API’s Q3 Results Mark Four Straight Quarters of Profitability, Sharply Reduced Costs Fuel Outlook
Core Platform Momentum and Cost Discipline Deliver Solid Third Quarter
Agora, Inc. (NASDAQ:API) reported another profitable quarter in Q3 2025, its fourth in a row, powered by double-digit revenue growth and cost containment across key operating lines. Total revenue rose 12% year over year to $35.4 million, and net income reached $2.7 million—a turnaround from a $24.2 million net loss a year ago. Management credits robust demand in its real-time engagement (RTE) platform and new investments in conversational AI as primary drivers behind the improving bottom line.
Operating Expenses Down 44.8%, Net Income Swings Positive
The standout story in Q3 was Agora’s ability to rein in costs while still expanding the top line. Total operating expenses dropped 44.8% to $25.3 million, helped by workforce optimization and a steep decline in share-based compensation (down over 90% year-over-year in R&D and G&A). Research and development expenses were halved to $13.8 million, reflecting streamlined operations and a renewed focus on efficient innovation. Sales and marketing, as well as general and administrative costs, saw similar reductions. This cost discipline led to an operating loss of just $1.6 million, a massive improvement from the prior year’s $24.7 million.
Platform Growth: Customers, Retention, and Revenue All Point Up
Key metrics highlight the rebound of Agora’s core business:
- Active Customers: Up 11.7% to 1,968 for Agora; nearly flat for Shengwang at 1,976.
- Dollar-Based Net Retention: 108% for Agora and 90% for Shengwang—showing expanding wallet share and sticky engagement from customers.
- Gross Profit: Up 10.8% to $23.3 million, with gross margin at 66.0% (slightly lower due to product mix).
- Cash Position: $374.3 million in total cash and equivalents supports both stability and continued investments.
| Q3 2025 | Q3 2024 | YoY Change | |
|---|---|---|---|
| Revenue ($M) | 35.4 | 31.6 | +12.0% |
| Gross Margin | 66.0% | 66.7% | -0.7 pts |
| Operating Expenses ($M) | 25.3 | 45.9 | -44.8% |
| Net Income ($M) | 2.7 | -24.2 | n/a |
| Active Customers (Agora) | 1,968 | 1,762 | +11.7% |
| DB Net Retention (Agora) | 108% | Not Disclosed | - |
Investments in Conversational AI: Product Momentum and Early Adoption
Management highlighted successful launches of Conversational AI Engine 2.0 and Conversational AI Studio, supporting a pipeline of customer use cases across voice agents and interactive apps. Early customer uptake was characterized as encouraging, adding another potential lever for topline growth into 2026 and beyond.
Share Repurchase Program Continues, Bolstering Shareholder Value
During Q3, Agora repurchased 5.2 million Class A ordinary shares (~1.3 million ADSs) for $4.8 million, taking total buybacks since program inception to 150.1 million shares—representing 66% of the $200 million authorization. With fewer shares outstanding and robust cash on hand, the company remains well-positioned to deploy capital for growth and shareholder returns.
| Metric | Q3 2025 Value | Program to Date |
|---|---|---|
| Shares Repurchased (Class A) | 5.2M | 150.1M |
| ADS Equivalent | 1.3M | 37.5M |
| Total Cost ($M) | 4.8 | 132.1 |
| Outstanding ADS (End Q3) | 89.8M | n/a |
| Authorization Utilized | 2.4% | 66.0% |
Looking Ahead: Q4 Revenue Forecast Calls for 7-10% Growth
The company projects Q4 revenue between $37 million and $38 million—up to 10.1% higher than the prior year. The guidance underscores continued demand for Agora’s platform solutions, even as management warns that market conditions may still evolve.
Bottom Line: Sustainable Profitability and Growth in Focus
Agora’s Q3 performance—marked by recurring profitability, lower costs, solid customer metrics, and a shareholder-friendly capital program—demonstrates strategic discipline. With a growing product suite and expanding adoption of its AI technologies, investors may want to monitor both revenue acceleration and operating margin trends heading into 2026. While risks remain, including competitive and market dynamics, Agora’s execution this quarter sets a higher bar for continued growth and profitability in the conversational AI sector.
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