DOMO Q2 Deep Dive: Consumption Model and Partner Strategy Drive Strategic Shift

Business intelligence platform Domo (NASDAQ:DOMO) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 1.7% year on year to $79.72 million. Its non-GAAP profit of $0.02 per share was significantly above analysts’ consensus estimates.

Is now the time to buy DOMO? Find out in our full research report (it’s free).

StockStory’s Take

Domo’s second quarter was met with a significant negative reaction from the market, despite the company reporting results above Wall Street expectations. Management attributed the disconnect to a transition period marked by a shift towards a consumption-based pricing model and increased partner engagement, which has yet to fully translate into accelerated growth. CEO Josh James emphasized that the company’s pivot to strategic partnerships with cloud data warehouse providers and a focus on consumption contracts are driving stronger customer engagement and improved net retention rates. He noted, “Our turnaround is visible in multiple areas over the past year,” highlighting accelerated new annual contract value (ACV) growth and increased sales productivity, but also recognized that the impact on reported financials is still in its early stages.

Looking forward, Domo’s management is focused on deepening its partnerships with major cloud vendors and further expanding its AI-driven platform capabilities. The company believes these efforts will accelerate growth as more customers adopt multi-year consumption contracts and leverage Domo’s integration with platforms like Snowflake and Google BigQuery. CFO Tod Crane stated, “We expect gross retention to remain at a similar level in Q3 and to increase meaningfully in Q4.” Management also highlighted upcoming investments in partner events and technology integration, which are expected to temporarily pressure margins but lay the groundwork for long-term growth as the business continues its transition to a partner-led, consumption-based model.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to a renewed emphasis on ecosystem partnerships, a shift to consumption-based pricing, and targeted investments in AI solutions, which are beginning to unlock new business opportunities and customer segments.

• Ecosystem partnerships expanded: Domo deepened integrations with major cloud data warehouse partners, including Snowflake, Databricks, Oracle, and Google, leading to new joint selling opportunities and higher pipeline conversion rates.
• Consumption model transformation: Over 75% of annual recurring revenue (ARR) now comes from consumption-based contracts, enabling broader customer adoption and higher net retention rates compared to seat-based models.
• International strength in Japan: Japan delivered near-record new ACV and total contract value (TCV), with net revenue retention (NRR) close to 130% in renewal deals, positioning the region as a standout performer.
• AI solutions drive customer wins: Demand for advanced AI-powered analytics and workflow automation led to competitive takeaways and upsells, particularly with enterprise customers seeking to modernize their business intelligence capabilities.
• Operational discipline supports margins: Focused cost management and strategic investments in R&D and go-to-market teams contributed to improved operating margins and the company’s first positive non-GAAP EPS, signaling early progress in the company’s turnaround.

Drivers of Future Performance

Domo expects continued growth to be driven by expansion of its partner ecosystem, adoption of AI-powered solutions, and further penetration of its consumption-based pricing model.

• Broader partner integration: Management anticipates that ongoing collaboration with cloud data warehouse and hyperscaler partners will drive higher customer acquisition and retention, as more deals are sourced and closed through these channels.
• AI-driven product enhancements: The company’s investments in AI and agentic solutions are expected to accelerate platform adoption, particularly as customers seek to automate workflows and gain deeper business insights from their data.
• Margin and retention improvements: While near-term investments in partner events may pressure margins, management expects long-term tailwinds from higher gross retention, increased multi-year contracts, and stable or expanding subscription margins as the consumption model matures.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be closely monitoring (1) the pace at which pipeline opportunities from cloud data warehouse partners convert to revenue, (2) sustained improvements in customer retention and expansion driven by the consumption model, and (3) the impact of AI-driven enhancements on customer adoption and multi-year deal growth. Execution on these priorities will be critical to tracking Domo’s ongoing transformation.

Domo currently trades at $15.60, down from $17.56 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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