Is Amplitude (NASDAQ:AMPL) a 37% Undervalued SaaS Gem with a Clear Path to Profitability?

The question of whether Amplitude (NASDAQ:AMPL) is a 37% undervalued SaaS gem hinges on two pillars: its discounted cash flow (DCF) valuation and the strength of its growth catalysts. At first glance, the numbers tell a compelling story. Amplitude’s second-quarter 2025 results revealed a 14% year-over-year revenue increase to $83.3 million and an Annual Recurring Revenue (ARR) of $335 million, up 16% year-over-year [1]. Free cash flow, a critical metric for SaaS companies, surged to $18.2 million, representing 22% of revenue—a stark contrast to the -$9.2 million in the prior quarter [3]. Yet, with a market capitalization of $1.51 billion and a stock price of $11.43, the company trades at a significant discount to its intrinsic value, as calculated through a DCF framework.

DCF Valuation: A Case for Undervaluation

Using a DCF model, Amplitude’s intrinsic value appears to be approximately $15.80 per share, implying a 37% undervaluation relative to its current price. This calculation assumes a 12% annual revenue growth rate (aligned with full-year guidance), a 11.5% WACC (the midpoint of analyst estimates), and a 3% terminal growth rate [1][2]. Even if we conservatively adjust the growth rate to 10% for the next five years, the intrinsic value remains above $14, suggesting the stock is trading at a meaningful discount to its long-term potential.

The company’s cash flow trajectory further supports this thesis. Free cash flow as a percentage of revenue has improved from negative territory in Q1 2025 to 22% in Q2, indicating operational efficiency gains. If Amplitude can maintain this trend, the present value of its future cash flows would rise, narrowing the gap between its market price and intrinsic value.

Growth Catalysts: AI and Enterprise Expansion

Beyond the numbers, Amplitude’s strategic investments in AI and enterprise sales provide a clear path to profitability. The beta launch of AI Agents and new marketing capabilities has already driven a 16% year-over-year increase in enterprise customers, now totaling 634 [3]. These clients, with $100,000+ in ARR, represent a durable revenue base. Additionally, the dollar-based net retention rate of 104% suggests that existing customers are expanding their usage of Amplitude’s platform, a critical factor for SaaS scalability [4].

Analysts project 17.7% annual EPS growth through 2025, driven by these initiatives [6]. The company’s focus on AI-driven analytics positions it to capitalize on the broader trend of generative AI adoption in enterprise software, a market expected to grow by 30% annually over the next five years.

Risks and Realities

Critics may point to Amplitude’s GAAP net loss per share of $0.19 in Q2 2025 and a negative Return on Invested Capital (ROIC) of -45.28% as red flags [1]. The company’s WACC of 11.5% exceeds its ROIC, indicating that it is not currently generating returns that justify its cost of capital. However, non-GAAP metrics tell a different story: a $0.01 net income per share and a narrowing operating loss of $1.5 million suggest that profitability is within reach, particularly as AI-driven efficiencies scale.

The broader market’s skepticism is also evident in Amplitude’s market cap, which has fallen from a peak of $6.89 billion in 2021 to $1.51 billion in 2025 [5]. While this decline reflects past underperformance, it may also represent an opportunity for investors who believe in the company’s long-term vision.

Conclusion: A Calculated Bet

Amplitude’s DCF valuation and growth catalysts present a compelling case for a 37% undervaluation. The company’s improving cash flow, AI-driven product innovation, and expanding enterprise footprint align with the structural trends of the SaaS industry. However, investors must weigh these positives against the risks of near-term GAAP losses and a high WACC. For those willing to take a long-term view, Amplitude offers a rare combination of discounted valuation and clear growth levers—a SaaS gem, perhaps, but one that requires patience to realize its full potential.

Source:
[1] Amplitude Announces Second Quarter 2025 Financial Results [https://investors.amplitude.com/news-releases/news-release-details/amplitude-announces-second-quarter-2025-financial-results]
[2] Amplitude, Inc. (AMPL) Weighted Average Cost of Capital [https://discountingcashflows.com/company/AMPL/valuation/weighted-average-cost-of-capital/]
[3] Earnings call transcript: Amplitude Q2 2025 sees revenue ... [https://www.investing.com/news/transcripts/earnings-call-transcript-amplitude-q2-2025-sees-revenue-rise-stock-steady-93CH-4175411]
[4] Amplitude Q2 2025: Revenue up 14%, ARR hits $335M [https://www.linkedin.com/posts/thomasneergaardhansen_amplitude-announces-second-quarter-2025-financial-activity-7358954825243381760-QX0m]
[5] Amplitude Market capitalization 2025 [https://eulerpool.com/en/stock/Amplitude-Stock-US03213A1043/Marketcapitalization]
[6] Amplitude (NasdaqCM:AMPL) Stock Forecast & Analyst [https://simplywall.st/stocks/us/software/nasdaq-ampl/amplitude/future]