Klaviyo Q1 Non-GAAP Earnings, Revenue Rise; Shares Gain After Hours
3min read Klaviyo (KVYO), the B2C customer engagement platform, delivered a robust Q1 2025 performance, with revenue surging 33% year-over-year to $279.8 million and non-GAAP net income hitting $42.07 million. The results, which exceeded market expectations, propelled shares 6.84% higher in after-hours trading. Beneath the headline numbers, Klaviyo’s metrics signal a company scaling efficiently while deepening its hold on the CRM market.
The Financial Breakdown: Growth Amid Margins
Klaviyo’s revenue growth of 33% YoY—driven by a 16% increase in its customer base to 169,000—outpaced its 2024 guidance. Non-GAAP operating income rose to $32.4 million, or 12% of revenue, from $29.3 million (14% margin) in Q1 2024. While GAAP net losses persisted at $(14.09 million), the exclusion of stock-based compensation ($38.3 million) and marketing amortization ($13.2 million) highlighted a focus on operational discipline.
The company’s non-GAAP gross margin held steady at 77%, though GAAP margins dipped slightly to 76% due to equity compensation. This bifurcation underscores the importance of non-GAAP metrics for investors, as Klaviyo continues to invest in its AI-driven tools like the Customer Hub and Marketing Analytics, which now account for 40% of its customer base’s growth in high-ARR accounts.
Customer Momentum: Retention and Expansion
Klaviyo’s dollar-based net revenue retention rate (NRR) of 108% remains a key strength. This metric reflects not only retention of existing customers but also upselling to higher-tier plans. The number of customers generating over $50,000 in annual recurring revenue (ARR) jumped 40% YoY to 3,030, signaling strong demand from mid-market and enterprise B2C brands.
The rise in high-ARR customers is critical because they typically spend 10–15x more than smaller clients. Klaviyo’s ability to convert these accounts—aided by its AI-powered personalization features—suggests a flywheel effect: satisfied high-value customers drive word-of-mouth growth and lower acquisition costs for the broader base.
Strategic Leverage: The Shopify Connection
Klaviyo’s partnership with Shopify, its largest customer, continues to pay dividends. While Shopify’s share of Klaviyo’s revenue has declined slightly to 45% (from 50% in 2023), Klaviyo’s standalone product, Customer Hub, has attracted a broader audience. This diversification reduces reliance on Shopify while expanding Klaviyo’s addressable market.
The amortization of prepaid marketing expenses tied to Shopify warrants attention. The $13.2 million adjustment in Q1 reflects costs from warrants issued to Shopify in prior years, a one-time drag on GAAP results. Non-GAAP metrics, however, exclude this, emphasizing Klaviyo’s core business performance.
Guidance: Ambitious but Achievable?
Klaviyo raised its FY2025 revenue guidance to $1.171–1.179 billion, implying 25–26% YoY growth. For Q2, it expects revenue of $276–280 million (24–26% growth) and non-GAAP operating income of $28.5–31.5 million. Analysts are watching for execution on free cash flow, which came in at $6.6 million in Q1, down from $15.2 million in Q4 2024.
Conclusion: A High-Growth CRM Play with Scaling Leverage
Klaviyo’s Q1 results confirm its position as a B2C CRM leader, leveraging AI-driven tools to fuel customer expansion and retention. The 108% NRR and 40% rise in high-ARR customers suggest a durable moat, while non-GAAP profitability points to margin stability as growth scales.
The raised revenue guidance to $1.17 billion—supported by a 16% customer base expansion and a 10% operating margin target—aligns with a company poised for sustained momentum. While GAAP losses remain due to stock-based compensation, the stock’s post-earnings surge reflects investor confidence in Klaviyo’s path to profitability.
For investors, Klaviyo’s valuation—currently trading at ~7x 2025 revenue—appears reasonable given its 25–30% long-term growth trajectory. The rise in free cash flow to $6.6 million in Q1, despite seasonally lower Q1 spending, bodes well for full-year targets. With strategic moves like the Customer Hub and Marketing Analytics, Klaviyo is not just keeping pace with B2C brands’ needs—it’s redefining them.
