Confluent Cloud on the public clouds provided by AWS, Azure, and GCP, which are also some of our primary actual and potential competitors. There is risk that one or more of these public cloud providers could use their respective control of their public clouds to embed innovations or privileged interoperating capabilities in competing products, bundle competing products, provide us unfavorable pricing, leverage their public cloud customer relationships to exclude us from opportunities, and treat us and our customers differently with respect to terms and conditions or regulatory requirements compared to similarly situated customers. 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. 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. 25 25 Table of Contents Table of Contents 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. Because Apache Kafka is open source and there are few technological barriers to entry into the open source market, it may be relatively easier for competitors, some of which may have greater resources than we have, to enter our markets and develop data-in-motion alternatives based on Apache Kafka. In addition, the data infrastructure market is large and continues to grow rapidly, and our future success will depend in part on differentiating our offering from open source alternatives, including Apache Kafka, and other data-in-motion offerings. If we are unable to sufficiently differentiate our offering from Apache Kafka, other offerings based on or derived from Apache Kafka, or other data-in-motion offerings, we may not be successful in achieving market acceptance of our offering, which would limit our growth and future revenue. Some existing and prospective customers may elect to use certain of our data-in-motion platform functions under free-to-use licenses, which can reduce demand for our offering. Such existing or prospective customers may also have reservations about utilizing proprietary software like our offering and may instead opt to use solely open source software based on the perception that this will lower long-term costs and reduce dependence on third-party vendors. In addition, our existing customers have chosen or could in the future choose to develop similar capabilities in-house and strengthen their use of open source software, rather than continue to purchase our offering. Some of our actual and potential competitors have been acquired by other larger enterprises and have made or may make acquisitions or may enter into partnerships or other strategic relationships that may provide more comprehensive offerings than they individually had offered or achieve greater economies of scale than us. Any trend toward industry consolidation may negatively impact our ability to successfully compete and may impose pressure on us to engage in similar strategic transactions, including acquisitions, which would be costly and may divert management's attention. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships, or strategic relationships. As we look to market and sell our offering and platform capabilities to potential customers with existing solutions, we must convince their internal stakeholders that the capabilities of our offering are superior to their current solutions. We compete on the basis of a number of factors, including: •ease of deployment, integration, and use; ease of deployment, integration, and use; •enterprise-grade data in motion; enterprise-grade data in motion; •the cloud-native capabilities of our offering; the cloud-native capabilities of our offering; •the ability to operate at scale and offer elasticity, end-to-end security, and reliability; the ability to operate at scale and offer elasticity, end-to-end security, and reliability; •the completeness of our offering, including as a complete data streaming platform, and our ability to offer rich SQL-based stream processing, integrated governance capabilities, and connectors to existing applications and IT and cloud infrastructure; the completeness of our offering, including as a complete data streaming platform, and our ability to offer rich SQL-based stream processing, integrated governance capabilities, and connectors to existing applications and IT and cloud infrastructure; •the availability of our offering, including in multiple public clouds, and for use in private clouds and in on-premise data centers; the availability of our offering, including in multiple public clouds, and for use in private clouds and in on-premise data centers; •quality of professional services and customer support; quality of professional services and customer support; •price and total cost of ownership; price and total cost of ownership; •flexible pricing, such as pay-as-you-go delivery; flexible pricing, such as pay-as-you-go delivery; •sales and marketing productivity and expertise; sales and marketing productivity and expertise; •brand recognition and reputation; and brand recognition and reputation; and •adherence to industry standards and certifications. adherence to industry standards and certifications. 26 26 Table of Contents Table of Contents Table of Contents 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. Further, other potential competitors not currently offering competitive solutions may expand their offerings to compete with our existing and new offering and platform capabilities. Additionally, our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and offerings in our addressable market. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our offering. In addition to product and technology competition, we face pricing competition. Some of our competitors offer their solutions at a lower price, which has resulted in, and may continue to result in, pricing pressures. 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 offering to continue to achieve or maintain market acceptance, any of which would harm our business, results of operations, and financial condition. **Current (2025):** 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. Our primary competition, especially on-premise, is internal IT teams that develop data infrastructure software using open source software, including Apache Kafka. Our principal competitors in the cloud are the well-established public cloud providers that compete in their respective clouds. These enterprises are developing and have released fully-managed data ingestion and data streaming products, such as Azure Event Hubs (Microsoft Corporation), Amazon Managed Streaming for Apache Kafka, Amazon Kinesis, and Amazon Managed Service for Apache Flink (AWS), and Google Cloud Pub/Sub, Cloud Managed Service for Apache Kafka, and BigQuery Engine for Apache Flink (Google). On premise, there are a number of vendors with legacy products that have pivoted into this space including TIBCO Streaming, Cloudera Dataflow, Red Hat (IBM), AMQ Streams, and Oracle Cloud Infrastructure Streaming. We currently offer Confluent Cloud on the public clouds provided by AWS, Azure, and GCP, which are also some of our primary actual and potential competitors. There is risk that one or more of these public cloud providers could use their respective control of their public clouds to embed innovations or privileged interoperating capabilities in competing products, bundle competing products, provide us unfavorable pricing, leverage their public cloud customer relationships to exclude us from opportunities, and treat us and our customers differently with respect to terms and conditions or regulatory requirements compared to similarly situated customers. 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. 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 28 28 Table of Contents Table of Contents 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. Because Apache Kafka is open source and there are few technological barriers to entry into the open source market, it may be relatively easier for competitors, some of which may have greater resources than we have, to enter our markets and develop data-in-motion alternatives based on Apache Kafka. In addition, the data infrastructure market is large and continues to grow rapidly, and our future success will depend in part on differentiating our offerings from open source alternatives, including Apache Kafka, and other data-in-motion offerings. If we are unable to sufficiently differentiate our offerings from Apache Kafka, other offerings based on or derived from Apache Kafka, or other data-in-motion offerings, we may not be successful in achieving market acceptance of our offerings, which would limit our growth and future revenue. Some existing and prospective customers may elect to use certain of our data-in-motion platform functions under free-to-use licenses, which can reduce demand for our offerings. Such existing or prospective customers may also have reservations about utilizing proprietary software like our offerings and may instead opt to use solely open source software based on the perception that this will lower long-term costs and reduce dependence on third-party vendors. In addition, our existing customers have chosen or could in the future choose to develop similar capabilities in-house and strengthen their use of open source software, rather than continue to purchase our offerings. Some of our actual and potential competitors have been acquired by other larger enterprises and have made or may make acquisitions or may enter into partnerships or other strategic relationships that may provide more comprehensive offerings than they individually had offered or achieve greater economies of scale than us. Any trend toward industry consolidation may negatively impact our ability to successfully compete and may impose pressure on us to engage in similar strategic transactions, including acquisitions, which would be costly and may divert management's attention. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships, or strategic relationships. As we look to market and sell our offerings and platform capabilities to potential customers with existing solutions, we must convince their internal stakeholders that the capabilities of our offerings are superior to their current solutions. We compete on the basis of a number of factors, including: •ease of deployment, integration, and use; ease of deployment, integration, and use; •enterprise-grade data in motion; enterprise-grade data in motion; •the cloud-native capabilities of our offerings; the cloud-native capabilities of our offerings; •the ability to operate at scale and offer elasticity, end-to-end security, and reliability; the ability to operate at scale and offer elasticity, end-to-end security, and reliability; •the completeness of our offerings, including as a complete Data Streaming Platform, and our ability to offer unified and scalable stream processing, integrated governance capabilities for higher data quality, and connectors to existing applications and IT and cloud infrastructure; the completeness of our offerings, including as a complete Data Streaming Platform, and our ability to offer unified and scalable stream processing, integrated governance capabilities for higher data quality, and connectors to existing applications and IT and cloud infrastructure; •the availability of our offerings, including in multiple public clouds, for use in private clouds, in on-premises data centers, and customers' own cloud environments; the availability of our offerings, including in multiple public clouds, for use in private clouds, in on-premises data centers, and customers' own cloud environments; •quality of professional services and customer support; quality of professional services and customer support; •price and total cost of ownership; price and total cost of ownership; •flexible pricing, such as pay-as-you-go delivery; flexible pricing, such as pay-as-you-go delivery; •sales and marketing productivity and expertise; sales and marketing productivity and expertise; •brand recognition and reputation; and brand recognition and reputation; and 29 29 29 Table of Contents Table of Contents Table of Contents •adherence to industry standards and certifications. adherence to industry standards and certifications. 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. Further, other potential competitors not currently offering competitive solutions may expand their offerings to compete with our existing and new offerings and platform capabilities. Additionally, our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and offerings in our addressable market. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our offerings. In addition to product and technology competition, we face pricing competition. Some of our competitors offer their solutions at a lower price, which has resulted in, and may continue to result in, pricing pressures. 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. --- ## Modified: 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. **Key changes:** - Reworded sentence: "Our offerings are often used for and within large scale, complex IT environments." **Prior (2024):** Our offering is often used for and within large scale, complex IT environments. Our customers and some partners require education and experience in the proper use of and the benefits that can be derived from our offering to maximize their potential. If users of our offering do not implement, use, or update our offering correctly or as intended, then inadequate performance and/or security vulnerabilities may result. Because our customers rely on our offering to manage a wide range of operations, the incorrect implementation or use of our offering, or our self-managed customers' failure to update Confluent Platform, or our failure to train customers on how to use our offering productively may result in customer dissatisfaction, and negative publicity, and may adversely affect our reputation and brand. Our failure to effectively provide education and implementation services to our customers could result in lost opportunities for follow-on sales to these customers and decrease subscriptions by new customers, which would adversely affect our business and growth prospects. **Current (2025):** Our offerings are often used for and within large scale, complex IT environments. Our customers and some partners require education and experience in the proper use of and the benefits that can be derived from our offerings to maximize their potential. If users of our offerings do not implement, use, or update our offerings correctly or as intended, then inadequate performance and/or security vulnerabilities may result. Because our customers rely on our offerings to manage a wide range of operations, the incorrect implementation or use of our offerings, or our self-managed customers' failure to update Confluent Platform, or our failure to train customers on how to use our offerings productively may result in customer dissatisfaction and negative publicity, and may adversely affect our reputation and brand. Our failure to effectively provide education and implementation services to our customers could result in lost opportunities for follow-on sales to these customers and decrease subscriptions by new customers, which would adversely affect our business and growth prospects. --- ## Modified: Investors' and other stakeholders' expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks. **Key changes:** - Reworded sentence: "For example, proposed or adopted climate and other ESG reporting regulations from the SEC, California, the European Union, the United Kingdom and other jurisdictions may increase our compliance costs." - Reworded sentence: "Since 2022, we have published an annual ESG Report, which describes the measurement of our greenhouse gas emissions and our efforts to achieve carbon neutrality." - Reworded sentence: "At the same time, anti-ESG sentiment has gained momentum among certain groups in the United States, and the federal and state governments have enacted or proposed "anti-ESG" policies." **Prior (2024):** There is an increasing focus from certain investors, customers, employees, and other stakeholders concerning environmental, social and governance matters, or ESG. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to ESG are inadequate. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies. As ESG best practices and reporting standards continue to develop, we may incur increasing costs relating to ESG monitoring and reporting and complying with ESG initiatives. For example, proposed or adopted climate and other ESG reporting regulations from the SEC, California, and other jurisdictions may increase our compliance costs. We may also face greater costs to comply with new ESG standards or initiatives in the European Union. In 2022, we published our first ESG Report, which describes the measurement of our greenhouse gas emissions for 2021 and our efforts to achieve carbon neutrality. In addition, our ESG Report provides highlights of how we are supporting our global workforce and our governance practices. Our disclosures on these matters, or a failure to meet evolving stakeholder expectations for ESG practices and reporting, may potentially harm our reputation and customer relationships. Due to new regulatory standards and market standards, certain new or existing customers, particularly those in the European Union, may impose stricter ESG guidelines or mandates for, and may scrutinize relationships more closely with, their counterparties, including us, which may lengthen sales cycles or increase our costs. In addition, in the event that we communicate certain initiatives or goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees and other stakeholders or our initiatives are not executed as planned, our business, financial condition, results of operations, and prospects could be adversely affected. 35 35 Table of Contents Table of Contents Table of Contents **Current (2025):** There is an increasing focus from certain investors, customers, employees, and other stakeholders concerning environmental, social and governance matters, or ESG. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to ESG are inadequate. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies. As ESG best practices and reporting standards continue to develop, we may incur increasing costs relating to ESG monitoring and reporting and complying with ESG initiatives. For example, proposed or adopted climate and other ESG reporting regulations from the SEC, California, the European Union, the United Kingdom and other jurisdictions may increase our compliance costs. We may also face greater costs to comply with new ESG standards or initiatives in the European Union. Since 2022, we have published an annual ESG Report, which describes the measurement of our greenhouse gas emissions and our efforts to achieve carbon neutrality. In addition, our ESG Report provides highlights of how we are supporting our global workforce and our governance practices. Our disclosures on these matters, or a failure to meet evolving stakeholder expectations for ESG practices and reporting, may potentially harm our reputation and customer relationships. Due to new regulatory standards and market standards, certain new or existing customers, particularly those in the European Union, may impose stricter ESG guidelines or mandates for, and may scrutinize relationships more closely with, their counterparties, including us, which may lengthen sales cycles or increase our costs. In addition, in the event that we communicate certain initiatives or goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees and other stakeholders or our initiatives are not executed as planned, our business, financial condition, results of operations, and prospects could be adversely affected. At the same time, anti-ESG sentiment has gained momentum among certain groups in the United States, and the federal and state governments have enacted or proposed "anti-ESG" policies. In addition, the U.S. Supreme Court's ruling striking down race-based affirmative action in higher education has increased scrutiny of private sector employment practices, and activist groups and state attorneys general have begun to analogize the outcome of that case to private employment matters, asserting that certain corporate practices are discriminatory and unlawful. Such anti-ESG related policies, legislation, initiatives and scrutiny could expose us to the risk of litigation or result in legal costs and reputational harm. 37 37 37 Table of Contents Table of Contents Table of Contents Further, we may experience backlash from customers, government entities, employees, or other stakeholders who disagree with our actual or perceived positions, or with our lack of position on social, environmental, governance, political, public policy, or other sensitive issues. --- ## Modified: If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected. **Key changes:** - Reworded sentence: "We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in "Note 2 - Basis of Presentation and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in this Annual Report." - Added sentence: "61 61 61 Table of Contents Table of Contents Table of Contents" **Prior (2024):** The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this Annual Report. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates." The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve revenue recognition, deferred contract acquisition costs, and the valuation of our stock-based compensation awards, among others. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock. **Current (2025):** The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this Annual Report. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in "Note 2 - Basis of Presentation and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in this Annual Report. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock. 61 61 61 Table of Contents Table of Contents Table of Contents --- ## Modified: If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or to changing customer needs, requirements, or preferences, our offerings may become less competitive. **Key changes:** - Reworded sentence: "Our ability to attract new users and customers and increase revenue from existing customers depends in large part on our ability to enhance, improve, and differentiate our existing offerings, increase adoption and usage of our offerings, and introduce new offerings and capabilities." - Reworded sentence: "Because the market for our offerings is relatively new, it is difficult to predict customer adoption, increased customer usage and demand for our offerings, the size and growth rate of this market, the entry of competitive products, or the success of existing competitive products." - Reworded sentence: "For instance, with the increasing prominence of new technology like artificial intelligence, we may be required to commit significant resources to developing new products, capabilities and features." - Reworded sentence: "Any failure of our offerings to operate effectively with widely adopted, future data infrastructure platforms, applications, and technologies would reduce the demand for our offerings." - Reworded sentence: "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." **Prior (2024):** Our ability to attract new users and customers and increase revenue from existing customers depends in large part on our ability to enhance, improve, and differentiate our existing offering, increase adoption and usage of our offering, and introduce new offerings and capabilities. The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Because the market for our offerings is relatively new, it is difficult to predict customer adoption, increased customer usage and demand for our offering, the size and growth rate of this market, the entry of competitive products, or the success of existing competitive products. If we are unable to enhance our offering and keep pace with rapid technological change, or if new technologies emerge that are able to deliver competitive products at lower prices, more efficiently, more conveniently or more securely than our offering, our business, financial condition, and results of operations could be adversely affected. 30 30 Table of Contents Table of Contents Table of Contents To remain competitive, we need to continuously modify and enhance our offering to adapt to changes and innovation in existing and new technologies. We expect that we will need to continue to differentiate our data-in-motion platform capabilities, as well as expand and enhance our platform to support a variety of adjacent use cases. This development effort will require significant engineering, sales, and marketing resources. Any failure to effectively offer solutions for these adjacent use cases could reduce customer demand for our offering. Further, our offering must also integrate with a variety of network, hardware, mobile, cloud, and software platforms and technologies, and we need to continuously modify and enhance our offering to adapt to changes and innovation in these technologies. This development effort may require significant investment in engineering, support, marketing, and sales resources, all of which would affect our business and results of operations. Any failure of our offering to operate effectively with widely adopted, future data infrastructure platforms, applications, and technologies would reduce the demand for our offering. In addition, the landscape of data and infrastructure will be impacted by the adoption of artificial intelligence in ways that are currently unforeseeable and that could have significant risks and opportunities for our business. If we are unable to respond to evolving customer needs, requirements, or preferences in a cost-effective manner, our offering may become less marketable and less competitive or obsolete, and our business, financial condition, and results of operations could be adversely affected. **Current (2025):** Our ability to attract new users and customers and increase revenue from existing customers depends in large part on our ability to enhance, improve, and differentiate our existing offerings, increase adoption and usage of our offerings, and introduce new offerings and capabilities. The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Because the market for our offerings is relatively new, it is difficult to predict customer adoption, increased customer usage and demand for our offerings, the size and growth rate of this market, the entry of competitive products, or the success of existing competitive products. If we are unable to enhance our offerings and keep pace with rapid technological change, or if new technologies emerge that are able to deliver competitive products at lower prices, more efficiently, more conveniently or more securely than our offerings, our business, financial condition, and results of operations could be adversely affected. To remain competitive, we need to continuously modify and enhance our offerings to adapt to changes and innovation in existing and new technologies. We expect that we will need to continue to differentiate our Data Streaming Platform capabilities, as well as expand and enhance our platform to support a variety of adjacent use cases. This development effort will require significant engineering, sales, and marketing resources. For instance, with the increasing prominence of new technology like artificial intelligence, we may be required to commit significant resources to developing new products, capabilities and features. Customer adoption of our products, capabilities, or features may also lag our investments as customers scrutinize their spend relating to these technologies. Any failure to effectively offer solutions for these adjacent use cases could reduce customer demand for our offerings. Further, our offerings must also integrate with a variety of network, hardware, mobile, cloud, and software platforms and technologies, and we need to continuously modify and enhance our offerings to adapt to changes and innovation in these technologies. This development effort may require significant investment in engineering, support, marketing, and sales resources, all of which would affect our business and results of operations. Any failure of our offerings to operate effectively with widely adopted, future data infrastructure platforms, applications, and technologies would reduce the demand for our offerings. In addition, the landscape of data and infrastructure will be impacted by the adoption of artificial intelligence in ways that are currently unforeseeable and that could have significant risks and opportunities for our business. 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 33 33 Table of Contents Table of Contents Table of Contents --- ## Modified: 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. **Key changes:** - Reworded sentence: "In the ordinary course of our business, we and the third parties with whom we work process sensitive data, which includes personal information and our or our customers' or other third parties' sensitive, proprietary, and confidential information." - Reworded sentence: "We have also experienced, and may in the future experience, inadvertent disclosures of confidential information, including source code, caused by accidental actions or inactions by personnel who have authorized access to our systems and the systems of third-party repositories of such information." - Reworded sentence: "During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services." - Reworded sentence: "Cybercrime and hacking techniques are constantly evolving, and we or third parties with whom we work may be unable to anticipate attempted security breaches, react in a timely manner, or implement adequate preventative measures, particularly given increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or obfuscate forensic artifacts." - Reworded sentence: "We and our third-party providers have been and may in the future be compromised by the aforementioned or similar threats, which have resulted and may in the future result in unauthorized, unlawful, or accidental processing of our information, or vulnerabilities in the products or systems upon which we rely." **Prior (2024):** In the ordinary course of our business, we and the third parties upon which we rely, may process sensitive data, which may include personal information and our or our customers' or other third parties' sensitive, proprietary, and confidential information. As a result, we and the third parties upon which we rely, face a variety of evolving threats, which could cause security incidents. Security incidents that compromise the confidentiality, integrity, and availability of this information could result from cyber-attacks, computer viruses (such as worms, spyware, or other malware), social engineering (including phishing), ransomware, supply chain attacks, denial of service attacks, credential harvesting or stuffing, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, including personnel who have authorized access to our systems and/or information, and security vulnerabilities in the software or systems on which we rely, including third-party systems. In particular, severe ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of information and income, reputational harm, and diversion of funds. We have also experienced, and may in the future experience, cybersecurity incidents resulting in inadvertent disclosures of confidential information, including source code, caused by accidental actions or inactions by personnel who have authorized access to our systems and the systems of third-party repositories of such information. If our personnel access authorization policies and processes for our systems and/or information are too permissive, we may experience additional security incidents due to errors or malfeasance from our personnel, customer dissatisfaction, or increase the risk of third-party breaches or cyber-attacks. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Some threat actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services. Additionally, certain functional areas of our workforce remain in a remote work environment and outside of our corporate network security protection boundaries, which imposes additional risks to our business, including increased risk of industrial espionage, phishing, and other cybersecurity attacks, including those that are state-sponsored or politically motivated, and unauthorized access to or dissemination of sensitive, proprietary, or confidential information. Future acquisitions could also expose us to additional cybersecurity risks and vulnerabilities from any newly acquired information technology infrastructure. In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations. We rely on third parties to operate our critical business systems and process the sensitive, proprietary, and confidential information that we own, process, or control, including customer information and proprietary data and information, including source code. Our ability to monitor these third parties' information security practices is limited, and these third parties may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their data privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties' infrastructure in our supply chain or our third-party partners' supply chains have not been compromised. 36 36 Table of Contents Table of Contents Table of Contents Cybercrime and hacking techniques are constantly evolving, and we or third parties who we work with may be unable to anticipate attempted security breaches, react in a timely manner, or implement adequate preventative measures, particularly given increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or obfuscate forensic artifacts. These risks are likely to increase as we continue to grow and process, control, store, and transmit increasingly large amounts of data. While we have taken steps designed to protect the confidentiality, integrity, and availability of our systems and the sensitive, proprietary, and confidential information that we own, process, or control, our security measures or those of our third-party vendors may not be able to anticipate or implement effective preventive and remedial measures against all data privacy and security threats. No security solution, strategy, or measures can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident. For example, we and our third-party providers have been and may in the future be compromised by the aforementioned or similar threats, and result in unauthorized, unlawful, or accidental processing of our information, or vulnerabilities in the products or systems upon which we rely. For example, beginning in January 2021, a malicious third party gained unauthorized access to a third-party vendor, Codecov, that provides a software code testing tool, potentially affecting more than a thousand of Codecov's customers, or Codecov Breach. In April 2021, we were notified that we had been impacted by the Codecov Breach. Through our investigations, we determined that the attackers leveraged a vulnerability in Codecov's software to gain access to credentials in our development environment, and thereby obtained unauthorized read-only access to, and copied to overseas IP addresses, the private Github repositories containing our source code and certain internal-use documents containing references to certain customers and other customer-related attributes. Upon learning of the breach, we took action to revoke Codecov's access and discontinued our use of the Codecov service, rotated all of our credentials identified as exposed by the Codecov Breach to prevent further unauthorized access, enhanced monitoring of our environment, and engaged a third-party forensics firm to assist in our investigation, response, and impact mitigation. We did not find any evidence of access to any customer data sent through or stored in our products, nor did we find any evidence that the attackers modified any of our source code or uploaded any malware or any other malicious code to our system. However, the full extent of the impact of this incident on our operations, products, or services may not be known for some time, and we cannot assure you that there will be no further impact in the future. This incident or any future incidents relating to the Codecov Breach could result in the use of exfiltrated source code to attempt to identify vulnerabilities in our offering, future ransomware or social engineering attacks, reduced market acceptance of our offering, injury to our reputation and brand, legal claims against us, and the diversion of our resources. In addition, we do not control the content that our customers transmit, process, and maintain using our offering. If our customers use our offering 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. If we, or a third party upon whom we rely, 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 offering, 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. We cannot assure you that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from such liabilities or damages. Applicable data privacy and security obligations may also require us to notify relevant stakeholders of security incidents. Such notifications are costly, and the notifications or the failure to comply with such requirements could lead to material adverse impacts such as negative publicity, loss of customer confidence in our services or security measures, investigations, and private or government claims. 37 37 Table of Contents Table of Contents Table of Contents In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive information of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees', personnel's, or vendors' use of GenAI, technologies. 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. Any of these results could adversely affect our business, financial condition, and results of operations. **Current (2025):** In the ordinary course of our business, we and the third parties with whom we work process sensitive data, which includes personal information and our or our customers' or other third parties' sensitive, proprietary, and confidential information. As a result, we and the third parties with whom we work face a variety of evolving threats that have in the past and could in the future cause security incidents. Security incidents that compromise the confidentiality, integrity, and availability of this information could result from cyber-attacks, computer viruses (such as worms, spyware, or other malware), social engineering (including phishing), ransomware, supply chain attacks, denial of service attacks, credential harvesting or stuffing, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, including personnel who have authorized access to our systems and/or information, and security vulnerabilities in the software or systems on which we rely, including third-party systems. In particular, severe ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of information and income, reputational harm, and diversion of funds. We have also experienced, and may in the future experience, inadvertent disclosures of confidential information, including source code, caused by accidental actions or inactions by personnel who have authorized access to our systems and the systems of third-party repositories of such information. If our personnel access authorization policies and processes for our systems and/or information are too permissive or if we do not implement adequate safeguards or controls in our information systems environments, we may experience additional security incidents due to errors or malfeasance from our personnel, customer dissatisfaction, loss of our proprietary and confidential information, or an increased risk of third-party breaches or cyber-attacks. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Some threat actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services. We face unique threats and vulnerabilities as a data streaming software company, including but not limited to, adverse consequences resulting from any vulnerabilities in our offerings and customer misuse of our offerings. The reliability and continuous availability of our offerings are critical to our success. We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Even if we have issued or otherwise made patches or information for vulnerabilities in our software applications, products or services, our customers may be unwilling or unable to deploy such patches and use such information effectively and in a timely manner. Vulnerabilities could be exploited and result in a security incident. 38 38 38 Table of Contents Table of Contents Table of Contents Additionally, certain functional areas of our workforce remain in a remote work environment and outside of our corporate network security protection boundaries, which imposes additional risks to our business, including increased risk of industrial espionage, phishing, and other cybersecurity attacks, including those that are state-sponsored or politically motivated, and unauthorized access to or dissemination of sensitive, proprietary, or confidential information. Future acquisitions could also expose us to additional cybersecurity risks and vulnerabilities from any newly acquired information technology infrastructure. In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations. We rely on third parties to operate our critical business systems and process the sensitive, proprietary, and confidential information that we own, process, or control, including customer information and proprietary data and information, including source code. Our ability to monitor these third parties' information security practices is limited, and these third parties may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their data privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties' infrastructure in our supply chain or our third-party partners' supply chains have not been compromised. Cybercrime and hacking techniques are constantly evolving, and we or third parties with whom we work may be unable to anticipate attempted security breaches, react in a timely manner, or implement adequate preventative measures, particularly given increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or obfuscate forensic artifacts. These risks are likely to increase as we continue to grow and process, control, store, and transmit increasingly large amounts of data. While we have taken steps designed to protect the confidentiality, integrity, and availability of our systems and the sensitive, proprietary, and confidential information that we own, process, or control, our security measures or those of our third-party vendors may not be able to anticipate or implement effective preventive and remedial measures against all data privacy and security threats. No security solution, strategy, or measures can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident. We and our third-party providers have been and may in the future be compromised by the aforementioned or similar threats, which have resulted and may in the future result in unauthorized, unlawful, or accidental processing of our information, or vulnerabilities in the products or systems upon which we rely. 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. We employ a shared responsibility model where our customers are responsible for using, configuring and otherwise implementing security measures related to our platform, services and products in a manner that meets applicable cybersecurity standards, complies with laws, and addresses their information security risk. As part of this shared responsibility security model, we make certain security features available to our customers that can be implemented at our customers' discretion, or identify security areas or measures for which our customers are responsible. For example, customers have options on how they wish to authenticate their user identity to Confluent Cloud, including options such as local accounts or implementing SSO. Customers can choose their preferred method which allows them flexibility in their implementation. 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 39 39 Table of Contents Table of Contents 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. We cannot assure you that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from such liabilities or damages. Applicable data privacy and security obligations may also require us to notify relevant stakeholders of security incidents. Such notifications are costly, and the notifications or the failure to comply with such requirements could lead to material adverse impacts such as negative publicity, loss of customer confidence in our services or security measures, investigations, and private or government claims. In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive information of Confluent or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees', personnel's, or vendors' use of GenAI technologies. 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. Any of these results could adversely affect our business, financial condition, and results of operations. --- ## Modified: The competitive position of our offerings depends in part on their ability to operate with third-party products and services, including those of our partners, and if we are not successful in maintaining and expanding the compatibility of our offerings with such products and services, our business may be harmed. **Key changes:** - Reworded sentence: "The competitive position of our offerings depends in part on their ability to operate with products and services of third parties, including software companies, software services, and infrastructure, and our offerings must be continuously modified and enhanced to adapt to changes in hardware, software, networking, browser, and database technologies." - Removed sentence: "31 31 Table of Contents Table of Contents Table of Contents" **Prior (2024):** The competitive position of our offering depends in part on its ability to operate with products and services of third parties, including software companies, software services, and infrastructure, and our offering must be continuously modified and enhanced to adapt to changes in hardware, software, networking, browser, and database technologies. In the future, one or more technology companies, whether our partners or otherwise, may choose not to support the operation of their software, software services, and infrastructure with our offering, or our offering may not support the capabilities needed to operate with such software, software services, and infrastructure. In addition, to the extent that a third party were to develop software or services that compete with ours, that provider may choose not to support our offering. We intend to facilitate the compatibility of our offering with various third-party software, software services, and infrastructure offerings by maintaining and expanding our business and technical relationships. If we are not successful in achieving this goal, our business, financial condition, and results of operations may be harmed. 31 31 Table of Contents Table of Contents Table of Contents **Current (2025):** The competitive position of our offerings depends in part on their ability to operate with products and services of third parties, including software companies, software services, and infrastructure, and our offerings must be continuously modified and enhanced to adapt to changes in hardware, software, networking, browser, and database technologies. In the future, one or more technology companies, whether our partners or otherwise, may choose not to support the operation of their software, software services, and infrastructure with our offerings, or our offerings may not support the capabilities needed to operate with such software, software services, and infrastructure. In addition, to the extent that a third party were to develop software or services that compete with ours, that provider may choose not to support our offerings. We intend to facilitate the compatibility of our offerings with various third-party software, software services, and infrastructure offerings by maintaining and expanding our business and technical relationships. If we are not successful in achieving this goal, our business, financial condition, and results of operations may be harmed. --- ## Modified: The market for our offerings may develop more slowly or differently than we expect. **Key changes:** - Reworded sentence: "It is difficult to predict customer adoption rates, consumption, and demand for our offerings, the entry of competitive products or the future growth rate and size of the data infrastructure market." - Reworded sentence: "If we have a security incident or third-party cloud service providers experience security incidents, loss of customer data, disruptions in delivery or other similar problems, which is an increasing focus of the public and investors in recent years, the market for products as a whole, including our offerings, may be negatively affected." **Prior (2024):** It is difficult to predict customer adoption rates, consumption, and demand for our offering, the entry of competitive products or the future growth rate and size of the data infrastructure market. The expansion of this market depends on a number of factors, including the cost, performance, and perceived value associated with data infrastructure platforms as an alternative or supplement to legacy systems such as traditional databases, as well as the ability of platforms for data in motion to address heightened data privacy and security concerns. If we have a security incident or third-party cloud service providers experience security incidents, loss of customer data, disruptions in delivery or other similar problems, which is an increasing focus of the public and investors in recent years, the market for products as a whole, including our offering, may be negatively affected. In addition, many of our potential customers have made significant investments in alternative data infrastructure platforms and may be unwilling to invest in new products, such as our offering. 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, weakening economic conditions, data privacy and security concerns, governmental regulation, competing technologies and products, decreases in information technology spending or otherwise, the market for our offering 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. **Current (2025):** It is difficult to predict customer adoption rates, consumption, and demand for our offerings, the entry of competitive products or the future growth rate and size of the data infrastructure market. The expansion of this market depends on a number of factors, including the cost, performance, and perceived value associated with data infrastructure platforms as an alternative or supplement to legacy systems such as traditional databases, as well as the ability of platforms for data in motion to address heightened data privacy and security concerns. If we have a security incident or third-party cloud service providers experience security incidents, loss of customer data, disruptions in delivery or other similar problems, which is an increasing focus of the public and investors in recent years, the market for products as a whole, including our offerings, may be negatively affected. In addition, many of our potential customers have made significant investments in alternative data infrastructure platforms and may be unwilling to invest in new products, such as our offerings. 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. Additionally, while the adoption of generative AI and event-driven autonomous agents may drive future growth in our business, particularly with respect to our Data Streaming Platform capabilities, worldwide markets for generative AI applications may not develop in the manner we anticipate, or at all. In addition, because the markets for generative AI applications are still emerging, demand for our offerings in these markets may be unpredictable. --- ## Modified: 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. **Key changes:** - Reworded sentence: "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." - Reworded sentence: "26 26 26 Table of Contents Table of Contents Table of Contents We also have limited experience marketing and selling our DSP capabilities and our BYOC offering." - Reworded sentence: "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." - Reworded sentence: "27 27 27 Table of Contents Table of Contents Table of Contents" **Prior (2024):** We intend to continue investing significantly in developing and growing Confluent Cloud as a fully-managed, cloud-native service. We have less experience marketing, determining pricing for, and selling Confluent Cloud. As a result, our shifts in sales strategy focused on customer acquisition for Confluent Cloud and a consumption-oriented sales model could 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. Our sales strategy for Confluent Cloud also involves landing customers at low entry points, including starting with our free Confluent Cloud trial and pay-as-you-go, which have no commitments. There can be no assurance that such customers will enter into commitments with us, expand their existing commitments, or ramp their usage of Confluent Cloud, even following our shift in our sales strategy to a consumption-oriented model. In addition, there can be no assurance as to the length of time required to attain substantial market adoption of Confluent Cloud, if at all. 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 near-term plan to accelerate our planned shift toward a consumption-oriented sales model for Confluent Cloud. The success of this planned shift will depend on, among other things, alignment of and effective execution by our sales organization, timely release of features in our product roadmaps as well as their market acceptance, effective pricing of our offering, and managing expected reductions in commitments for Confluent Cloud. We also believe certain customers are reluctant to make large and long-term commitments for Confluent Cloud, which has led to historical misalignment between our focus on upfront commitments and customer preferences. Growth of Confluent Cloud consumption may be harmed if we do not manage these factors effectively in shifting our sales model to be oriented toward consumption. Our business and growth will also be negatively impacted if we do not experience the expected benefits from the shift toward a consumption-oriented sales model during or following its implementation, including if we continue experiencing headwinds on consumption, use case expansion or adoption of Confluent Cloud due to other factors. To expand usage of and our potential customer and sales pipeline for Confluent Cloud, we will need to increase brand awareness, successfully demonstrate the value of Confluent Cloud over alternatives, including open source alternatives, 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 increase market adoption and expand the customer base for Confluent Cloud, we have also been targeting the commercial customer segment, comprised of small to medium-sized companies, including early-stage companies, as part of our overall sales and marketing strategy for Confluent Cloud. These customers typically demand faster deployment of Confluent Cloud within their organizations and prioritize ease of use. In addition, the sales cycle for these customers is typically shorter, requiring accelerated ramp time of our sales force and higher velocity marketing strategies. 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 planned shift to a consumption-oriented model for our sales motion. Reduced consumption by, or the loss or expected loss of, customers has historically negatively impacted and may continue to negatively impact our growth, business, results of operations, and financial condition. 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. 24 24 Table of Contents Table of Contents Table of Contents **Current (2025):** We intend to continue investing significantly in developing and growing Confluent Cloud as a fully-managed, cloud-native service. We have less experience marketing, determining pricing for, and selling Confluent Cloud. 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. 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. There can be no assurance that such free users will enter into commitments with us, or that customers will expand their existing commitments or ramp their usage of Confluent Cloud, even following our shift in our sales strategy to a consumption-oriented model. In addition, there can be no assurance as to the length of time required to attain substantial market adoption of Confluent Cloud, if at all. 26 26 26 Table of Contents Table of Contents Table of Contents We also have limited experience marketing and selling our DSP capabilities and our BYOC offering. We expect our future growth to depend substantially on continued customer adoption and use of these capabilities and offerings, including as we continue to introduce additional features, functionalities, and use cases for such capabilities and offerings. In particular, the growth in adoption and usage of such capabilities and offerings will depend on, among other things, our ability to increase their market acceptance, improve customer understanding of their full benefits and potential uses cases, cost-effectively manage customers' adoption and usage journey, including managing customer optimization, and ensure customers realize benefits in total cost of ownership relating to these capabilities and offerings. We may experience fluctuations in our growth from time to time due to these and other factors impacting the adoption and usage of our DSP capabilities and BYOC offering. 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. Additionally, due in part to our shift to a consumption-oriented sales model, new customers acquired in 2024 tended to have lower initial consumption, which negatively impacted and may continue to negatively impact our revenue, growth rates, consumption forecasts, and results of operations. The ongoing success of this shift will depend on, among other things, alignment of and effective execution by our sales organization, timely release of features in our product roadmaps as well as their market acceptance, effective pricing of our offerings, and managing expected reductions in commitments for Confluent Cloud. We also believe certain customers are reluctant to make large and long-term commitments for Confluent Cloud, which has led to historical misalignment between our focus on upfront commitments and customer preferences and was a factor in the shift in our sales strategy to a consumption-oriented sales model. Growth of Confluent Cloud consumption may be harmed if we do not manage these factors effectively following the shift of our sales model to be oriented toward consumption. Our business and growth will also be negatively impacted if we do not experience the expected benefits from our shift to a consumption-oriented sales model following its implementation, including if we continue experiencing headwinds on consumption, use case expansion or adoption of Confluent Cloud due to other factors. 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. Continuing consumption volatility, including due to customer focus on cloud cost controls and increased efficiency, and our efforts in response will likely result in reduced consumption expansion over the near term. We target small to medium-sized companies, including early-stage companies, as part of our overall sales and marketing strategy for Confluent Cloud. These customers typically demand faster deployment of Confluent Cloud within their organizations and prioritize ease of use. In addition, the sales cycle for these customers is typically shorter, requiring accelerated ramp time of our sales force and higher velocity marketing strategies. 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. 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. 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. 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 27 27 Table of Contents Table of Contents Table of Contents --- ## Modified: 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. **Key changes:** - Reworded sentence: "We have limited experience with respect to determining the optimal prices for our offerings, and, in particular, we have limited experience pricing our offerings under economic conditions characterized by high inflation or in recessionary or uncertain economic environments." - Reworded sentence: "We also expect to continue providing additional features and functionality for our offerings as we work toward expanding applications and use cases for our offerings, which will require us to continuously evaluate optimal pricing for our offerings." - Reworded sentence: "As a result, we have been, and may in the future be, required to reduce our prices or increase our discounting, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow." **Prior (2024):** We have limited experience with respect to determining the optimal prices for our offering, and, in particular, we have limited experience pricing our offering under economic conditions characterized by high inflation or in recessionary or uncertain economic environments. We have changed our pricing model from time to time and expect to continue to do so in the future. For example, in late 2019, we transitioned the primary purchase model for Confluent Cloud from a defined configuration paid annually in advance to a model based on actual monthly usage and committed annual spend. We also expect to continue providing additional features and functionality for our offering as we work toward expanding applications and use cases for our offering, which will require us to continuously evaluate optimal pricing for our offering. If we do not optimally adjust pricing for our offering, our revenue and margins as well as future customer acquisitions may be negatively impacted. As the markets for our offering mature, as macroeconomic conditions evolve, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or on the same terms. Moreover, enterprise customers may demand greater price concessions, or we may be unable to increase prices to offset increases in costs, including hosting costs associated with Confluent Cloud and increases related to inflationary pressures. However, our historical data and operating experience may be insufficient to adequately inform our future pricing strategies for changing market environments. As a result, in the future we may be required to reduce our prices or increase our discounting, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow. 43 43 Table of Contents Table of Contents Table of Contents **Current (2025):** We have limited experience with respect to determining the optimal prices for our offerings, and, in particular, we have limited experience pricing our offerings under economic conditions characterized by high inflation or in recessionary or uncertain economic environments. We have changed our pricing model from time to time and expect to continue to do so in the future. We also expect to continue providing additional features and functionality for our offerings as we work toward expanding applications and use cases for our offerings, which will require us to continuously evaluate optimal pricing for our offerings. If we do not optimally adjust pricing for our offerings, our revenue and margins as well as future customer acquisitions may be negatively impacted. As the markets for our offerings mature, as macroeconomic conditions evolve, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or on the same terms. Moreover, enterprise customers may demand greater price concessions, or we may be unable to increase prices to offset increases in costs, including hosting costs associated with Confluent Cloud and increases related to inflationary pressures. However, our historical data and operating experience may be insufficient to adequately inform our future pricing strategies for changing market environments. As a result, we have been, and may in the future be, required to reduce our prices or increase our discounting, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow. --- ## Modified: 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. **Key changes:** - Reworded sentence: "We derive and expect to continue to derive substantially all of our revenue from sales of, and additional services related to, our offerings." **Prior (2024):** We derive and expect to continue to derive substantially all of our revenue from sales of, and additional services related to, our data-in-motion offering. We have directed, and intend to continue to direct, a significant portion of our financial and operating resources to developing more features and functionality for such offering. Our growth will depend in large part on enabling additional use cases for our customers after they initially adopt our offering, ranging from industry-specific use cases, including generative AI ("GenAI") use cases, to use cases generated by the network effects of connecting multiple applications within an enterprise. In addition, the success of our business is substantially dependent on the actual and perceived viability, benefits, and advantages of our offering as a preferred data streaming platform, particularly when compared to open source alternatives developed internally by customers. As such, market adoption of our offering is critical to our continued success. Demand for our offering has been and will continue to be affected by a number of factors, including market acceptance of our offering, customers' perception of the value of our offering compared to alternatives, including open source alternatives, use case expansion by existing customers and potential new customers, effectiveness of our sales and marketing strategy and team, the extension of our offering to new applications and use cases, the timing of development and release of new offerings by us and our competitors, technological change, growth or contraction of the market in which we compete, customers optimizing consumption and prioritizing cash flow management, and customer information technology spending budgets, which may be reduced during periods of high inflation or in recessionary or uncertain economic environments and may be impacted by geopolitical events such as the ongoing conflicts around the world. Failure to successfully address these factors, satisfy customer demands, achieve continued market acceptance over competitors, including open source alternatives, and achieve growth in sales of our offering would harm our business, results of operations, financial condition, and growth prospects. **Current (2025):** We derive and expect to continue to derive substantially all of our revenue from sales of, and additional services related to, our offerings. We have directed, and intend to continue to direct, a significant portion of our financial and operating resources to developing more features and functionality for our Data Streaming Platform, which delivers four key capabilities, stream, connect, process, and govern, that reinforce each other to create a comprehensive platform for data in motion. For example, we acquired WarpStream Labs, Inc., or WarpStream, in September 2024, a bring-your-own-cloud, or BYOC, managed service offering where the raw data resides inside a customer's own cloud environment. Our growth will depend in large part on enabling additional use cases for our customers after they initially adopt our offerings, ranging from industry-specific use cases, including generative AI, or GenAI, use cases, to use cases generated by the network effects of connecting multiple applications within an enterprise. While we have recently expanded on the capabilities of our Data Streaming Platform, enabling customers to stream, connect, process, and govern their data, our future growth is dependent on continued customer expansion of these and additional capabilities and use cases for our Data Streaming Platform. In addition, the success of our business is substantially dependent on the actual and perceived viability, benefits, and advantages of our offerings as a preferred data streaming platform, particularly when compared to open source alternatives developed internally by customers. As such, market adoption of our offerings is critical to our continued success. Demand for our offerings has been and will continue to be affected by a number of factors, including market acceptance of our offerings, customers' perception of the value of our offerings compared to alternatives, including open source alternatives, customers' understanding of the potential benefits and cost impacts from our Data Streaming Platform and related features and functionalities, use case expansion by existing customers and potential new customers, effectiveness of our sales and marketing strategy and team, the extension of our offerings to new applications and use cases, the timing of development and release of new offerings by us and our competitors, technological change, growth or contraction of the market in which we compete, customers focusing on cloud cost efficiencies and prioritizing cash flow management, and customer information technology spending budgets, which may be reduced during periods of high inflation or in recessionary or uncertain economic environments and may be impacted by geopolitical events such as the ongoing conflicts around the world. Failure to successfully address these factors, satisfy customer demands, achieve continued market acceptance over competitors, including open source alternatives, and achieve growth in sales of our offerings would harm our business, results of operations, financial condition, and growth prospects. --- ## Modified: Seasonality may cause fluctuations in our sales and results of operations. **Key changes:** - Reworded sentence: "Historically, we have experienced seasonality in new customer bookings, as we typically sell a higher percentage of subscriptions to new customers and renewal subscriptions with existing customers in the fourth quarter of the year." - Reworded sentence: "We expect that this seasonality will continue to affect our bookings and results of operations in the future and might become more pronounced as we continue to target larger enterprise customers." **Prior (2024):** Historically, we have experienced seasonality in RPO and new customer bookings, as we typically sell a higher percentage of subscriptions to new customers and renewal subscriptions with existing customers in the fourth quarter of the year. We believe that this results from the procurement, budgeting and deployment cycles of many of our customers, particularly our enterprise customers. We expect that this seasonality will continue to affect our bookings, RPO, and results of operations in the future and might become more pronounced as we continue to target larger enterprise customers. 32 32 Table of Contents Table of Contents Table of Contents **Current (2025):** Historically, we have experienced seasonality in new customer bookings, as we typically sell a higher percentage of subscriptions to new customers and renewal subscriptions with existing customers in the fourth quarter of the year. We believe that this results from the procurement, budgeting and deployment cycles of many of our customers, particularly our enterprise customers. We expect that this seasonality will continue to affect our bookings and results of operations in the future and might become more pronounced as we continue to target larger enterprise customers. --- *Data sourced from SEC EDGAR. Last updated 2026-05-10.*