Agora's Q3 2025 Earnings Call: Contradictions Emerge on AI Adoption, Market Growth, Profitability Targets, and Regional Revenue Projections

Date of Call: November 19, 2025

Financials Results

• Revenue: $35.4M, up 12% year-over-year
• Gross Margin: 66%, down 0.7% year-over-year and down 0.8% sequentially

Guidance:

• Q4 2025 revenue expected to be $37M–$38M (up 7.2%–10.1% YoY)
• Expect GAAP operating profit breakeven in Q4 2025
• Net income expected to grow sequentially in Q4 2025
• Target to achieve full-year GAAP operating profit in 2026; year‑over‑year net income improvement expected but subject to interest-rate uncertainty

Business Commentary:

* Revenue Growth and Profitability: - Agora, Inc. reported $35.4 million in total revenue for Q3, up 12% year-over-year. - The company achieved its fourth consecutive quarter of GAAP profitability, with a GAAP net profit of $2.7 million and a GAAP net margin of 7.8%. - The growth was driven by double-digit revenue growth and expanding margins, with a strong rebound in its core real-time engagement PaaS business.

• Conversational AI Investment and Expansion:
• Agora is significantly increasing its investment in conversational AI, focusing on building voice agents that can converse naturally with users.
• The company launched Conversational AI Engine 2.0 to address challenges such as audio processing, latency management, and compliance requirements.

• This investment is aimed at providing a zero-code interface for developers and expanding its product suite to include a conversational AI studio and benchmarking platform.

• Market Demand Trends:

• In China, demand recovery is ongoing, driven by stabilized regulatory environments and growth in social, entertainment, education, IoT, and digital transformation sectors.
• In the U.S. and international markets, live commerce demand is rapidly growing, with other verticals also showing positive growth.

• The company's strong performance is attributed to robust market penetration and growing adoption in key verticals such as live shopping, social, entertainment, and IoT.

• Conversational AI Revenue Projections:

• Conversational AI is anticipated to become a significant revenue contributor by the end of next year.
• Key use cases driving early adoption are call centers, education, and companionship toys, with customers already in production, although usage is still ramping up.
• The success of these customers is expected to drive broader adoption and meaningful revenue contributions.

Sentiment Analysis:

Overall Tone: Positive

• Management reported "fourth consecutive quarter of GAAP profitability," Q3 revenue of $35.4M (+12% YoY) and stated they "expect revenue and net profit to continue growing on a quarter-over-quarter basis in Q4," plus guidance to reach Q4 GAAP operating-profit breakeven.

Q&A:

• Question from Harry Zhuang (BofA Securities): Could management share key demand trends domestically and internationally, downstream sectors driving growth; latest update on AI development and near-term revenue scenarios; and profitability outlook for Q4 and FY26?
  Response: Demand is rebounding globally (live commerce, social, IoT strong); conversational AI is focused on real-time voice agents with call centers, education and companionship toys progressing to production and expected to contribute meaningfully in H1 next year; company expects GAAP operating-profit breakeven in Q4 and targets full-year GAAP operating profit in 2026.

• Question from Rachel Han (CICC): What drove Q3 revenue beating the midpoint of guidance, and which AI downstream applications show strongest momentum—particularly AI companionship toys and timing for financial contribution?
  Response: Q3 beat driven by strong U.S./international live-commerce demand plus China seasonality and rapid IoT (smart cameras, wearables, toys) growth; AI companionship toys (e.g., Robopoet) show commercial traction with subscription monetization and additional toy launches expected in the next few months.

• Question from Yu Sing (China Securities): What was the sequential growth trend for AI-related usage and when might AI applications reach meaningful scale; and can Agora expand into edge inference or security given CDN/edge moves?
  Response: Conversational AI usage grew >150% quarter-over-quarter; management is building distributed real-time inference services (low-latency, multi-location ASR/TTS/LLM orchestration) as a natural expansion to support real-time agent workloads.

Contradiction Point 1

AI Adoption and Market Timing

It involves differing expectations on the timeline and trajectory for the adoption of conversational AI, which is a key growth driver.

What is the latest update on AI development? Which key scenarios could drive meaningful short-term revenue? - Harry Zhuang(BofA Securities)

2025Q3: We expect adoption growth and revenue contribution in the first half of next year. - Bin Zhao(CEO)

When will conversational AI see mass adoption, given its current pricing premium over non-AI applications, and when is the tipping point for this adoption? - Unidentified Analyst (Nomura)

2025Q1: Massive adoption depends on achieving product market fit in various industries and specific use cases. The timeline is uncertain and depends on the industry's product maturity. - Tony Zhao(CEO)

Contradiction Point 2

AI Market Growth and Revenue Contribution

It involves differing perspectives on the growth and revenue contribution of AI-related technologies, which are crucial for understanding the company's strategic direction and potential financial impact.

Can management provide the latest AI development updates and key scenarios for near-term meaningful revenue contributions? - Harry Zhuang (BofA Securities)

2025Q3: Expect adoption growth and revenue contribution in the first half of next year. - Bin Zhao(CEO)

What are the trends in international and China markets? What are the key growth sectors for 2025? In what scenarios have we applied AI technologies? - Harry Zhuang (BofA Securities)

2024Q4: Growth in mature use cases before new ones. - Tony Zhao(CEO)

Contradiction Point 3

Profitability Targets and Expectations

It involves changes in financial forecasts, specifically regarding profitability targets, which are critical indicators for investors.

What is the profitability outlook for Q4 and FY '26, specifically for operating and net profit? - Harry Zhuang (BofA Securities)

2025Q3: For 2026, target to achieve GAAP operating profit. GAAP net profit has some uncertainty due to potential interest rate cuts, but expect year-over-year improvement. - Jingbo Wang(CFO)

What caused Agora's strong Q4 growth recovery, and will the growth momentum continue in 2025? How do you view the demand for voice and multimodal interaction over the next two years, and which areas will Agora and Shengwang prioritize? - Liping Zhao (CICC)

2024Q4: Growth in revenue and cost management expected to drive profitability. - Jingbo Wang(CFO)

Contradiction Point 4

AI Usage Growth

It highlights different perspectives on the growth rate of AI usage, which impacts the company's revenue projections and strategic planning.

Can you provide the sequential growth trend for AI-related usage? And based on the current customer pipeline, when can we expect meaningful scaling of these AI applications? - Yu Sing(China Securities)

2025Q3: Conversational AI usage increased by over 150% quarter-over-quarter. - Bin Zhao(CEO)

Are there downstream demand issues related to AI-powered real-time interaction capabilities? - Unidentified Analyst (CICC)

2025Q1: AI adoption growth relies on achieving product market fit in specific verticals. - Tony Zhao(CEO)

Contradiction Point 5

Revenue Growth in China and International Markets

It suggests varying levels of optimism regarding revenue growth in different markets, impacting investor perceptions of the company's regional performance.

What are the key trends in domestic and international markets for the coming quarters and the key downstream sectors driving demand growth? - Harry Zhuang (BofA Securities)

2025Q3: In China, demand recovery continues with stabilized regulation. Social, entertainment, and education sectors rebounded. - Bin Zhao(CEO)

What are the key drivers for Q4 revenue growth and demand trends in China mainland and overseas markets? - Huiqun Li (Daley Lee with Bank of America)

2024Q3: In the U.S., international market, we see more demand in live shopping... In China, we see improvement on IoT and digital transformation in Q4. - Jingbo Wang(CFO)