Amwell's Q3 2025: Contradictions Emerge on AI Monetization, Noncore Asset Divestitures, and DHA Contract Uncertainty

Date of Call: November 04, 2025

Financials Results

• Revenue: $56.3M, down 8% YOY (normalized for APC divestiture would have increased 1.3%)
• Gross Margin: GAAP gross margin 52%, compared to 37% in the prior year

Guidance:

• Full-year revenue now expected $245M–$248M (prior range $245M–$250M).
• Full-year adjusted EBITDA now expected (−$45M) to (−$42M) (prior range −$50M to −$45M).
• AMG visits for full year expected 1.3M–1.35M.
• Q4 revenue expected $51M–$54M; Q4 adjusted EBITDA expected (−$15M) to (−$12M).
• Expect R&D >10% reduction vs 2024; sales & marketing down >25% YoY; G&A down ≥20%.
• Target positive cash flow from operations in 2026; prospective divestitures not included in current guidance.

Business Commentary:

• Revenue and Financial Performance:
• Amwell reported revenue of $56.3 million for Q3 2025, representing an 8% decrease year-over-year.
• Subscription revenue increased by 18% year-over-year to $30.9 million, accounting for 55% of total revenue.
• The reduction in total revenue was primarily due to the divestiture of Amwell Psychiatric Care (APC) and a step-down in contributions from Leidos.

• visit Volume and Revenue per Visit:
• Amwell's total visit volume in the third quarter was approximately 1.1 million visits, down 21% from the previous year.
• Average revenue per visit was $71, a 14% decrease year-over-year, but when normalizing for the APC sale, the average revenue per visit increased by 3.5%.
• The decrease in visits was primarily due to the sale of APC, while the increase in average revenue per visit was driven by a shift towards higher-priced virtual primary care and specialty care visits.

• Cost Efficiency and Expense Reduction:
• Operating expenses for Q3 2025 were $58.9 million, a 16% decrease compared to the previous year.
• This reduction was due to a 6% reduction in R&D, a 46% decrease in sales and marketing expenses, and a 14% decrease in G&A expenses.

• The company's focus on optimizing resources and rightsizing headcount contributed to these cost efficiencies.

• AI and Platform Integration:

• Amwell is integrating AI into its core workflow to enhance patient intake, navigation, and clinical program matching, which benefits from its extensive historical data.
• The integration aims to create a more personalized and efficient user experience, generating additional value for customers while reducing costs.
• The company plans to continue leveraging AI to streamline operations, improve patient outcomes, and increase customer engagement.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management said results "compared favorably to the guidance we provided," highlighted adjusted EBITDA improvement to a $12.7M loss versus a $31M loss a year ago, noted GAAP gross margin expanded to 52% from 37% last year, and reiterated a goal of achieving cash-flow breakeven by end of 2026.

Q&A:

• Question from Stanislav Berenshteyn (Wells Fargo Securities, LLC): You had announced a Florida Blue plan win — how did you win it? Was it a competitive takeaway? Are you seeing similar opportunities going forward?
  Response: Win was a competitive takeaway driven by Amwell's ability to offer a single, white-labeled, integrative platform that reduces vendor fragmentation and enables AI-driven program integration.

• Question from Stanislav Berenshteyn (Wells Fargo Securities, LLC): You mentioned potential further divestiture of noncore assets — which assets might those be and are there active discussions or is it theoretical?
  Response: This is practical and underway in approach: legacy, noncore products will be de-emphasized or divested to reallocate resources to the core platform while continuing to support customers on legacy solutions.

• Question from Charles Rhyee (TD Cowen): How will AI monetization work — are you charging extra, and how should we think about guardrails for 2026 topline impact?
  Response: AI increases platform ROI and traction; monetization today is mainly via increased software mix and partner referral/rev-share rather than direct price increases; financial impact driven more by software mix than new AI pricing.

• Question from Charles Rhyee (TD Cowen): Should we assume the ~52% gross margin this quarter is the right level to model for 2026?
  Response: AI features aren't expected to materially change margins; margin trajectory will be driven by software revenue mix — management expects 2026 margins broadly consistent with 2025.

• Question from Charles Rhyee (TD Cowen): On divesting noncore assets beyond APC — how many assets remain, and what's the timing?
  Response: Divestitures are opportunistic; there are identifiable assets that could be separated and the company will pursue narrowing focus through 2026 rather than immediate mass sales.

• Question from Jenny Cao (Truist Securities, Inc.): With macro uncertainty and IT budget scrutiny, have you seen pipeline impacts and what's your direct tariff exposure?
  Response: Core platform demand remains resilient as customers view it as essential; tariff exposure is negligible (minor hardware business), so no meaningful direct impact from tariffs.

• Question from Jack Senft (UBS Investment Bank) on behalf of Kevin: The resource diversion from noncore assets — is that included in guidance and could it move up cash-flow breakeven?
  Response: Divestiture actions are not included in 2025 guidance and aren't expected to materially change the target of operational cash-flow breakeven by end of 2026.

• Question from Jack Senft (UBS Investment Bank): Your sales & marketing step-down — are current operating expense run rates durable or is additional leverage available next year?
  Response: Further cost reductions are available, notably in G&A and delivery functions; AI tools will drive delivery efficiency and scale benefits visible in 2026 and beyond.

• Question from John Park (Morgan Stanley): To reach cash-flow breakeven, how would you rank factors like retention, price, service mix, divestitures?
  Response: Client retention is the top priority, followed by product-led growth initiatives; divestitures and the strong balance sheet provide optionality but are secondary to retention.

• Question from John Park (Morgan Stanley): Are there categories you would rather own outright than partner on?
  Response: Amwell's approach is to integrate secure, compliant third-party solutions per customer needs; they prefer to enable customer choice via integrations unless owning a solution is necessary.

Contradiction Point 1

AI Implementation and Monetization

It involves the company's strategy and expectations regarding the implementation and monetization of AI, which are crucial for understanding Amwell's growth and profitability.

How will AI implementation impact patient intake and monetization? What are the potential impacts on 2026 margins? - Charles Rhyee (TD Cowen)

2025Q3: AI influences patient navigation and experience by personalizing the journey. It increases ROI and improves customer acquisition costs. Amwell does not charge extra for AI but shares rev share from partners, enhancing platform value. AI investments improve efficiency across operations. - Ido Schoenberg(CEO)

Does the 2025 subscription revenue forecast reflect a decline due to revised scope under the DHA contract? How can we achieve cash flow breakeven in 2026? - Lucas Cole Romanski (TD Cowen)

2025Q2: We're leveraging AI to personalize patient care, enhance clinical outcomes and reduce costs in partnership with our clients. The use of AI is enabled within our platform and we enable it to be extended across multiple use cases and clinical programs. - Ido Schoenberg(CEO)

Contradiction Point 2

Noncore Asset Divestiture

It involves the company's strategy for divesting noncore assets, which is essential for focusing on core business growth and meeting financial goals.

Can you clarify the timing and strategy for divesting non-core assets? - Charles Rhyee (TD Cowen)

2025Q3: We are focusing on core assets without disrupting client relationships. Potential sales will be distinct assets that can be run separately. - Mark Hirschhorn(COO/CFO)

What assets are being considered for potential divestiture, and are there any active discussions or is this still theoretical? - Stan Berenshteyn (Wells Fargo Securities)

2025Q3: We plan to continue supporting these legacy products but will invest less in growing these market segments compared to the main opportunity. - Ido Schoenberg(CEO)

Contradiction Point 3

Divestiture of Noncore Assets

It involves the company's strategy regarding the divestiture of noncore assets, which could impact financial performance and strategic focus.

Can you provide details on potential non-core assets for further divestiture? - Stanislav Berenshteyn (Wells Fargo Securities, LLC, Research Division)

2025Q3: Amwell is focusing on core offerings due to their high ROI potential. Legacy products are secure and reliable but will see less investment. The focus is on integrating rapidly evolving technologies and interoperability, which creates considerable value in select market segments. - Ido Schoenberg(CEO)

If the DHA contract is signed, could there be economic changes? Are there updates on other potential government opportunities? - Stan Berenshteyn (Wells Fargo Securities LLC)

2025Q1: We are focusing on our core offerings, which are riding atailwind of strong demand, rapid product innovation, and increasingly higher ROI, we have great confidence in our ability to execute in our core and are taking significant actions to enhance shareholder value. - Ido Schoenberg(CEO)

Contradiction Point 4

Revenue Run Rate and Contract Renewal

It involves the expectations and uncertainties surrounding the revenue run rate and contract renewal with DHA, which directly impacts Amwell's financial outlook.

Are there areas where Amwell prefers to own solutions outright rather than integrate with third-party partners? - John Park (Morgan Stanley)

2025Q3: Amwell is cautiously optimistic about the renewal process and the overall market for virtual care. The current contract does not expire until early 2027. - Ido Schoenberg(CEO)

How does the extended DHA contract's revenue run rate compare to the pilot contract? Are there KPIs that will determine 2027 renewal? - Stanislav Berenshteyn (Wells Fargo Securities)

2025Q2: So in 2027 the contract will be up, and we'll be there to have a great discussion with our client, with DHA, based on the value that we delivered. - Ido Schoenberg(CEO)