7. Business Combinations, Goodwill, and Intangible Assets

2024 Business Combination

In September 2024, the Company acquired all outstanding shares of WarpStream Labs, Inc. (“WarpStream Labs”), an Apache Kafka-compatible data streaming platform. The Company acquired WarpStream Labs primarily for its talent and to add WarpStream Labs’ BYOC data streaming solution to the Company’s product portfolio to serve customers who want a cloud-native streaming offering in their own cloud account.

The total preliminary purchase consideration of $135.1 million consisted of $132.5 million of cash and $2.6 million for the fair value of 132,476 shares of the Company’s Class A common stock. In allocating the purchase consideration, the Company preliminarily recorded $16.9 million of cash acquired, $6.8 million as a developed technology intangible asset, to be amortized on a straight-line basis over an estimated useful life of five years, and $112.4 million of goodwill. The goodwill is primarily attributed to the assembled workforce and expected synergies arising from the acquisition, and is not deductible for income tax purposes. The purchase price allocation is subject to measurement period adjustments until September 2025.

The Company also entered into holdback agreements with certain employees of WarpStream Labs, pursuant to which the Company issued $7.9 million in restricted Class A common stock and will pay up to an aggregate of $76.2 million in cash. The vesting and payout of the restricted common stock and holdback cash is subject to continued employment over three years and achievement of certain milestones, and is recorded as post-combination compensation expense within operating expenses over the requisite service period for accounting purposes. The Company deposited $8.6 million of the holdback cash into an escrow account upon closing of the acquisition, and the Company recorded this amount within prepaid expenses and other current assets on the consolidated balance sheets. Total compensation expense related to the holdback agreements during the three months ended March 31, 2025 was $7.6 million. See Note 11, Stockholders’ Equity, for further information.

Transaction costs associated with the acquisition incurred during the three months ended March 31, 2025 were not material and were recorded as general and administrative expenses in the condensed consolidated statements of operations. The results of operations of WarpStream Labs included in the Company’s condensed consolidated financial statements since the date of acquisition were not material. Pro forma results of operations have not been presented because they were not material to the condensed consolidated results of operations.

2023 Business Combination

In January 2023, the Company acquired all outstanding shares of immerok GmbH (“Immerok”), an Apache Flink stream processing managed services company, for purchase consideration of $54.9 million in cash. The Company acquired Immerok primarily for its talent and developed technology.

The Company also entered into holdback agreements with certain employees of Immerok, pursuant to which the Company could pay up to an aggregate of $52.3 million in cash. The vesting and payout of the holdback is subject to continued employment and achievement of certain milestones over three years, and is recorded as post-combination compensation expense within operating expenses over the requisite service period for accounting purposes. The Company recognized compensation expense of $4.4 million related to the holdback agreements for both the three months ended March 31, 2025 and 2024.

Goodwill

No changes were made to the carrying values of goodwill during the three months ended March 31, 2025. Goodwill as of March 31, 2025 and December 31, 2024 was $164.4 million.

Intangible Assets, Net

Amortization expense was not material for the three months ended March 31, 2025 and 2024.