American Well's Q3 2025: Contradictions Emerge on Noncore Divestitures, AI Monetization, Government Contracts, and Economic Uncertainty

Date of Call: November 4, 2025

Financials Results

• Revenue: $56.3M, down 8% YOY (includes step-down from Leidos and APC divestiture); normalized for APC sale would be up 1.3% YOY
• Gross Margin: 52%, compared to 37% a year ago

Guidance:

• Full-year revenue now expected $245M–$248M (prior range $245M–$250M)
• Full-year adjusted EBITDA now expected (loss) $45M–$42M (prior -$50M to -$45M)
• AMG visits expected 1.3M–1.35M for the full year
• Q4 revenue expected $51M–$54M; Q4 adjusted EBITDA expected (loss) $15M–$12M
• Expect R&D down >10% vs 2024; S&M down >25% YoY; G&A down ≥20% in 2025
• Aim for positive operating cash flow in 2026

Business Commentary:

• Strong Financial Performance and Cost Efficiency:
• Amwell reported revenue of $56.3 million for Q3 2025, down 8% year-over-year, but would have increased by 1.3% excluding the sale of APC.
• Subscription revenue increased by 18% year-over-year to $30.9 million, representing 55% of total revenue.
• Adjusted EBITDA improved to a loss of $12.7 million, compared to a loss of $31 million a year ago.
• The improvement was due to stronger subscription retention, increased visit volume in specialty care and virtual primary care, and successful restructuring actions leading to meaningful cost efficiencies.

• Platform Enhancements and Strategic Focus:
• Amwell is focusing on integrating enterprise-grade AI into its core workflow, enhancing program integration, and investing in data and analytics infrastructure.
• The company is divesting noncore assets like Amwell Psychiatric Care and reducing headcount across operations, aiming to focus on core offerings and drive efficiency.
• These strategic shifts are in response to growing market demand for integrated technology-enabled care solutions and are expected to enhance customer experience and operational efficiency.

• Market Opportunities and Consumer Demand:
• The company observes accelerating demand for digital health, with mental health telehealth utilization reaching 27.8% in July and 79% of Gen Z using health technology monthly.
• Digital clinical programs are demonstrating effectiveness, such as reducing 30-day readmission rates by 50%.

• These trends are driving investment in AI health solutions and creating opportunities for Amwell to provide integrated solutions addressing market fragmentation and need for efficiency.

• Operating Expense Reduction:

• Operating expenses decreased by 16%, with significant reductions in sales and marketing (46%), R&D (6%), and G&A expenses (14%) compared to the previous year.
• The reductions are attributed to optimizing resources and streamlining operations, which are crucial for maintaining financial balance and achieving long-term goals.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management said results 'compared favorably to the guidance' and 'delivered results ahead of expectations for both revenue and adjusted EBITDA.' CFO highlighted adjusted EBITDA improvement (Q3 loss $12.7M vs $31M a year ago) and cash of ~$201M; CEO reiterated goal of cash flow breakeven by end of 2026.

Q&A:

• Question from Stanislav Berenshteyn (Wells Fargo Securities): I actually wanted to go back to the prior quarter where you had announced a Florida Blues plan win. I was curious if you can give us some color regarding how you won that? Was that a competitive takeaway? And are you seeing any similar opportunities for you going forward?
  Response: It was a competitive win deinstalling a major competitor; the client wanted a unified, branded infrastructure to reduce vendor fragmentation and integrate AI-driven programs — indicative of growing demand.

• Question from Stanislav Berenshteyn (Wells Fargo Securities): Regarding the comments you made in the prepared remarks around potential further divestiture of noncore assets. Can you give us any insight as to what those assets might be? And are you in any active discussions here? Or is this more of a theoretical process?
  Response: Practical process: examples are legacy inpatient/automated programs; we will continue to support them but invest significantly less in growing those segments and may pursue divestitures to focus resources on core opportunities.

• Question from Charles Rhyee (TD Cowen): You talked about AI and implementing that across the enterprise and other technology to sort of inform patient intake, navigation, et cetera. Can you talk a little bit about how that can be monetized? Is that something that you are charging extra for? What is sort of the model as we think about that? And maybe, Mark, I know it's still probably a little early. How should we think about maybe any kind of guardrails to think about when looking out to '26 at all, at least from a top line perspective?
  Response: AI boosts partner program performance, personalization and ROI; monetization today is mainly via increased platform traction and rev‑share/referral fees to partners rather than direct platform price increases, with potential future monetization options.

• Question from Charles Rhyee (TD Cowen): But I guess it sounds like then maybe, Mark, in terms of how should we think about next year? And also if we're not necessarily charging more for these innovations and obviously demonstrating more ROI for customers, how should we think about margins at least? Is the current rate, I think it was 52% here in the quarter. Is that sort of the right level we should be thinking about next year? Or maybe any kind of thoughts there would be helpful.
  Response: AI features aren't expected to materially change margins; margin trajectory is driven by revenue mix (more software/implementation revenue raises margins), and 2026 should be consistent with 2025 margin profile.

• Question from Charles Rhyee (TD Cowen): And maybe one last one, if I could. You talked about sort of divesting sort of noncore assets. Obviously, APC was an example. Is there a lot of other assets still that you would consider in that noncore bucket? And is there a sense for timing? Is this something that we'd like to do very soon? Or is this when you can get something a good value for it?
  Response: More opportunistic/latter approach: defined assets could be bifurcated without disrupting clients; not actively marketed today but may pursue transactions throughout 2026 to narrow focus.

• Question from Jenny Cao (Truist Securities): Have you seen any impact on your sales pipeline as health systems continue to evaluate their IT budgets? Just curious how that conversation has been going in terms of the last couple of months? And related to that, can you talk about your direct tariff exposure?
  Response: Pipeline impact minimal: payers/employers view hybrid/AI-enabled care as essential so demand persists; health systems are more cautious on hardware/workflow spend; tariff exposure negligible — only a tiny hardware line outside the U.S.

• Question from Jack Senft (UBS Investment Bank) (on behalf of Kevin): I wanted to go back to the comments on diverting resources away from the noncore assets. So just to clarify, this is something that's not embedded in guidance this year, correct? And then maybe as a second part to that, is this -- if it's not, is this something that could move up your time line on being cash flow breakeven next year? Or is this something that could even meaningfully move up cash flow expectations?
  Response: Not included in 2025 guidance; any divestitures would not materially change our expectation of achieving cash flow breakeven from operations by end of 2026.

• Question from Jack Senft (UBS Investment Bank) (on behalf of Kevin): I know your sales and marketing expense, it took a nice step down sequentially this quarter. I know you're still targeting the declines of at least 25% plus this year. But maybe as we look at each like kind of line item in the operating expenses here, are these kind of good run rates to think about going forward? Or is there still additional leverage that you can pull next year?
  Response: S&M reduction is material and sustainable; additional cost takeout opportunities remain in G&A and delivery functions, with AI tools expected to scale delivery and lower costs visible in 2026 and beyond.

• Question from John Park (Morgan Stanley): If you had to prioritize or rank the factors going into this target (cash flow breakeven) — factors such as customer renewals, perhaps price increases, service mix, maybe some other factors — how would you rank those?
  Response: Top priority is client retention; second is product/growth initiatives; divestitures provide balance‑sheet optionality but retention and delivering ROI drive breakeven.

• Question from John Park (Morgan Stanley): Is there any areas or topics that you would not want to partner where you would want to just own outright versus integrate with third party?
  Response: We are happy to integrate third‑party solutions as long as they are logistic, secure and compliant — the platform is designed to be flexible and add customer‑desired programs rather than force ownership.

Contradiction Point 1

Divestiture of Noncore Assets and Impact on Cash Flow Breakeven

It involves expectations regarding the divestiture of noncore assets and its impact on achieving cash flow breakeven, which are crucial for financial planning and investor expectations.

Will the divestiture of noncore assets significantly impact reaching cash flow breakeven next year? - Charles Rhyee (TD Cowen)

2025Q3: Divestiture of noncore assets is not expected to significantly impact the target of achieving cash flow breakeven by the end of 2026. The company remains focused on client retention and product growth. - Mark Hirschhorn(CFO)

Does the EBITDA guidance change reflect only the MHS scale adjustment? Was there any revenue pulled forward to Q1? - Eric R. Percher (Nephron Research)

2025Q2: We have some noncore assets that we are reviewing, and we've been in discussions for many months. We've talked about that publicly. And we think those will be an important part of our strategy as we move forward to help us achieve our cash flow breakeven target by the end of the year. - Mark Hirschhorn(CFO)

Contradiction Point 2

AI Integration and Monetization

It involves the company's strategy and expected benefits from AI integration, which are crucial for understanding Amwell's growth and financial outlook.

How can AI be monetized in the product and drive top-line growth through its integration? - Charles Rhyee (TD Cowen, Research Division)

2025Q3: AI enhances Amwell's platform by improving precision in patient intake and navigation, benefiting both Amwell and non-Amwell clinical partners. It also drives value through increased customer acquisition and retention. While AI doesn't directly increase platform costs, it enhances platform value. - Ido Schoenberg(CEO), Mark Hirschhorn(CFO)

Can you discuss Converge's bookings trends outside of the DHA? And what are Dan Zamansky's key strategic priorities or how he can leverage his Amazon experience? - Craig Hettenbach (Morgan Stanley)

2025Q1: We are focusing more sharply on the core market we play and the platform we will give to our market. And in our platform, there will be machine learning, AI, analytics, which are all key components of our ability to ensure we can lead that market for the next several years. - Ido Schoenberg(CEO)

Contradiction Point 3

Government Contract Expectations and Revenue Impact

It involves expectations regarding the government contract, specifically the impact on revenue and growth prospects, which are critical for investor expectations.

How confident are you in the government pipeline, and what role could the DHA extension play? - John Park (Morgan Stanley)

2025Q3: The DHA extension provides Amwell with a strategic beachhead for broader government penetration. - Ido Schoenberg(CEO)

How does the revenue run rate of the extended DHA contract compare to the pilot contract? - Stan Berenshteyn (Wells Fargo Securities)

2025Q2: The DHA extension reflects continued client satisfaction. No major changes in performance expectations are anticipated. - Ido Schoenberg(CEO)

Contradiction Point 4

Divestiture of Noncore Assets

It concerns the company's strategic focus and financial expectations, which are critical for understanding Amwell's future operations and financial health.

Are there other noncore assets remaining and what is the timeline for divesting them? - Charles Rhyee (TD Cowen, Research Division)

2025Q3: There are distinct assets that could be divested without impacting core operations. These assets are not currently disrupting Amwell's core focus. Divestiture efforts are ongoing, with expectations to finalize in 2026. - Mark Hirschhorn(CFO)

What are the booking trends for Converge excluding DHA? What strategic priorities can Dan Zamansky leverage from his Amazon experience? - Craig Hettenbach (Morgan Stanley)

2025Q1: The legacy assets, which are hardware, AI and analytics, and low margin offerings, will be sold down over the next 2 years. That is our goal. - Ido Schoenberg(CEO)

Contradiction Point 5

Expected Impact of Economic Uncertainty

It involves the company's response to macroeconomic conditions, which can significantly impact Amwell's growth and financial performance.

Has there been any impact on your sales pipeline due to macroeconomic noise, tariffs, or economic uncertainty? What is your direct tariff exposure? - Stanislav Berenshteyn (Wells Fargo Securities, LLC, Research Division)

2025Q3: While macroeconomic conditions may slow down or cause some of our healthcare organizations to rethink their strategy in terms of growth, it does not impact our ability to drive customer engagement. - Mark Hirschhorn(CFO)

Have economic uncertainty and tariffs impacted sales timelines and conversations? - Jailendra Singh (Truist)

2025Q1: Despite market sentiment, the trend in implementing Amwell's platform is accelerating. The market is starting to see the value of integrating the hybrid care. - Ido Schoenberg(CEO)