Agora, Inc. (API) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals positive financial performance with revenue growth and profitability, but concerns arise from a slight gross margin decline and unclear guidance on new product margins. The Q&A section highlights potential in AI applications, though management's vague responses on margins and future targets create uncertainty. The share repurchase program supports shareholder value, but impacts cash reserves. Overall, the balanced factors suggest a neutral sentiment for stock price movement.
Key Financial Performance
Total Revenue $34.3 million, up 11% year-over-year. The increase was driven by solid revenue growth and continued efficiency improvement, excluding revenues from certain end-of-sale low-margin products.
GAAP Net Profit $1.5 million, more than triple the previous quarter, with a GAAP net margin of 4.3%. This marks the third consecutive quarter of GAAP profitability, attributed to seasonality and a strong business outlook.
Agora Revenues $18.2 million, representing 16.7% year-over-year growth and a 2.2% quarter-over-quarter decline. The strong year-over-year growth reflects successful market penetration and growing adoption in high-growth verticals such as live shopping and entertainment. The marginal sequential decrease is mainly due to usage fluctuation of customers.
Shengwang Revenues RMB 115.5 million, with a 6.7% year-over-year growth and 9.5% sequential growth. The growth was driven by continued business expansion and adoption in key verticals such as digital transformation and IoT.
Gross Margin 66.8%. Excluding gross profit from certain end-of-sale low-margin products, gross margin of continuing business slightly decreased 1.2% year-over-year and sequentially.
R&D Expenses $14 million, decreased 23% year-over-year. R&D expenses represented 40.8% of total revenues in the quarter compared to 53% in Q2 last year.
Sales and Marketing Expenses $6.5 million, increased 4% year-over-year. Sales and marketing expenses represented 19% of revenues in the quarter, compared to 18.3% in Q2 last year.
G&A Expenses $6 million, decreased 26.6% year-over-year. G&A expenses represented 17.6% of total revenues in the quarter compared to 24% in Q2 last year.
Operating Cash Flow Negative $0.4 million, compared to negative $7.6 million last year. The improvement reflects better financial management and operational efficiency.
Share Repurchase $10.9 million worth of shares repurchased in Q2, representing 3.5% of the entire outstanding shares at the beginning of the quarter. Since February 2025, $127.2 million worth of shares have been repurchased.
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Operating Highlights
Conversational AI engine: Launched a few months ago, it received a major upgrade with three new features: advanced attention locking, real-time vision-based intelligence, and natural interactive avatars. These features aim to make AI conversations as natural as human interactions. The product has been well-received at the World Artificial Intelligence Conference.
Fuzozo AI companion toy: Developed by Robopoet and powered by Agora's conversational AI engine, it has been a top performer in its category, delivering natural and engaging conversations. It has seen significant user engagement, with sessions lasting over 50 rounds of interaction.
Adoption in high-growth verticals: Agora's revenues grew 16.7% year-over-year, driven by adoption in live shopping and entertainment. Shengwang's revenues grew 6.7% year-over-year, with expansion in digital transformation and IoT.
South American food delivery platform: Leveraged Agora's conversational AI engine for AI agents making thousands of calls daily, with potential for higher volume and expanded use cases.
Revenue growth: Total revenue reached $34.3 million in Q2 2025, an 11% year-over-year increase. Agora and Shengwang showed strong growth in their respective markets.
Profitability: Achieved third consecutive quarter of GAAP profitability with a net profit of $1.5 million, more than triple the previous quarter.
Cost management: R&D expenses decreased by 23% year-over-year, while G&A expenses decreased by 26.6% year-over-year.
Leadership changes: Sheng Zhong resigned as Director, CTO, and Chief Scientist. CEO Bin Zhao will take over operational responsibilities. Tony Wang and Jingbo Wang were appointed as directors of the Board.
Share repurchase program: Repurchased $10.9 million worth of shares in Q2 2025, totaling $127.2 million since February 2025, representing 3.5% of outstanding shares at the beginning of Q2.
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Risk or Challenges
Resignation of Key Leadership: The resignation of Sheng Zhong, the Director, Chief Technology Officer, and Chief Scientist, could disrupt the company's technology leadership and innovation in conversational AI, potentially impacting strategic objectives.
Dependence on Conversational AI Success: The company's heavy reliance on the success of its conversational AI engine, which is still being optimized and requires ongoing improvements, poses a risk if the product fails to meet market expectations or faces technical challenges.
Revenue Concentration in High-Growth Verticals: A significant portion of revenue growth is tied to high-growth verticals like live shopping and entertainment, which may be subject to market fluctuations and changing consumer preferences.
Decline in Sequential Revenue for Agora: Agora's revenue experienced a 2.2% quarter-over-quarter decline, attributed to customer usage fluctuations, which could indicate potential instability in revenue streams.
Negative Operating Cash Flow: The company reported negative operating cash flow of $0.4 million in Q2, which, while an improvement from the previous year, still indicates financial strain.
Gross Margin Decline: Gross margin for continuing business slightly decreased by 1.2% year-over-year and sequentially, which could impact overall profitability.
Share Repurchase Impact on Cash Reserves: The company spent $10.9 million on share repurchases in Q2, which, while aimed at creating shareholder value, reduces cash reserves that could be used for growth investments.
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Guidance & Outlook
Revenue Expectations: For Q3 2025, total revenues are expected to be between $34 million and $36 million, representing a year-over-year growth rate of 7.6% to 13.9%.
Profitability Outlook: Net income is expected to grow sequentially throughout 2025, supported by current business momentum and visibility into the second half of the year.
Conversational AI Solution: The company anticipates significant revenue potential from its conversational AI solution due to its higher pricing compared to standard RTC audio products. The solution is expected to expand into more use cases and higher volumes, particularly in the customer service industry.
Market Trends and Adoption: Continued adoption in high-growth verticals such as live shopping, entertainment, digital transformation, and IoT is expected to drive revenue growth.
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Shareholder Return Plan
Share Repurchase Program: In the second quarter, we repurchased 13.1 million ordinary shares or 3.3 million ADSs, representing 3.5% of our entire outstanding shares at the beginning of the quarter. Since our board approved the share repurchase program in February 2025, we have repurchased $127.2 million worth of shares through June 30, 2025. We are fully committed to creating shareholder value through this program, while keeping the financial flexibility to invest in growth opportunities such as conversational AI.
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Key Q&A
Q:Regarding the AI-related business, which application area is expected to see faster application and potential revenue contribution going forward?
A:For AI use cases, conversational AI applications in call centers, education, and companionship toys have progressed to a more advanced stage. Some customers have moved from proof of concept to real-world production. The success of these customers is expected to drive broader adoption.
Q:Why did the gross profit margin in Q2 show a year-over-year expansion but a quarter-on-quarter drop? What is the future trend for gross and net profit margins?
A:The gross margin of the current RDCO RTE business has been stable, fluctuating between 66% and 68%. The sequential and year-over-year decline of 1% in this quarter is due to normal fluctuation. For new conversational AI products, initial margins might be lower due to ramp-up and testing costs, but they are expected to reach or exceed RTC margins in the steady state. Net margins are expected to improve as revenues ramp up, with a medium to long-term operating margin target of 15%-20%.
Q:What is the market reception of the newly launched advanced attention locking and avatar features?
A:The features were designed considering real-world applications and customer needs. Advanced attention locking is essential in noisy environments, such as subways or shopping malls, to ensure seamless user experience. Interactive avatars are crucial for education and customer service use cases, enabling lifelike and engaging interactions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the gross margin of new conversational AI products, stating it was too early to determine due to ramp-up and testing costs. They also used vague language regarding the medium to long-term operating margin target, without providing concrete steps or timelines to achieve it.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Conference
AI companion
AI context
AI conversation
AI engine
AI innovation
AI solution
Agora Easemob
Agora Inc
Agora dedication
Agora division
America AI
America Merrill
Artificial Intelligence
Bin Co
CEO Chairman
Chairman Wang
Chief Financial
Financial Officer
Unidentified
Wang Chief
World
agent user
avatar
background
body movement
building
companion toy
engine AI
feature
goal
human
improvement
member
problem
profitability
user voice
volume
world
API Transcript
Agora, Inc. (API) Q3 2025 Earnings Call Transcript
Positive11-19
The earnings call shows strong revenue growth, improved profitability, and efficient cost management. Despite a slight decline in gross margin, the company is experiencing significant demand growth in key sectors and markets. The Q&A highlights positive trends in AI and international markets, with promising future revenue contributions. The company's strategic focus on conversational AI and improved financial outlook further support a positive sentiment. Although the market cap is not available, the overall positive indicators suggest a stock price increase in the range of 2% to 8%.
Agora, Inc. (API) Q2 2025 Earnings Call Transcript
Unknown8-18
The earnings call reveals positive financial performance with revenue growth and profitability, but concerns arise from a slight gross margin decline and unclear guidance on new product margins. The Q&A section highlights potential in AI applications, though management's vague responses on margins and future targets create uncertainty. The share repurchase program supports shareholder value, but impacts cash reserves. Overall, the balanced factors suggest a neutral sentiment for stock price movement.
Agora, Inc. (NASDAQ:API) Q1 2025 Earnings Call Transcript
Positive5-28
The earnings call reflects strong financial performance with a 12% revenue increase and continued GAAP profitability. The launch of the conversational AI engine and market expansion efforts are positive indicators. The share repurchase program extension further boosts confidence. Despite competitive and regulatory risks, the guidance remains optimistic. The Q&A revealed positive sentiment towards AI applications and market growth, though management was vague on adoption timing. Overall, these factors suggest a positive stock price movement, with strong financial metrics and optimistic guidance outweighing uncertainties.
Agora, Inc (API) Q1 2025 Earnings Call Transcript
Positive5-28
The earnings call summary reflects positive financial performance, including a revenue increase and GAAP profitability, alongside strategic initiatives in AI and operational efficiency. The share repurchase extension indicates confidence in long-term growth. Despite competitive pressures and seasonality, the Q&A reveals strong demand trends, particularly in North America and Europe. The management's focus on high-value use cases and cost management supports stable margins. These factors, combined with optimistic guidance and strategic growth plans, suggest a positive stock price movement over the next two weeks.
API Slides
API Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
