This article first appeared on GuruFocus.

Release Date: December 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Domo Inc (NASDAQ:DOMO) achieved positive adjusted free cash flow of $2.1 million in Q3, marking a $15.8 million improvement over the previous year.

The company reported an operating margin of 6.8%, surpassing guidance and setting a record for the highest full-year operating margin.

Domo Inc (NASDAQ:DOMO) posted positive EPS for the second consecutive quarter, indicating improved financial performance.

The transition to a consumption model has been successful, with 80% of annual recurring revenue now on consumption contracts, expected to exceed 85% by year-end.

Partnerships with cloud data warehouses have strengthened, with over 350 accounts using the Cloud Amplifier feature, doubling year over year.

Q3 billings were $73.2 million, falling short of guidance due to longer-than-expected sales cycles for partner-related deals.

The transition to a consumption model, while beneficial, has led to elongated sales cycles, impacting short-term billing expectations.

Gross margin decreased by 90 basis points year over year, primarily due to ecosystem-focused platform improvements.

The company faces challenges in maintaining high net retention rates, with ARR net retention at 95% for the fifth consecutive quarter.

There is uncertainty around the timing of gross retention improvements, partly due to longer sales cycles with cloud data warehouses.

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Q: Josh, could you elaborate on the negative billing surprise and what steps are being taken to address it? How should we gain confidence in hitting the growth rebound targets for Q4 in terms of billing? A: The ecosystem business has grown significantly, leading to longer sales cycles due to more involved deals. These deals have higher close rates and are stickier, involving CIOs and multiple vendors. We are confident in the Q4 pipeline and excited about the anticipated billing growth. The delay is a one-time shift, and we are seeing improvements in retention and new deals through ecosystem partnerships.

Q: Can you provide more details on the opportunities with CDWs around OEM and other investments? A: Partners are recognizing the value we bring to their customers, leading to discussions about OEM deals and joint market efforts. Our neutrality among big players makes us a safe choice for data integration, presenting significant opportunities. We expect to see continued improvement in relationships and potential big deals in the near future.

Q: How is the conversation around AI evolving, and how is Domo playing offense in this area? A: AI is a major focus for us, enhancing our ability to deliver for customers by simplifying processes. We are developing an agent platform to enable customers to build AI solutions. Governance is crucial, and we ensure customers have full control over their data while leveraging AI. Our efforts are recognized as leading in the industry.

Q: How much leverage are you gaining with new partners based on learnings from the Snowflake partnership? A: The experience with Snowflake has been instrumental in building out partnerships. While each partner has unique requirements, the go-to-market strategy benefits from previous learnings, leading to economies of scale and improved efficiency in partner engagements.

Q: What are the planned areas of investment for FY27, and will they be at a higher run rate than FY26? A: While there may be areas of increased investment, we are also finding efficiencies through technology and AI. We are committed to maintaining a balance between growth and profitability, aiming for 10% growth and 10% margin by the end of FY27. This approach provides comfort to investors regarding our growth strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.