Domo’s Strategic Transformation: A High-Conviction Buy for AI-Driven Data Analytics

Domo, Inc. (DOMO) has emerged as a compelling investment opportunity amid the accelerating adoption of AI-driven data analytics. The company’s Q2 2026 earnings call and 8-K filing reveal a strategic transformation that aligns with long-term industry tailwinds, including the shift to consumption-based pricing, ecosystem-driven innovation, and AI-first product development. With a 19% year-over-year increase in subscription Remaining Performance Obligations (RPO) to $409.8 million, a first-ever positive non-GAAP EPS of $0.02, and a consumption model now accounting for 75% of Annual Recurring Revenue (ARR), Domo is demonstrating both operational discipline and scalable growth [1].

The Power of the Consumption Model

Domo’s pivot from a seat-based to a consumption-based pricing model has unlocked significant value for both the company and its clients. Customers who initially purchased on consumption contracts now exhibit a 108% Net Revenue Retention (NRR) rate, a metric that underscores the stickiness of Domo’s platform [1]. This shift has also enabled Domo to secure longer-term contracts, with one example highlighting a three-year agreement driven by a joint solution with a cloud data warehouse (CDW) partner [1]. The consumption model’s success is further reflected in the fact that over 75% of ARR is now tied to consumption contracts, up from negligible levels just two years ago [1].

Financial Milestones and RPO Growth

Domo’s Q2 2026 results marked a turning point in its financial trajectory. The company reported total revenue of $79.7 million, with subscription revenue at $72.7 million, and delivered its first positive non-GAAP EPS of $0.02, driven by an 8% non-GAAP operating margin [2]. This margin expansion, a 5 percentage point increase year-over-year, signals improved cost management and pricing power. Meanwhile, subscription RPO grew 19% year-over-year to $409.8 million, with current subscription RPO at $220.2 million—a 4% increase [2]. These figures suggest robust demand for Domo’s solutions and a strong pipeline for future revenue.

Ecosystem-Driven Innovation and AI Adoption

Domo’s ecosystem strategy is a cornerstone of its growth narrative. By partnering with CDW providers like Snowflake, Databricks, and Google, Domo has positioned itself as a modern analytics stack that integrates seamlessly with enterprise data infrastructure [1]. These partnerships have not only expanded Domo’s market reach but also enhanced its value proposition through AI-driven tools like Agent Catalyst, which enables rapid deployment of AI agents for real-time decision-making [1]. The CEO emphasized that AI innovation and ecosystem expansion are “powering Domo’s growth engine,” a sentiment echoed by the 19% RPO growth and positive free cash flow generation [2].

Valuation Opportunity Amid AI Tailwinds

Despite GAAP profitability challenges, Domo’s non-GAAP metrics and consumption model success create a compelling valuation case. The company’s ability to generate positive free cash flow while scaling AI-driven solutions positions it to capitalize on the $30 billion global AI analytics market, which is projected to grow at a 25% CAGR through 2030 [3]. With a market cap of ~$1.2 billion as of August 2025 and a forward P/E ratio of 12x based on non-GAAP earnings, Domo offers a rare combination of near-term profitability and long-term growth potential.

Conclusion

Domo’s strategic transformation—from a seat-based model to a consumption-driven, AI-first platform—has positioned it as a high-conviction buy for investors seeking exposure to the data analytics revolution. The 19% RPO growth, first positive non-GAAP EPS, and ecosystem-driven innovation validate the company’s ability to execute on its vision. As AI adoption accelerates and consumption-based pricing becomes the industry standard, Domo is well-positioned to outperform peers and deliver outsized returns.

**Source:[1] EARNINGS_CALL_TRANSCRIPT, [https://finance.yahoo.com/quote/DOMO/earnings/DOMO-Q2-2026-earnings_call-349057.html][2] Domo Announces Second Quarter Fiscal 2026 Financial ..., [https://www.stocktitan.net/news/DOMO/domo-announces-second-quarter-fiscal-2026-financial-epy5kgdm8fbm.html][3] Domo, Inc., [https://www.datainsightsmarket.com/companies/DOMO]