Executive Summary / Key Takeaways

• Domo (NASDAQ: DOMO) is undergoing a significant strategic transformation, pivoting to a consumption-based pricing model and an ecosystem-led go-to-market approach, complemented by a strong focus on AI innovation, aiming to drive sustainable, profitable growth.
• The shift to consumption is progressing rapidly, now representing over 70% of ARR, demonstrating higher customer adoption, stickiness, and significantly better retention rates compared to traditional seat-based pricing.
• Early results from the ecosystem strategy, particularly partnerships with CDWs and SIs, show dramatically higher partner-sourced pipeline growth, conversion rates, and deal velocity, positioning Domo for accelerated new logo acquisition and stronger customer relationships.
• Domo's long-standing investment in a comprehensive data stack (connectors, ETL, governance, workflows) provides a unique foundation for delivering tangible ROI through AI agents and data products, differentiating it from competitors focused solely on visualization or basic AI features.
• While near-term financials reflect the transition and challenging macro environment (recent flat revenue, historical losses), improving operational efficiency, positive adjusted free cash flow generation, accelerating RPO growth, and increasing contract lengths signal strengthening fundamentals and confidence in achieving targeted growth and margin expansion in FY26 and FY27.

Domo's Transformation Journey: Rebuilding for a Data-Driven Future

Founded in 2010 with the ambitious vision of connecting every individual within an organization to real-time data, Domo set out to tackle the pervasive challenge of data silos and inaccessible insights. Its cloud-based platform was designed as a comprehensive solution, integrating data ingestion, preparation, analysis, visualization, and distribution, all accessible across various devices. This foundational technology, emphasizing real-time connectivity and mobile accessibility, aimed to empower everyone from the CEO to frontline employees to leverage data for decision-making.

However, like many growth-focused software companies, Domo faced significant financial hurdles, accumulating substantial net losses since its inception. More recently, macroeconomic headwinds introduced further pressure, leading to elongated sales cycles and challenging customer retention. Recognizing these "cracks" in its traditional model, Domo embarked on a significant strategic pivot over the past few years, fundamentally reshaping its approach to pricing, go-to-market, and technology focus. This transformation centers on three interconnected pillars: a rapid conversion to consumption-based pricing, building a robust ecosystem of partners, and doubling down on AI innovation. The goal is to move beyond simply providing a BI tool to becoming an indispensable AI and data products platform, driving a more durable, efficient, and profitable growth engine.

The Strategic Pivot: Consumption, Ecosystem, and AI as Growth Catalysts

The core of Domo's strategic shift lies in aligning its business model more closely with the value it delivers and the evolving market landscape.

The transition to a consumption-based pricing model has been a rapid and deliberate effort. Moving away from restrictive seat licenses, Domo now primarily offers tiered pricing based on usage volume or enterprise-wide licenses with data caps. This model, which management expects to cover approximately 90% of ARR by the end of FY26 (up from over 70% in Q1 FY26 and 65% at the end of FY25), is designed to remove barriers to adoption and encourage wider deployment across customer organizations. The impact is already visible: consumption customers demonstrate significantly higher gross retention (over 90% in FY25) and net retention (over 100% in FY25) compared to seat-based cohorts. This shift not only facilitates product-led growth by making the full platform more discoverable but also aligns Domo's pricing with that of key partners, encouraging vendor consolidation in Domo's favor as customers realize the cost-effectiveness and comprehensive capabilities of the platform compared to multiple legacy tools.

Complementing the pricing shift is a strong focus on building an ecosystem-led go-to-market motion. Recognizing that Cloud Data Warehouses (CDWs) have become central to enterprise data strategies, Domo has invested heavily in seamless integration with major players like Snowflake (SNOW), Databricks, Google (GOOGL), Oracle (ORCL), and IBM (IBM). This positions Domo as a partner, not a competitor, enabling joint solutions that offer faster time to value by reducing the need for customers to stitch together multiple vendors. Early results are promising: partner-sourced leads show dramatically higher conversion rates (up to 5x better) and close rates (2-3x higher) than traditional leads. The number of joint deals in the pipeline with CDW partners has grown rapidly, and relationships with CDW System Integrators (SIs) are expanding, providing influential endorsements and ensuring successful implementations. The Domo Everywhere solution further extends this ecosystem, allowing customers to embed Domo-powered analytics into their own products, creating new revenue streams for them and lead generation for Domo. While the full financial impact is expected to materialize over the next 12-24 months, the momentum in pipeline activity and deal characteristics provides confidence in this strategy as a driver of future growth.

The third pillar is continuous AI innovation. Domo's platform was built with foundational elements crucial for AI, including extensive data connectors, robust ETL capabilities, comprehensive data governance, and a flexible Workflows engine. This infrastructure supports the development and deployment of AI-driven solutions. The introduction of the AI service layer allows customers to leverage various AI models within a secure, governed environment. Recent innovations like Agent Catalyst enable customers to build intelligent AI agents that automate complex business processes, delivering remarkable efficiencies and measurable ROI. Customer examples highlight the speed and power of these agents, performing tasks in minutes that previously took weeks. Domo's ability to connect, curate, and apply AI models to deliver insights to the line of business is a core competency, positioning it well to capitalize on the growing demand for practical AI applications that deliver tangible business value.

Technological Differentiation and Competitive Standing

Domo's core technological differentiation lies in its comprehensive, cloud-native platform designed for real-time, organization-wide data access and action. Unlike competitors that may specialize in specific areas like visualization (e.g., Tableau (Salesforce (CRM))) or data modeling (e.g., Looker (Google)), Domo offers an end-to-end stack. This includes over 1,000 pre-built connectors for rapid data ingestion, a powerful ETL engine (including Magic ETL on CDWs), robust data governance and security features, automated alerts and workflows, and visualization tools accessible across all devices, notably optimized for mobile.

This integrated approach provides several tangible benefits. It enables faster time to value by reducing the complexity and time required to connect and prepare data from disparate sources. The real-time capabilities allow users to access the freshest data, supporting more agile decision-making. The mobile-first design facilitates widespread adoption, particularly among frontline workers who may not have traditional desktop access, leading to higher user engagement across the organization. While specific, universally applicable quantifiable metrics comparing Domo's technology across all dimensions against all competitors are not readily available, customer feedback and examples highlight the platform's ability to handle complex integrations, provide superior real-time performance in specific use cases, and enable rapid development of analytics and workflows. For instance, one customer completed a data migration in just one week using Domo, and another built a complex analytics report agent in under 2.5 minutes.

Domo continues to invest in R&D, focusing on enhancing its AI capabilities (Agentic AI, ML model management) and deepening integrations with CDW partners. These initiatives aim to improve efficiency, expand use cases, and solidify Domo's position as an AI and data products platform.

In the competitive landscape, Domo operates as a challenger against larger, more established players and specialized vendors. Major competitors include:

• Large Software Companies: Microsoft (MSFT), Oracle, SAP (SAP), IBM. These companies leverage vast existing customer bases and integrated product suites. Power BI, in particular, is known for its affordability and deep integration with the Microsoft ecosystem.
• Business Analytics Software Companies: Tableau (Salesforce), Qlik, Looker (Google), MicroStrategy (MSTR), ThoughtSpot, Alteryx (AYX), Informatica (INFA), Sisense, Tibco. These offer various strengths in visualization, data preparation, or specific analytics capabilities.
• SaaS/Cloud Analytics Providers: Amazon Web Services (AMZN) (QuickSight), Sigma Computing, Fivetran, Matillion. These often compete on cost and integration within their respective cloud ecosystems.

Domo's estimated market share is relatively small (2-4%), and its recent revenue growth has been flat, lagging behind many competitors who benefit from larger scale or faster-growing segments. Competitors like Tableau (Salesforce) and Power BI often have significantly greater financial resources for R&D and marketing, higher gross and operating margins, and stronger cash flow generation.

However, Domo's strategic pivot aims to leverage its unique technological strengths and the evolving market. By focusing on consumption, it removes a key barrier that favored competitors with simpler licensing. By partnering with CDWs, it addresses the "soft underbelly" of lacking CIO endorsement and taps into a powerful go-to-market channel that competitors may not access as effectively. Its comprehensive stack and AI readiness differentiate it from competitors focused on narrower capabilities. While Domo faces vulnerabilities related to its cost structure and the need to accelerate AI innovation to keep pace, its strategic response is designed to create a defensible niche and capture new growth opportunities by becoming an essential layer on top of the modern data stack centered around CDWs.

Financial Performance and Health: Signs of Stabilization and Leverage

Domo's financial performance over the past year reflects a business in transition, navigating macroeconomic challenges while executing a significant strategic pivot. For the three months ended April 30, 2025 (Q1 FY26), total revenue was $80.1 million, essentially flat compared to $80.1 million in the same period last year. Subscription revenue, the core of the business, saw a slight decrease of 1% to $71.4 million, while professional services and other revenue increased by 9% to $8.7 million.

Despite the flat top-line, there are clear signs of operational improvement and leverage. Gross profit for Q1 FY26 was $59.4 million, with a total gross margin of 74%, consistent with the prior year. Subscription gross margin was 81%, a slight decrease from 82% in Q1 FY25, primarily due to increased third-party web hosting costs associated with higher customer data usage, though management expects this to stabilize and improve long-term. Professional services gross margin saw a significant improvement, rising from 1% to 21%, mainly due to reduced outsourced service costs.

Operating expenses decreased significantly, falling by 9% from $80.8 million in Q1 FY25 to $73.8 million in Q1 FY26. This reduction was driven by decreases across sales and marketing (down 6% to $39.7 million, primarily due to lower employee-related costs, partially offset by marketing events), research and development (down 12% to $20.0 million, due to lower employee costs and increased capitalized software costs), and general and administrative expenses (down 11% to $14.2 million, mainly from lower professional and legal fees). As a percentage of revenue, operating expenses decreased from 101% to 92%, demonstrating substantial operating leverage.

This led to a significant improvement in the loss from operations, which narrowed from $21.5 million in Q1 FY25 to $14.3 million in Q1 FY26. Net loss also improved, decreasing from $26.0 million to $18.1 million. The accumulated deficit as of April 30, 2025, stood at $1.51 billion.

Liquidity remains a key focus. As of April 30, 2025, Domo had $47.2 million in cash and cash equivalents, an increase from $45.3 million at January 31, 2025.

The company generated positive net cash provided by operating activities of $4.0 million in Q1 FY26, a notable improvement from $1.9 million in Q1 FY25, turning the corner on cash generation. Adjusted free cash flow was also positive at $1.3 million in Q1 FY26.

The company's long-term debt stood at $119.7 million as of April 30, 2025, following the refinancing in August 2024 which extended maturity to August 2028 and reduced cash interest rates, providing improved financial flexibility. Domo was in compliance with its debt covenants as of April 30, 2025.

Billings, a key operational metric reflecting sales activity, were $63.9 million in Q1 FY26, down from $65.5 million in Q1 FY25. However, subscription remaining performance obligations (RPO), a measure of future revenue from existing contracts, showed accelerating growth. Total subscription RPO grew 24% year-over-year to $408.2 million as of April 30, 2025, with long-term RPO (beyond 12 months) growing an impressive 61%. This acceleration, coupled with a 13% increase in average contract length across the customer base in Q3 FY25 and continued increases, indicates strengthening customer commitments and derisks future revenue streams.

Outlook and Forward Guidance: Betting on the Strategic Pivot

Management's guidance for FY26 reflects confidence in the strategic pivot to consumption and ecosystem-led growth, despite acknowledging the ongoing challenging macroeconomic environment and the time lag for partner momentum to fully impact reported financials.

For Q2 FY26, Domo expects:

• Billings: $69 million to $70 million (1% to 2% year-over-year growth)
• GAAP Revenue: $77.5 million to $78.5 million
• Non-GAAP Net Loss per Share: $0.03 to $0.07

For the Full Year FY26, Domo has raised its guidance, expecting:

• Billings: $312 million to $322 million
• GAAP Revenue: $312 million to $320 million
• Non-GAAP Net Loss per Share: $0.18 to $0.26

This full-year guidance implies a steady acceleration in billings growth in the latter half of FY26, exiting the year at approximately 5% billings growth. It also implies continued operating margin expansion, targeting a 5% operating margin exit rate for FY26. Looking further ahead, management anticipates exiting FY27 at 10% billings growth and 10% operating margin.

The rationale underpinning this outlook is directly tied to the strategic initiatives. Management believes the momentum in partner-sourced pipeline (higher volume, conversion, and deal size) will translate into meaningful new logo acquisition and billings growth, particularly as these efforts mature. The near completion of the consumption transition is expected to drive improved retention, providing a more stable revenue base. Continued focus on operational efficiency and cost control is anticipated to fuel margin expansion and sustained positive free cash flow generation throughout FY26. While acknowledging the variability and timing aspects inherent in these strategic shifts, the improving internal metrics like RPO growth, contract length, sales force productivity, and retention rates provide management with the confidence to project accelerating growth and profitability.

Risks and Challenges

Despite the positive momentum from the strategic pivot, Domo faces several significant risks and challenges that could impact its ability to achieve its objectives and execute its investment thesis.

A primary risk is the ability to translate partner pipeline momentum into realized billings growth. While early indicators are strong, scaling these relationships and consistently closing deals sourced through the ecosystem will be critical. The competitive intensity in the BI and analytics market remains high, with larger players like Microsoft and Salesforce/Tableau (Salesforce) possessing significantly greater resources and market share. Domo must effectively differentiate itself and demonstrate superior value to win against these formidable competitors.

Customer retention and upsell remain crucial. Although consumption customers show better retention, maintaining and improving overall gross and net retention rates in a tight budgetary environment is an ongoing challenge. The success of the consumption model relies on customers increasing their usage over time; if adoption or usage falls short of expectations, it could negatively impact revenue growth.

Managing growth effectively while maintaining operational efficiency is also a risk. As the company scales its partner-focused sales force and invests in technology, it must ensure these investments yield sufficient returns to continue expanding margins and generating cash flow. The historical accumulated deficit highlights the importance of achieving and sustaining profitability.

Furthermore, reliance on third-party infrastructure (cloud hosting, data centers) and access to data from third-party platforms (via connectors) exposes Domo to potential disruptions or limitations that could impact service delivery and customer satisfaction. The evolving landscape of privacy, data protection, and cybersecurity regulations globally requires continuous investment and compliance efforts, with potential liabilities for non-compliance.

Finally, the dual-class stock structure concentrates voting control with the founder and CEO, which could limit the influence of other stockholders on important matters, including potential changes in control.

Conclusion

Domo is at a pivotal juncture, actively transforming its business model in response to market evolution and past challenges. The strategic shift towards a consumption-based pricing model, a robust ecosystem-led go-to-market, and focused AI innovation represents a credible path to unlock future growth and improve profitability. While recent financial results reflect the transitional phase and a challenging macro backdrop, key operational metrics like accelerating RPO growth, increasing contract lengths, improving retention trends, and demonstrated operating leverage signal that the strategic changes are gaining traction.

The investment thesis hinges on Domo's ability to successfully execute this pivot, leveraging its unique technological foundation to become an indispensable AI and data products platform within the modern data ecosystem. The early success seen in partner-sourced pipeline and the strong performance of consumption cohorts provide tangible evidence that the new model is working. Investors should closely monitor the translation of partner momentum into billings, the continued improvement in retention metrics, and the progress towards achieving the targeted growth and operating margin exit rates in FY26 and FY27. While risks persist, particularly related to competitive pressures and execution, Domo's strategic clarity and improving operational performance suggest a potential turnaround story in the making.