Veritone's Q3 2025: Emerging Contradictions on VDR Pipeline, Revenue Growth, and Public Sector Impact

Date of Call: November 6, 2025

Financials Results

• Revenue: $29.1M, up 32% year-over-year (Q3 2025 vs Q3 2024)
• Gross Margin: GAAP gross margin 63.3% in Q3 2025 vs 66.6% in Q3 2024; non-GAAP gross margin 70.6% in Q3 2025 vs 71.2% in Q3 2024 (Q4 non-GAAP forecast ~60–61%)
• Operating Margin: Operating loss $15.8M, improved $6.7M or 29% year-over-year

Guidance:

• Q4 revenue expected $33.4M–$39.4M (vs $22.4M in Q4 2024; ~63% growth at midpoint; ~25% sequential from Q3).
• Q4 Software Products & Services >75% YoY; Public Sector ~50% YoY; Veritone Hire slightly down YoY; Managed Services expected down.
• Q4 non-GAAP gross margin ~60%–61%; Q4 non-GAAP net loss $1.5M–$5M (vs $9.7M in Q4 2024).
• Fiscal 2025 revenue $109M–$115M (midpoint +22% YoY); fiscal 2025 non-GAAP net loss $31.6M–$26M (midpoint ~29% improvement).

Business Commentary:

* Revenue Growth and Debt Reduction: - Veritone reported revenue of over $29 million for Q3 2025, representing a 32% year-over-year increase. - The growth was driven by high demand for its aiWARE solutions, data products, and intelligent applications, particularly in Software Products & Services. Additionally, the company completed agreements to retire its term debt and repurchase approximately 50% of its outstanding convertible debt, which reduced annual debt service burden from over $14 million to approximately $800,000 annually.

• VDR Pipeline and Expansion:
• The Veritone Data Refinery (VDR) business saw a 100% increase in its qualified pipeline and bookings, exceeding $40 million.
• This growth was attributed to increased demand from major hyperscalers and model training partners, positioning Veritone as a critical enabler in the unstructured AI training data ecosystem. The company aims to secure contracts with every major hyperscaler by the end of 2025.

• Public Sector Growth:
• Veritone's Public Sector revenue grew by over 25% year-over-year, with a pipeline approaching $218 million.

• Growth was driven by the rollout of larger deals executed in the first half of 2025, including contracts with the Department of Defense and larger public safety agencies. Despite the federal government shutdown, Veritone continues to generate revenue and engage with customers.

• Balance Sheet Strengthening:

• Veritone successfully reduced its consolidated debt from a peak of $201 million in December 2021 to approximately $126.7 million.
• This was achieved through strategic debt management, including paying off 100% of its term loan and repurchasing 50% of its convertible debt. The company held approximately $36.5 million in cash and restricted cash, enhancing its liquidity position and future cash flow outlook.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized strong momentum: revenue $29.1M (+32% YoY), Software Products & Services +55% YoY, VDR pipeline/bookings >$40M (100% QoQ growth). They highlighted major balance-sheet improvements (term debt retired, ~50% convertible repurchased), annual debt service reduced from >$14M to ~$800k, and confidence in reaching profitability in late 2026.

Q&A:

• Question from Joshua Reilly (Needham & Company, LLC): What are the puts and takes that could drive Q4 to the high end versus the low end of the $33.4M–$39.4M guidance range?
  Response: Range is driven primarily by timing and velocity of large VDR and commercial deals (and to a lesser extent public sector deal timing); management is optimistic and pushing to hit the high end.

• Question from Joshua Reilly (Needham & Company, LLC): You reported a 100% quarter-over-quarter increase in the VDR pipeline — what go-to-market actions are driving that growth and will you expand GTM for 2026?
  Response: VDR growth is fueled by both buy-side (hyperscalers/model developers) and supply-side (content owners); company will strategically expand its sales/go-to-market efforts to scale velocity and capture upside.

• Question from Joshua Reilly (Needham & Company, LLC): Q4 public sector guidance implies ~50% YoY growth — how are you factoring in the federal government shutdown and potential deal timing into that assumption?
  Response: They baked in potential shutdown-related delays; some federal revenues were delayed but other business outperformed, so shutdown timing is a headwind but not expected to materially derail the guide.

• Question from Glenn Mattson (Ladenburg Thalmann & Co. Inc.): Is the public sector slowdown driven by the federal shutdown or a specific contract (e.g., the Air Force), and should we expect a snapback?
  Response: It's a short-term blip (weeks to a couple months) driven by furloughs/delays; projects remain active and management expects a snapback with negligible long-term modeling impact.

• Question from Glenn Mattson (Ladenburg Thalmann & Co. Inc.): How should we think about seasonality for next year given historical front-half lightness versus stronger back half and the impact of VDR?
  Response: No formal 2026 guidance, but the company expects the back-half-weighted pattern to persist; use last year's back-half strength as directional context for YoY comparisons.

• Question from Stephen Banta (Banta Asset Management LP): What is the strategy for Veritone Hire given it's relatively flat while other areas grow rapidly?
  Response: Veritone Hire is a stable, cash-generative business that is flat to slightly down versus peers; it remains an important part of the portfolio and the company will keep options open while focusing on higher-growth areas.

Contradiction Point 1

VDR Revenue Pipeline and Growth Expectations

It involves differing statements about the VDR revenue pipeline and growth expectations, which could impact investor perceptions of the company's financial outlook.

What is driving the 100% QoQ increase in the VDR pipeline? - Joshua Reilly (Needham & Company, LLC, Research Division)

2025Q3: We have over $20 million in the near-term VDR pipeline, which reflects high visibility opportunities with large hyperscalers. - Ryan Steelberg(CEO)

Can you quantify the VDR pipeline and its expected revenue impact? - Glenn Mattson (Ladenburg Thalmann & Co. Inc., Research Division)

2025Q2: The near-term VDR pipeline is over $20 million, reflecting high visibility opportunities with large hyperscalers. - Ryan Steelberg(CEO)

Contradiction Point 2

Revenue Growth Expectations

It involves changes in revenue growth expectations, which are critical for investor expectations and financial forecasting.

What factors could impact Q4 revenue to reach the high or low end of guidance? - Joshua Reilly (Needham & Company, LLC, Research Division)

2025Q3: We're optimistic about our growth trajectory, the VDR deal outlook and the public sector rollout. Our revenue guidance reflects this confidence. - Ryan Steelberg(CEO)

How confident are you in meeting the guidance reflecting strong growth in H2? - Scott Buck (H.C. Wainwright & Co.)

2025Q1: Given our strong bookings momentum and overall pipeline, we expect to deliver at least $150 million in revenue for the year, resulting in a year-over-year growth rate in the low 40s. - Ryan Steelberg(CEO)

Contradiction Point 3

VDR and Public Sector Revenue Contribution

It involves changes in the expected contribution of VDR and Public Sector revenues, which are key components of the company's overall revenue strategy.

What factors could push Q4 revenue expectations to the high or low end of the guidance range? - Joshua Reilly (Needham & Company, LLC, Research Division)

2025Q3: We're already seeing the benefits of this growth strategy, with VDR booking over $10 million in the quarter and Software and Services increasing by about 25% on a year-over-year basis. - Ryan Steelberg(CEO)

What's the composition of the public pipeline, and is it driven more by new customers or customer expansions? - Scott Buck (H.C. Wainwright & Co.)

2025Q1: Software and Services revenue in Q1 2025 was $29.1 million, an increase of approximately 11% year-over-year, with year-to-date Software and Services revenue up approximately 6% year-over-year. - Ryan Steelberg(CEO)

Contradiction Point 4

Public Sector Revenue and Federal Government Shutdown Impact

It involves differing perspectives on the impact of the federal government shutdown on the Public Sector business, which could influence revenue expectations and investor confidence.

How will the federal government shutdown impact Q4 federal public sector outlook? - Joshua Reilly (Needham & Company, LLC, Research Division)

2025Q3: The shutdown has caused delays in some revenues, but growth is still ongoing. The impact is minor compared to the overall business, and we remain bullish on the federal public sector. - Ryan Steelberg(CEO)

Are you experiencing disruptions or delays in the federal government due to administration turnover? - Scott Buck (H.C. Wainwright & Co.)

2024Q4: We are primarily servicing against approved 2025 dollars. We obviously are all watching closely, the upcoming budget cycle and the potential CR that's currently being negotiated. - Ryan Steelberg(CEO)

Contradiction Point 5

VDR Pipeline Growth and Sales Strategy

It highlights differing explanations for the growth in the VDR pipeline and the sales strategy, potentially impacting investor understanding of the company's business momentum.

What is the go-to-market strategy behind the 100% quarter-over-quarter growth in the VDR pipeline? - Joshua Reilly (Needham & Company, LLC, Research Division)

2025Q3: We are unique in representing and selling to both the buy and supply sides of the AI training data ecosystem. Our growth strategy involves expanding the sales force to manage the increased opportunity and accommodate new data providers. - Ryan Steelberg(CEO)

What specific drivers beyond consumption headwinds support your confidence in this growth inflection point? - Jesse Sobelson (D. Boral Capital)

2024Q4: VDR and Public Sector, are by far going to be leading the growth and trajectory, in terms of proof points and immediate catalyst. VDR has exceeded our expectations. - Ryan Steelberg(CEO)