Domo’s Fiscal Q1 Earnings: A Hidden Gem in the Data Analytics Arena?

Domo, Inc. (NASDAQ: DOMO) has long been a contender in the data analytics space, but its persistent net losses have kept investors wary. However, the company’s Q1 2025 earnings report reveals a compelling narrative of stabilization and strategic momentum that could redefine its valuation trajectory. Let’s dissect the numbers and assess whether Domo is undervalued or still too risky to bet on.

Q1 Revenue Trends: Resilience Amid Stagnation

Domo reported $80.1 million in Q1 revenue, matching its year-ago figure but exceeding analyst expectations by $2.1 million. While revenue growth remains flat, this consistency is a victory for a company historically plagued by volatility. The real story lies in the composition of this revenue:
- Subscription Revenue: $71.4 million, representing 89% of total revenue, underscores the strength of its recurring revenue model.
- Remaining Performance Obligations (RPO): Soared 24% YoY to $480 million, with $182 million (61% YoY growth) earmarked for recognition beyond 12 months. This signals robust customer commitments and scalability.

The narrowing of losses—non-GAAP net loss fell to $3.6 million from $12.3 million a year earlier—proves Domo is making progress toward profitability. Even GAAP net loss improved to $18.05 million from $26 million, aided by operational efficiency gains.

Valuation: A Discounted Growth Story

With a market cap of ~$320 million as of February 2025 (and recent stock prices hovering around $8.50), Domo trades at a Price/Sales (P/S) ratio of 1.0x based on its $312–320 million full-year revenue guidance. This is starkly undervalued compared to peers like Tableau (now part of Salesforce) or Looker (Google Cloud), which typically command P/S ratios of 5x–10x.

The current valuation ignores key drivers:
1. Margin Expansion Potential: Operating cash flow jumped 108% YoY to $4.0 million, with adjusted free cash flow improving 159% to $1.3 million. Management’s goal of a 5% operating margin by year-end and 10% by 2026 is achievable if revenue growth stabilizes.
2. AI-Driven Innovation: The launch of Agent Catalyst, an AI tool enabling rapid agent development, has already attracted over 200 customers. Use cases in solar energy, education, and logistics highlight its versatility. This product could accelerate upselling and cross-selling opportunities.
3. Ecosystem Partnerships: Collaborations with Snowflake, Databricks, and Oracle have boosted partner-sourced pipeline activity by 200% QoQ, signaling stronger sales leverage.

The Case for Growth: Subscription Model and Retention

Domo’s shift to a consumption-based pricing model is paying dividends:
- Sales Productivity: Improved by over 60% YoY, enabling faster deal closures and larger contract values.
- Retention Rates: Gross retention rose to 86%, while net retention hit 94%—both sequential improvements for three straight quarters. This suggests customers are not just staying but expanding their usage.

With 70% of ARR now tied to consumption-based contracts (targeting 90% by year-end), Domo is aligning its revenue streams with customer growth. This model reduces churn risks and creates a recurring revenue engine.

Risks and Skepticism

Critics will point to Domo’s $18 million GAAP net loss and its reliance on non-GAAP metrics, which exclude stock-based compensation and other costs. The Q2 guidance, projecting a $0.03–$0.07 non-GAAP loss per share, still leaves the company in the red. Additionally, macroeconomic pressures could delay enterprise spending on analytics tools.

However, the narrowing loss trajectory and RPO growth suggest Domo is past the “cash burn” phase. Its $47.2 million cash balance and improving cash flow metrics provide a runway to execute on its AI roadmap without needing immediate dilutive financing.

Conclusion: A Compelling Risk-Reward Trade

Domo’s stock trades at a valuation that seems to ignore its improving fundamentals. With a 1.0x P/S ratio, 24% YoY RPO growth, and margin expansion on the horizon, the stock appears undervalued. The AI-driven catalysts (Agent Catalyst, ecosystem partnerships) and subscription model’s scalability suggest Domo could emerge as a leader in the $20B+ data analytics market.

While losses linger, the path to profitability is clearer than ever. For investors willing to look past short-term losses and focus on long-term scalability, Domo’s current valuation offers a rare opportunity to buy a high-growth software company at a fraction of its peers.

Actionable Takeaway: Domo’s stock could be primed for a revaluation as it executes on its margin and revenue targets. Investors should consider accumulating positions at current levels, with a focus on the $8–$9 range, while monitoring Q2 billings guidance for further confirmation.

In a sector dominated by giants like Snowflake and Microsoft, Domo’s niche focus on AI-powered workflow automation could carve out a defensible position—if the market finally gives it credit.