Phunware Reports Q2 Revenue Drop

Key Points

• Revenue (GAAP) fell short of analyst expectations by 44.9%, declining to $0.455 million from $1.011 million a year earlier (GAAP, Q2 2025 vs Q2 2024).

• Gross margin improved to 43.9%, up from 26.9% in Q2 2024, driven by recurring software revenue.

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Phunware (NASDAQ:PHUN), a developer of mobile software and cloud-based application platforms, reported its Q2 2025 earnings on August 8, 2025. The quarter was marked by significant revenue decline and a wide miss versus analyst estimates, with GAAP revenue of $0.4 million, missing the analyst estimate of $0.73 million by 44.9%. Revenue (GAAP) dropped to $0.455 million compared to expectations of $0.7265 million, while the net loss (GAAP) reached $3.14 million. Despite the poor top-line performance, Phunware recorded an improved gross margin of 43.9% and continued to invest in new technologies, particularly artificial intelligence features. The overall quarter revealed ongoing challenges, with new product initiatives yet to make a financial impact.

Source: Analyst estimates provided by FactSet.

Business Overview and Strategic Focus

Phunware creates cloud-based software platforms for mobile applications, focusing on industries such as hospitality and healthcare. Its framework allows customers to build, manage, and monetize branded mobile experiences tailored to specific needs. A core differentiator is its long-standing expertise in vertical mobile apps, and its approach centers on providing a seamless consumer journey and actionable data insights.

The company's strategy relies on product innovation, especially the integration of generative artificial intelligence features. Building out its software with automation, an AI Concierge, and hospitality-specific tools has become central to its growth ambitions. Recent business focus has shifted towards developing new AI-powered solutions and expanding its customer base. Key success factors include strengthening recurring revenue.

Highlights from the Quarter: Performance and Operational Updates

Phunware’s revenue missed analyst estimates. This contraction was mirrored in its software subscriptions and services revenue, which fell 16%. While total revenue dropped, there was an increase in software bookings sourced entirely from new customers. This suggests early signs of diversification, although not at a scale sufficient to offset existing customer churn or decrease in renewals. The sales pipeline continues to develop, with four new customer deals in progress for upcoming launches in the hospitality and healthcare sectors.

Despite the topline pressure, gross margin rose to 43.9%. A gross margin measures the percentage of revenue that exceeds costs directly tied to producing services; improvement here means Phunware is generating more profit per dollar of revenue from its existing client base. The higher margin is attributed mainly to recurring revenue from existing customers. Operational expenses continued to climb, with the company investing more in research and development—R&D expenditures were $2.3 million in fiscal 2024 and $4.4 million in fiscal 2023—as it pressed forward with AI product initiatives.

The company invested in product upgrades, launching its Map Editor 3.0 for its Multiscreen-as-a-Service platform. It also announced two AI-powered features: AI Concierge and Guest Services Agent, aimed at improving guest engagement for hotels. Both new products were showcased at a major technology event for the hospitality sector, but remain in the development stage and have yet to generate measurable revenue.

On the leadership side, Jeremy Krol stepped in as interim Chief Executive Officer. No dividends were declared during the period. The company remains exposed to customer concentration risk, with three major clients accounting for 34% of annual revenue in 2024. However, all new bookings in the quarter came from new customers, signaling potential for a more balanced base in the future.

Looking Ahead

Phunware did not provide forward-looking financial guidance for the next quarter or the remainder of fiscal 2025. Management has outlined key priorities for the coming periods, such as the commercial rollout of its AI features, further expanding its customer base in targeted industries, and ongoing enhancement of its core software platform. No updates were issued regarding the financial impact or expected launch date for its dual-token blockchain ecosystem.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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