Consumption pricing is honest and it makes forecasting miserable

It traded at 359.47 this morning, +2.81% on the session. The seat versus consumption debate is treated as a pricing detail. It changes the entire risk profile of the revenue.

What each model does

Seat pricing charges per user per month. Predictable, easy to forecast, and increasingly disconnected from value when software does work that used to require people.

Consumption pricing charges for what is actually used. Better aligned, obviously fairer, and it means revenue moves with customer activity rather than customer headcount.

The consequence nobody mentions when selling it

Under consumption, a customer having a quiet quarter reduces your revenue without churning, without complaining, and without appearing in any retention metric. The relationship is perfectly healthy and the revenue is down.

That makes forecasting genuinely harder, and it means a soft quarter can reflect the customers' business conditions rather than anything about the product.

• Revenue against underlying activity metrics where they are disclosed
• Customer concentration, since consumption concentrates naturally towards heavy users
• Whether committed contracts underpin a floor, and how much of revenue sits above it
• Retention measured properly, because the usual metric behaves differently under consumption

Why I am flat

Better alignment with customer value and worse predictability of revenue are both true, and the multiple has to accommodate the second.

I think consumption is the better model and I think the market has not settled on what to pay for revenue that flexes this way. Being right about the model does not tell me what the shares are worth.

What I am waiting for

A downturn, honestly. Consumption pricing has not been properly tested through one, and how this revenue behaves when customers slow down is the thing that would tell me most.