Why did PERF's earnings surprise in Q2?

Perfect Corp. (PERF) reported its Q4 2024 earnings, which were generally in line with expectations, with a few surprises. Here's a detailed analysis:

1. **Revenue Growth**: PERF reported a 12.4% year-over-year revenue growth for Q4 2024, reaching $15.9 million. This growth was primarily driven by strong performance in the mobile app subscription business under AI/AR cloud solutions, with a 14.3% increase in active paying subscribers. However, this growth was slightly below the consensus estimate of $16.4 million, which could be a source of surprise for investors.

2. **Licensing Revenue Decline**: A significant decline of 72.2% in licensing revenue was reported in Q4 2024, dropping to $0.5 million. This decrease could be a notable surprise for investors, as it represents a substantial drop in a segment that was likely expected to contribute to revenue growth.
3. **Gross Margin Decrease**: The gross margin decreased by 730 basis points to 74.2% in Q4 2024, primarily due to the increase in third-party payment processing fees paid to digital distribution partners. This could be a concern for investors, especially given the impact on profitability.
4. **Overall Performance**: Despite the challenges, PERF reported a net income of $1.1 million for the quarter, with an adjusted net income of $2.3 million, indicating a stable bottom line. The company's strong cash position, holding $165.9 million in cash and cash equivalents, also supports this view.

In conclusion, while PERF's revenue growth was in line with expectations, the decline in licensing revenue and gross margin decrease could be considered surprises. However, the company's overall financial performance and strong cash position mitigate these negatives, resulting in a generally positive earnings report.