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Domo, Inc., a data cloud company with a market capitalization of $618 million specializing in business intelligence (BI) and analytics, has been making significant strides in its business model and product offerings. The stock has shown remarkable momentum, delivering a 100% return over the past year according to InvestingPro data. As the company navigates a transition to a consumption-based pricing model and expands its AI capabilities, investors and analysts are closely watching its performance and future prospects. This comprehensive analysis examines Domo’s current position, recent financial results, strategic initiatives, and market outlook.
Company Overview and Recent Performance
Domo has been focusing on transforming its business to better align with customer needs and market trends. The company’s shift towards a consumption-based pricing model has been a central part of this strategy. As of the latest reports, over 75% of Domo’s Annual Recurring Revenue (ARR) now comes from this model, with expectations to reach 85-90% by the end of FY26.
In its most recent quarter, F2Q26, Domo reported revenue of $79.7 million, representing a 1.7% year-over-year growth. While this growth rate is modest, it exceeded consensus expectations. The company maintains a healthy gross profit margin of 75%, though InvestingPro analysis indicates challenges with profitability, as reflected in its negative EBITDA of -$43 million over the last twelve months. The company’s non-GAAP EPS of $0.02 also surpassed the Street’s estimate of -$0.05, indicating improved profitability.
Domo has raised its guidance for FY26, projecting revenue between $316 million and $320 million. This represents roughly flat growth at the midpoint but demonstrates management’s confidence in the company’s trajectory. The company also improved its EPS guidance to a range of -$0.19 to -$0.11 for the fiscal year.
Strategic Partnerships and Business Model Transition
A key driver of Domo’s recent performance and future prospects is its strategic partnership ecosystem. According to InvestingPro’s Financial Health assessment, Domo currently shows a weak overall score, suggesting room for improvement as these partnerships mature. Want deeper insights? InvestingPro offers 7 additional key tips about Domo’s financial health and market position. The company has been actively collaborating with major cloud data warehouse providers such as Snowflake, Oracle NetSuite, Google BigQuery, and Databricks. These partnerships are yielding positive results, with Domo reporting significantly improved close rates and sales productivity.
The transition to a consumption-based pricing model is another crucial aspect of Domo’s strategy. This shift is expected to lead to more predictable revenue streams and better align the company’s offerings with customer usage patterns. Analysts note that consumption customers are showing strong net retention rates, exceeding 100%, which bodes well for future growth.
Product Innovation and AI Integration
Domo has been investing heavily in product innovation, particularly in the realm of artificial intelligence and machine learning. The company recently launched Agent Catalyst, a platform that enables developers to rapidly create AI agents. This offering has garnered significant interest from customers and positions Domo well in the growing market for AI-powered analytics solutions.
The company’s focus on AI extends beyond Agent Catalyst, with ongoing efforts to integrate AI capabilities throughout its platform. This strategy aligns with broader market trends, as businesses increasingly seek to leverage AI and ML in their data analytics processes.
Market Position and Competitive Landscape
Domo operates in a competitive market for data analytics and business intelligence solutions. However, the company’s unique combination of BI capabilities and partnerships with cloud data warehouse providers sets it apart from some competitors. Analysts note that Domo’s offerings, when combined with solutions from partners like Snowflake, can provide capabilities similar to those of larger competitors such as Palantir, but at a lower cost.
The recent acquisition of Informatica by Salesforce has created potential opportunities for Domo to capture market share during the integration period. This development, coupled with Domo’s strategic partnerships and product innovations, could strengthen its competitive position in the coming years.
Bear Case
How might Domo’s high debt levels impact its ability to invest in growth and innovation?
Domo’s financial position shows signs of strain, with a current ratio of 0.48 and total debt of $141 million, which could potentially constrain the company’s financial flexibility. InvestingPro’s analysis indicates that short-term obligations exceed liquid assets, a factor that investors should carefully consider. This high debt-to-cash ratio may limit Domo’s ability to invest aggressively in research and development or pursue strategic acquisitions. In a rapidly evolving technology landscape, any limitations on innovation spending could put Domo at a competitive disadvantage.
Furthermore, if market conditions deteriorate or if the company’s transition to a consumption-based model takes longer than expected to yield results, servicing this debt could become more challenging. This could force Domo to divert resources from growth initiatives to debt repayment, potentially slowing its expansion and product development efforts.
What challenges could Domo face in improving its gross retention rate?
Domo’s gross retention rate of 85% in the most recent quarter, while showing some improvement, still lags behind top-tier SaaS companies. Improving this metric is crucial for long-term growth and profitability. However, several factors could make this challenging:
1. Competition: The BI and analytics market is highly competitive, with both established players and innovative startups vying for market share. Customers have many options, which could make it difficult for Domo to retain clients if they perceive better value elsewhere.
2. Economic uncertainty: In an environment of tightening IT budgets, some customers may reassess their software spending, potentially leading to churn or downgrades.
3. Transition pains: As Domo shifts to a consumption-based model, some customers may experience friction in adapting to the new pricing structure, potentially leading to short-term churn.
4. Product adoption challenges: If customers struggle to fully utilize Domo’s platform or realize its full value, they may be more likely to churn. Ensuring strong product adoption and demonstrating clear ROI will be critical for improving retention rates.
Bull Case
How could Domo’s strategic partnerships drive revenue growth and market share gains?
Domo’s partnerships with major cloud data warehouse providers like Snowflake, Google BigQuery, and Oracle NetSuite present significant opportunities for growth. These collaborations could drive revenue and market share gains in several ways:
1. Expanded customer base: By integrating with popular data warehouse solutions, Domo can tap into these partners’ existing customer bases, potentially accelerating customer acquisition.
2. Enhanced product offerings: These partnerships allow Domo to offer more comprehensive solutions, combining its BI and analytics capabilities with powerful data storage and processing capabilities of its partners.
3. Improved sales efficiency: Partner-led deals have shown higher close rates and improved sales productivity, which could lead to more efficient growth and potentially higher margins.
4. Competitive differentiation: The ability to seamlessly integrate with multiple cloud data warehouses could set Domo apart from competitors, especially in enterprise deals where customers often use multiple data platforms.
5. Upsell opportunities: As customers adopt Domo through these partnerships, there may be opportunities to expand usage and introduce additional services, driving higher ARR per customer.
What potential benefits could Domo realize from its transition to a consumption-based pricing model?
The shift to a consumption-based pricing model could yield several advantages for Domo:
1. Improved customer alignment: This model better aligns Domo’s revenue with the value customers derive from the platform, potentially leading to higher customer satisfaction and retention.
2. Increased adoption and usage: With pricing tied to usage, customers may be more inclined to expand their use of Domo’s platform across their organizations, driving organic growth.
3. More predictable revenue: As the model matures, Domo could benefit from more predictable and potentially smoother revenue streams, which investors typically value highly.
4. Higher lifetime value: Consumption-based pricing often leads to higher lifetime value per customer as usage grows over time, without the friction of renegotiating fixed contracts.
5. Competitive advantage: This pricing model may be more attractive to potential customers, especially those looking for flexibility in their software spending, potentially giving Domo an edge in competitive deals.
6. Improved profitability: As customers increase their usage over time, Domo could see improving margins due to the scalability of its platform.
SWOT Analysis
Strengths:
- Strong partnerships with major cloud data warehouse providers
- Innovative AI-focused products like Agent Catalyst
- Transition to consumption-based pricing model
- High net retention rates among consumption customers
Weaknesses:
- Low gross retention rate (85%)
- High debt levels relative to cash on hand
- Flat to low revenue growth projections
Opportunities:
- Increasing demand for AI and ML integration in data analytics
- Potential acquisition target due to attractive valuation
- Market share gains from disruption caused by Salesforce’s acquisition of Informatica
- Expansion of partner ecosystem and go-to-market strategies
Threats:
- Intense competition in the data analytics and BI market
- Potential macroeconomic headwinds affecting IT budgets
- Execution risks associated with business model transition
- Rapid technological changes requiring continuous innovation
Analysts Targets
1. Cantor Fitzgerald: $22.00 (September 29, 2025)
2. D.A. Davidson: $15.00 (August 28, 2025)
3. Citizens Bank: $20.00 (August 28, 2025)
4. Cantor Fitzgerald: $20.00 (August 28, 2025)
5. Citizens Bank: $20.00 (June 25, 2025)
6. Cantor Fitzgerald: $17.00 (June 25, 2025)
7. Cantor Fitzgerald: $17.00 (May 28, 2025)
8. Cantor Fitzgerald: $12.00 (May 22, 2025)
9. Citizens Bank: $16.00 (May 22, 2025)
10. Citizens Bank: $16.00 (April 8, 2025)
11. Citizens Bank: $16.00 (March 21, 2025)
12. Cantor Fitzgerald: $11.00 (March 20, 2025)
Analysts’ price targets for Domo range from $11.00 to $22.00, with more recent targets generally being higher. This suggests growing optimism about the company’s prospects as it executes its strategic initiatives and shows signs of improved financial performance.
In conclusion, Domo finds itself at a critical juncture as it navigates its business model transition and seeks to capitalize on the growing demand for AI-powered analytics solutions. Based on InvestingPro’s Fair Value analysis, the stock currently appears slightly undervalued. For comprehensive analysis including valuation metrics, growth prospects, and expert insights, explore Domo’s full potential with InvestingPro’s detailed research report, available along with 1,400+ other top stocks. While challenges remain, particularly around debt levels and gross retention rates, the company’s strategic partnerships, product innovations, and shift to consumption-based pricing present significant opportunities for growth. Investors will be closely watching Domo’s execution in the coming quarters to see if it can successfully leverage these strengths to drive sustainable growth and profitability.
This analysis is based on information available up to October 8, 2025.
InvestingPro: Smarter Decisions, Better Returns
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