BASE Q1 Earnings Call: Capella Migrations Drive Growth, Near-Term Revenue Lags Expectations

Database as a service company Couchbase (NASDAQ: BASE) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 10.1% year on year to $56.52 million. Its non-GAAP loss of $0.06 per share was 1.9 cents above analysts’ consensus estimates.

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StockStory’s Take

Couchbase’s first quarter results reflected the company’s ongoing shift toward its Capella database-as-a-service platform and deeper penetration within large strategic accounts. Management pointed to accelerated annual recurring revenue (ARR) growth, with CEO Matt Cain highlighting strong upsell and expansion activity: “Our pipeline of large strategic opportunities continues to grow, which in combination with our strong Q1 results reinforces my confidence in our strategy and our ability to maintain our momentum this fiscal year and beyond.” The quarter also saw continued momentum in Capella adoption, driven by customer migrations and increased credit consumption as more applications moved into production.

Looking ahead, Couchbase’s guidance reflects expectations for further Capella migrations, ongoing investment in product capabilities, and disciplined cost management. Management acknowledged that revenue growth will likely remain modest in the near term as customers transition from traditional enterprise licenses to the consumption-based Capella model, which changes how revenue is recognized. CFO Bill Carey noted, “We expect migrations as well as grown consumption to be significant drivers for us this fiscal year, along with ongoing investments in product capabilities and strengthening our partner ecosystem.” The company remains focused on achieving operating income positivity next year, while maintaining its commitment to innovation, particularly in AI and edge computing use cases.

Key Insights from Management’s Remarks

Couchbase’s management attributed first quarter results to growth in large strategic accounts, increased Capella adoption, and ongoing product enhancements tailored for developer needs.

• Strategic account expansion: The company reported notable growth within large enterprise customers, with multiple accounts deploying Couchbase solutions across tens or even hundreds of applications. Management emphasized that success is increasingly defined by becoming a core platform provider for these organizations, enabling long-term expansion opportunities.
• Capella adoption and migration: Capella, Couchbase’s cloud-based database offering, saw continued traction as more customers migrated from legacy enterprise licenses. This transition fueled higher credit consumption, especially as new and existing clients moved applications into production. Management highlighted Capella’s performance, ease of use, and scalability as key differentiators.
• Go-to-market improvements: Couchbase introduced enhancements such as a free Capella tier, credit card transactions for onboarding, and dedicated strategic account teams. These efforts were designed to lower barriers for developers and increase top-of-funnel demand, with trial volumes up significantly year over year.
• Product innovation in edge and AI: The launch of Couchbase Edge Server—an offline-first, lightweight database for edge environments—aims to support applications requiring reliable, local data access. Management also underscored ongoing investments in AI capabilities, including high-performance vector database features to power agent-based AI applications.
• Starter pack cohort dynamics: While customer count declined due to churn in the starter pack segment, management described successful ARR expansion among a subset of these customers, with some converting from small initial engagements to large, high-value accounts.

Drivers of Future Performance

Couchbase expects future performance to be shaped by continued Capella migrations, strategic account growth, and investments in AI and edge solutions.

• Capella migration and consumption: Management believes the transition of existing enterprise customers to Capella will remain a primary growth driver, though it creates short-term revenue recognition delays. As more applications reach steady-state usage, revenue and ARR are expected to converge, supporting longer-term growth.
• AI and edge computing initiatives: The company is investing in AI-related features, such as integrated vector search and agent-based workflows, and expanding its offerings for edge environments. Management views these capabilities as essential for addressing the evolving needs of application developers and differentiating Couchbase in a competitive market.
• Efficiency and profitability focus: Couchbase is prioritizing sales and marketing efficiency, operating leverage, and disciplined cost management. The company reaffirmed its aim to reach operating income positivity next year, while balancing growth investments with margin improvement.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be monitoring (1) the pace and scale of migrations to Capella and whether usage growth offsets short-term revenue headwinds, (2) customer adoption of new AI-related and edge database features, and (3) progress in expanding strategic accounts into larger multi-application deployments. The company’s ability to improve sales efficiency and profitability will also be important signposts.

Couchbase currently trades at a forward price-to-sales ratio of 4.2×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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