This Niche Tech Stock Dropped 50%, but Its Revenue Model Means It's Poised for a Comeback

Investors spent most of 2025 chasing the next big thing in artificial intelligence (AI), leaving quieter fintech names to drift. Alkami Technology (NASDAQ: ALKT) is one of those overlooked tickers.

The cloud-based digital banking platform's stock closed Tuesday at $21.80, roughly 50% below its highs from late 2024 and early 2025. Short-term earnings misses spooked investors last year, but the underlying business tells a story built on sticky recurring revenue, deep institutional demand, and a local, yet structural, shift in banking technology.

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Alkami is not a consumer fintech app or a high-profile AI play. It builds mission-critical digital banking platforms for U.S. community banks and credit unions that otherwise couldn't develop these systems on their own.

Its clients serve millions of customers who demand modern digital experiences, and Alkami's technology essentially unifies onboarding, digital banking, data, and marketing into a single platform.

Alkami's fundamentals: growing, recurring, sticky

What most investors missed last year is that Alkami's business model is subscription-based and recurring. According to the company's filings, around 96% of revenue comes from recurring sources, primarily subscription fees tied to its software-as-a-service (SaaS) model and implementation services expected over the next 12 months.

Annual recurring revenue (ARR), a key metric for cloud platforms, climbed to $449 million in the third quarter of 2025, up substantially from the prior year. That kind of base-line revenue doesn't vanish when Wall Street gets skittish; it provides visibility into future cash flow far better than one-off services or transaction fees.

Registered users of Alkami's platform reached 20.9 million, up year over year. User metrics are tricky because they can be inflated, but this still shows that adoption is not only broadening but also deepening. That matters because Alkami often ties pricing to user growth, aligning its incentives with those of its clients.

Growth in revenue over the last several quarters has been notable, even during broader market headwinds. Q2 2025 revenue grew about 36% year over year, while Q3's growth was 31.5%.

Why Alkami's stock slid

So, why has the stock cratered?

Several factors seem to be at play. First, Alkami missed analysts' earnings estimates in Q2 2025. Even though revenue continued to grow at a strong pace, earnings per share fell short of Wall Street expectations, and management's guidance was more cautious than analysts had hoped. That objectively raises concerns that the company's growth may be slowing.

There's also ongoing pressure around profitability. Like many fast-growing SaaS companies, Alkami is spending heavily on product development and sales to support long-term expansion, which means profitability on generally accepted accounting principles (GAAP) remains elusive for now. That kind of investment-heavy approach can make short-term investors uneasy.

Finally, broader market trends have worked against the stock. Investor attention has shifted toward high-profile AI names, leaving more traditional fintech and back-office software companies like Alkami relatively overlooked.

However, none of this points to a collapse of the business model. It points to a market more focused on short-term wins.

A technology tailwind to count on

The digital banking software market isn't a fad that will fade on the local level. Community banks and credit unions face structural pressure: Customers expect digital experiences comparable to those at big banks and fintech challengers.

Institutions that can't deliver risk losing deposits and relevance. Alkami's playbook addresses that directly.

The company has also invested heavily in tools and thought leadership for its clients. Its digital banking conversion toolkit and strategies playbooks are designed to ease banks' transitions to modern platforms, a selling point with slower-moving financial institutions.

This type of investment doesn't generate immediate profits but strengthens Alkami's competitive moat. Unlike consumers switching between apps, banks sign multiyear contracts, making revenue stickier and churn lower.

What this means for investors

The bear case today is understandable: Slower earnings and a flat stock price are not good things. But the bull case is that the market has priced Alkami like a company losing customers, rather than one with nearly $450 million in predictable ARR fueling double-digit top-line growth.

If digital banking adoption continues at its current trajectory, Alkami has an opportunity tied to a large and still underpenetrated market. Its total addressable market includes more than 250 million digital users across U.S. financial institutions with assets between about $100 million and $450 billion, excluding megabanks. And the digital banking market continues growing 5% to 8% annually as smaller banks and credit unions modernize.

So, while Alkami competes with larger banking legacy providers like Fiserv (NASDAQ: FISV), Fidelity National Information Services (NYSE: FIS), nCino (NASDAQ: NCNO), and Q2 Holdings (NYSE: QTWO) for regional and community bank business, its platform and unique product suite give it a differentiated position to capture market share.

With all that said, a move back toward $40 for the stock within the next year isn't outlandish if the company keeps delivering ARR growth and narrows earnings surprises. The stock now trades at a depressed valuation relative to growth.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Q2 and nCino. The Motley Fool has a disclosure policy.