Agora (API) Q4 2025 Earnings Call Transcript

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DATE

Monday, March 2, 2026 at 8 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Tony Zhao
• Chief Financial Officer — Jingbo Wang
• Operator

TAKEAWAYS

• Revenue -- $38.2 million, up 10.7% year over year, exceeding the high end of guidance.
• GAAP Net Income -- $4.9 million, with a net margin of 12.9%, marking the fifth consecutive profitable quarter and first full year of GAAP profitability since 2018.
• Core Revenue -- $19.9 million, up 14.4% year over year and 9.3% quarter over quarter, reflecting adoption in verticals such as live shopping.
• Shengwang Segment Revenue -- RMB 129.2 million, up 5.7% year over year and 5.6% sequentially, driven by growth in social entertainment and IoT.
• Dollar-based Net Retention Rate -- 109% for Agora; 89% for Shengwang.
• Gross Margin -- 65.1%, down 1.5 percentage points year over year and 0.9 percentage points sequentially, primarily due to low-margin conversational AI products at subscale usage.
• Research & Development Expenses -- $13.6 million, down 7.7% year over year, accounting for 35.8% of revenues compared to 42.9% a year earlier.
• Sales & Marketing Expenses -- $7.1 million, down 2.1% year over year, representing 18.7% of revenues versus 21.1% a year ago.
• General & Administrative Expenses -- $5.4 million, down 16.5% year over year, or 14.1% of revenues compared to 18.7% a year earlier, mainly from lower credit loss provisions.
• Operating Cash Flow -- $9.3 million, versus $4.5 million in the prior year period.
• Cash Balance -- $374.9 million in cash and equivalents on hand at quarter end.
• Share Repurchases -- $10.9 million spent to buy back 12 million ordinary shares (3 million ADSs), representing 3.3% of quarter-start shares; total repurchases since 2022 amounted to $143.1 million, or 71.6% of the $200 million program.
• Share Repurchase Program Extension -- Board has extended the program by twelve months to February 28, 2027, with all other terms unchanged.
• 2026 Guidance -- Total revenue expected between $36 million and $37 million, or 8.1%-11.1% year-over-year growth.
• Conversational AI Usage Growth -- Usage of the conversational AI engine more than doubled each quarter since its March 2025 launch, with revenue targeted to approach 5% of annual recurring revenue by year-end.
• High-Profile Customer Event Validation -- MrBeast’s event on OneNote using Agora’s platform delivered real-time full HD video to 600,000 peak concurrent viewers at sub-second latency, with reported “reliability at peak” and “consistently low latency.”
• Conversational AI Device Kit Expansion -- Enhanced multimodal features with vision and motion capabilities were introduced post-CES 2026; adoption spans AI robotics and companion devices across multiple industries.
• Multi-Agent Solution Deployment -- Supported Agnes AI in launching an AI group chat platform enabled by Agora’s real-time and conversational AI infrastructure.
• Gross Margin Outlook -- Management expects flat gross margins in 2026 relative to Q4 2025, with improvement as conversational AI scales.
• Operating Income Outlook -- Forecast for significant improvement in 2026, targeting GAAP operating profit for Q4 2026 even after accounting for share-based compensation and headquarters amortization.

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RISKS

• Gross margin declined by 1.5 percentage points year over year due to “very low” margin on conversational AI products at subscale usage. Management noted it may take several quarters before margins recover.
• Conversational AI revenue currently lags behind usage growth as a “lot of customers are in POC stage,” leading to delayed revenue realization and initial negative impact on gross margin.
• Industry consolidation and ongoing competitive pressure in the real-time engagement market were highlighted. Management referenced increased consolidation in recent months.

SUMMARY

Agora (NASDAQ:API) reported its first full year of GAAP profitability since 2018, supported by sustained double-digit revenue growth and cost discipline. The company’s core platform was validated at scale through a major U.S. live streaming event reaching nearly 600,000 concurrent viewers. Management guided for continued revenue and net income growth in 2026, driven by conversational AI innovation, new product launches, and expanded customer deployments.

• The board’s extension of the share repurchase program to February 2027 underlines confidence in long-term growth and capital return priorities.
• Conversational AI is positioned for increased ARR contribution by year-end, with management noting growing adoption across hardware, consumer, and enterprise use cases.
• International demand momentum is evident, with high-profile exposure in live shopping establishing further penetration potential outside China.
• Management expects sustained cost discipline to support ongoing operating leverage improvements into 2026.

INDUSTRY GLOSSARY

• ARR (Annual Recurring Revenue): The value of contracted recurring revenue components, normalized to a one-year period, excluding one-time or non-recurring sales.
• POC (Proof of Concept): Trial project or pilot phase where customers validate solution feasibility before committing to full-scale deployment.
• ADS (American Depositary Share): A security representing shares of a non-U.S. company traded on U.S. exchanges.
• Shengwang: Agora’s operating business unit focused on China-based RTE services, reported separately within segment financials.
• AIGC (AI Generated Content): Content created using artificial intelligence technologies, often referenced in product context.

Full Conference Call Transcript

Tony Zhao: Thanks, Operator, and welcome, everyone, to our earnings call. I will begin by reviewing our operational performance for the past quarter. We are pleased to report our fifth consecutive quarter of GAAP profitability in Q4, marking our first full year of GAAP profitability since 2018, driven by sustained double-digit revenue growth, improved operating leverage, and disciplined cost management. Total revenue for the fourth quarter was $38.2 million, representing 10.7% year-over-year growth. Our GAAP net profit for the quarter was $4.9 million, with a GAAP net margin of 12.9%. Next, I would like to share with you our recent business update, which highlights both the strength of our core real-time engagement business and the accelerating momentum of our conversational AI initiatives.

Our platform scalability was recently validated during a high-profile live streaming event over the Super Bowl weekend. MrBeast, the world's most followed content creator, hosted a forecast session on OneNote, the leading video-based shopping platform and a long-standing customer of Agora, Inc. We delivered high-quality full HD video to nearly 600,000 peak concurrent viewers worldwide, enabling their interactions at sub-second latency. To quote our customer's own words from their technical blog, on event day, Agora's real-time media pipeline performed reliably at peak. Time to first frame stayed under one second. Latency remained consistently low, and video quality held stable throughout the stream, even as we pushed systems to their limits at extreme load.

We believe this is the largest live video shopping event in U.S. history. Events of this magnitude are the ultimate stress test for real-time infrastructure. Our ability to deliver stable, high-quality video at ultra-low latency and at a global scale demonstrates our leadership in network resilience, distributed architecture, and real-time routing. This event was powered exclusively by our platform, as no competitors can match our performance and scale. This is why industry leaders in e-commerce, social entertainment, and education continue to trust our infrastructure for their most critical moments. At the same time, we are witnessing rapid adoption of our conversational AI engine product. Since its launch in March 2025, usage has more than doubled each quarter.

We are also encouraged to see early experimentations among our customers quickly evolve into real-world deployments across multiple verticals, including customer service, smart devices, education, and AI-powered consumer applications. Companionship toys powered by our solution, such as Fuzuzu, are driving accelerated shipments with high user stickiness. Validating this momentum, a leading consumer hardware giant recently launched a companionship toy built on our technology. Our conversational AI device kit integrating a voice module and an emotion display screen has set an industry trend and is now widely adopted by manufacturers. We started the year with a strong reception of our conversational AI solution for physical AI at CES 2026 in January.

After the event, we introduced a little upgrade of our conversational AI device kit, featuring enhanced multimodal capabilities, including vision understanding and motion control. These new capabilities enable the development of embodied AI hardware and robotics across multiple use cases. For example, our customer Luwu Dynamics is developing a desktop embodied AI robot powered by this solution. Many of our customers also showcased products at CES that leverage our solutions, ranging from AI companion devices and robotics to next-generation physical AI products. The strong market interest and media coverage coming out of CES further validate the growing demand for real-time human-like interaction embedded directly into smart devices.

Beyond one-on-one interactions between humans and AI agents, we are also expanding into multi-agent collaboration scenarios. During the quarter, we supported Agnes AI in launching its next-generation AI group chat and multi-agent collaboration platform. By leveraging our real-time engagement infrastructure and conversational AI capabilities, Agnes AI enables multiple AI agents and human participants to interact seamlessly. We believe multi-agent orchestration represents the next frontier of AI-driven productivity, where agents can coordinate tasks, share information, and collaborate with humans in real time. Across this development, a clear theme is emerging. As AI becomes more interactive and multimodal, the technological complexity behind delivering a seamless interaction experience between a human and an AI agent increases significantly.

Real-time conversational AI requires not only powerful foundation models, but also advanced audio processing, ultra-low latency networking, global scalability, interruption handling, turn-taking management, and device-level optimization. These are areas where we have made substantial investments and have built a strong competitive edge. Our deep expertise in real-time infrastructure uniquely positions us to bridge the gap between AI model capabilities and production-grade user experiences. Looking ahead, we remain focused on driving revenue growth and advancing conversational AI innovation throughout 2026. We entered the new year with strong momentum, supported by an expanding customer pipeline, growing production deployments, and increasing ecosystem partnerships. We believe we are well positioned to capture this transformation and create long-term value for our shareholders.

Before I conclude, I would like to thank our customers, developers, partners, and shareholders for their continued trust and support, and our global team for their dedication and innovation. I will now turn the call over to Jingbo Wang for the financial results.

Jingbo Wang: Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for 2025, and then I will discuss outlook for 2026. Total revenues for the fourth quarter reached $38.2 million, representing a 10.7% year-over-year increase and exceeding the high end of our revenue guidance. This marks our fourth consecutive quarter of double-digit organic growth. If we look at the two business divisions, our core revenues reached $19.9 million in Q4, representing 14.4% year-over-year growth and 9.3% quarter-over-quarter growth. Strong growth reflects our successful market penetration and growing adoption in verticals such as live shopping.

Shengwang revenues reached RMB 129.2 million in Q4, up 5.7% year-over-year and 5.6% sequentially, driven by continued business expansion and adoption in key verticals such as social entertainment and IoT. Dollar-based net retention rate is 109% for Agora and 89% for Shengwang. Gross margin for the quarter was 65.1%, down 1.5 percentage points year-over-year and 0.9 percentage points sequentially. The slight decline was primarily driven by the lower margin profile of our conversational AI-related products as usage is still ramping up and remains at a subscale level. Turning to expenses, R&D expenses were $13.6 million in Q4, down 7.7% year-over-year, reflecting our continued cost discipline.

R&D expenses accounted for 35.8% of total revenues, compared to 42.9% in the same period last year. Sales and marketing expenses were $7.1 million in Q4, down 2.1% year-over-year. Sales and marketing expenses represented 18.7% of total revenues in the quarter, compared to 21.1% in Q4 last year. G&A expenses were $5.4 million in Q4, a decrease of 16.5% year-over-year, primarily due to lower provisions for credit losses following improved customer collections. G&A expenses represented 14.1% of total revenues, compared to 18.7% in Q4 last year. Moving on to the bottom line, we delivered net income of $4.9 million in Q4, representing a 12.9% net income margin.

As Tony just mentioned, this marks our fifth consecutive quarter of GAAP profitability and our first full year of GAAP profitability since 2018. Based on current business momentum and visibility into 2026, we expect net income to grow compared to 2025. Now turning to cash flow, operating cash flow was $9.3 million in Q4, compared to $4.5 million in Q4 last year. Moving on to the balance sheet, we ended Q4 with $374.9 million in cash, cash equivalents, bank deposits, and financial products issued by banks. Net cash outflow in the quarter was mainly due to share repurchases of $10.9 million.

In the fourth quarter, we repurchased 12,000,000 ordinary shares, or 3,000,000 ADSs, representing 3.3% of our outstanding shares at the beginning of the quarter. Since our board approved the share repurchase program in February 2022, we have repurchased $143.1 million worth of shares through December 31, 2025, which represented 71.6% of our $200 million share repurchase program. We are pleased to announce that the board has authorized a twelve-month extension of our share repurchase program to 02/28/2027, with all other terms unchanged. This reflects the board's confidence in our long-term growth prospects and our continued commitment to delivering shareholder value.

Now turning to guidance, for 2026 we currently expect total revenues to be between $36 million and $37 million, compared to $33.3 million in 2025, representing a year-over-year growth rate of 8.1% to 11.1%. This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change. In closing, I want to express my sincere gratitude for exceptional teams in Shengwang and Agora, Inc. Sustained double-digit revenue growth and double-digit net income margin are a direct result of your dedication and execution. Let us remain focused on driving revenue growth and advancing conversational AI innovation throughout 2026. To our shareholders, thank you for your continued trust and partnership.

Thank you all for joining the call today. We will now open for questions.

Operator: As a reminder, to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press 11 again. Just a moment for our first question, please. First question comes from Dylan Lee from Bank of America Securities. Please go ahead.

Dylan Lee: Hi, management. Thanks for taking my question. Firstly, congrats on the strong Q4 results. And I have two questions here. Firstly, could you update us on the overall RTE demand trend in China and overseas, and what industries are the key demand drivers? Secondly, you have released the conversational AI device kit, and could you please share more color on the conversational AI applications and what industries and applications are the key drivers? And besides, I am not sure, could you share some color about your targeted revenue for the conversational AI this year? Thank you.

Tony Zhao: Okay. For the real-time engagement market trend in China, demand from social entertainment and education customers continues to grow at a modest rate, while we remain optimistic on the long-term growth potential of IoT and digital transformation customers to drive our channel revenue. In recent months, competitive pressure for the base, and we believe the industry will continue to consolidate. In U.S. and international markets, as I mentioned earlier, our success in one of the massive single-channel live streaming events solidifies our position and brand awareness among live shopping, which will bring more business opportunities for us. We are confident that we will gain more market share in this vertical.

And for conversational AI device kit, we do expect our conversational AI revenue to continue to grow. The use cases are not just the companionship toys. As I mentioned, physical AI equipment are all happening. For the revenue, as you know, we released our conversational AI engine in March.

Jingbo Wang: And since its release, as Tony just talked about, its usage has more than doubled every single quarter. Its revenue contribution is still relatively low at the moment because a lot of customers are in POC stage, so the revenue growth lags behind usage growth. But we do see a healthy pipeline of customers. Based on that, we expect to see revenue contribution from conversational AI ramp up throughout this year, and our goal is for conversational AI to approach 5% of ARR contribution towards the end of this year. Tony, do you want to talk more about the use cases?

Tony Zhao: Sure. We have been talking about the conversational AI usage before. It is still focused on customer service, companionship devices, education, and interactive ads. We are now also focusing closely with global customers from the U.S., Europe, South America, Asia-Pacific region, and inside China to implement our solution in a couple of customer service scenarios, such as outbound marketing, cold calling, appointment scheduling, order confirmation, and so on. For companionship devices, the number of device shipments and activations are promising, and more importantly, our solution is becoming the de facto industry standard or best practice.

We expect to see more customers launch their products throughout the year, including some based on well-known IP with the potential to become a global hit.

Dylan Lee: Thank you, Jim Oso, and Tony Zong. Thank you.

Jingbo Wang: Thank you. Thank you.

Operator: Just a moment for our next question, please. Next, we have Ruhnn from CICC. Please go ahead.

Ruhnn: Hi. This is Ruhnn from CICC. Can you hear me?

Jingbo Wang: Yep.

Ruhnn: Okay. Yes, I can. Thanks for taking my question, and congrats on another solid quarter, especially with revenue coming above the high end of guidance. My first question is on gross margin. We noticed that gross margin declined slightly year-over-year to 65%, just as Jingbo said. Can you walk us through the key factors behind that decline? Should we view this as mix-driven and temporary or more structural given AI ramp-up cost? How should we think about margin trend into 2026? My second question is on profitability for 2026. After achieving full-year GAAP profitability in 2025, how do you think about operating income and operating margin next year? What are the main drivers that could support further margin expansion?

That is it. Thank you.

Jingbo Wang: Sure. I will talk about gross margin first. As I said, the slight decrease in gross margin was mainly due to the impact of conversational AI-related products because some of the customers are still in early pilot stage. We do not charge customers for pilot POC experimentations, so revenue ramp-up lags behind usage growth. Also, the conversational AI infrastructure is currently running at a very small scale, subscale levels. If we only look at the margin of that particular product, it is very low at the moment. That drags down the overall margin slightly. We do expect this to improve as usage and revenue ramp up, but it might take a couple of quarters to fully recover.

When we look at our internal forecast and give guidance for 2026 profitability, we are essentially forecasting flat gross margins compared to Q4 2025. In terms of operating income, we expect operating income to improve significantly compared to 2025. It is driven by revenue growth and improved operating leverage, and our goal is to achieve GAAP operating profit in Q4 2026. Please note, this is after taking into consideration about $6 million of share-based compensation in 2026 and about $4 million of amortization related to the headquarters project. After these two items, we expect to significantly improve the operating income.

Ruhnn: Okay. That is very helpful. Congrats again on a strong year. All the best going forward.

Jingbo Wang: Thank you.

Operator: Next question comes from Zhong Xun Yang from CITIC Securities. Please go ahead.

Zhong Xun Yang: Yeah. Thanks for taking my question, and also congrats on the last quarter's performance. I just have one question following the first question from Bank of America regarding AI. We can see that stock prices, especially for those U.S. software companies, have fluctuated recently, so the market has a lot of concern about AI software. I just want to know how you think of the infrastructure and the cybersecurity companies' position in this AI era, and then also maybe other companies' leadership on this issue and other companies' position in AI. Thank you.

Tony Zhao: So SaaS service is threatened because of the drastic cost reduction in building UI/UX and application-layer logical software by low-code or AI coding. However, the system-level or infrastructure-level core services, including the platform and API services we provide, are actually facing increasing demand from low-code, and the need for even higher quality and scalable API services is actually much greater than before. It is hard to imagine those hardcore low-level or system-level infrastructure technologies would be easily disrupted by low-code or AI coding. As demand for real-time multimodal interaction with AI engines grows, especially in this sector, we will largely benefit from the global trend of AI development. Plus, who is not an AI company these days?

If you are not, you are outdated. As a company, we are the first one to introduce AI technology into the RTE sector, even before the generative AI era, and we are the first one to launch AIGC RTE SDK, the first one to demo full duplex conversational AI. We provide the best AI turnkey and AI models in the world, and we are one of the few to launch real-time APIs openly. We are heavily invested in the AI development and the AI input front. We have also positioned the company as a leading innovator in the generative AI era, and we are committed to being number one in the coming decades.

Jingbo Wang: Actually, I want to add a layman's perspective from a non-technical person. Now if you ask a coding agent, a Claude Code or OpenCode, to write an app with real-time engagement features like a video meeting app for your own company or your team, it is most likely, if you try, you will see that agent will call APIs to build this instead of rebuilding the entire real-time communication from the fundamental code again. So actually, we will be used by coding agents rather than be replaced by coding agents.

Zhong Xun Yang: Okay. Got it. So no more questions. Thank you. I will be back to the queue.

Tony Zhao: Thank you.

Operator: Thank you. Our last question comes from Xu Yue from China Securities Co. Please go ahead.

Xu Yue: Thank you. Thanks, management, for taking my question, and congrats on the solid results. I have two questions. The first question is regarding the gross profit margin. We see this quarter the gross margin is kind of dropped down by AI investment. How do you forecast it for future AI product margin trend? The second question is, how do you view the growth trajectory for AI across quarters for AI toys and customer service? Have we reached the inflection point for mass production in these verticals?

Jingbo Wang: Sure. In terms of gross margin, we actually think the conversational AI product has greater margin potential based on our own internal estimates if we operate at normal levels, at good utilization rates, and at a decent scale. The gross margin of the AI product should be at least similar, if not higher, than the current core RTE product. The currently low margin is really due to the suboptimal scale and also a lot of POCs ongoing. We do not have a fundamental concern on the margin. It will just take some time to ramp up to the target levels. In terms of AI product adoption, as Tony talked about, we do expect adoption to grow throughout this year.

You asked about the performance and cost. It is not just us; for all the players globally in conversational AI, there are a lot of new startups focused on this area, and I think we face the same problem. The technology itself is fundamentally ready, but from an engineering perspective, there remain a lot of corner cases and use case adaptation to be done. This will take time. It is really just a question of time, not a question of whether it will work or not. We made a lot of progress already in 2025. That is why in several use cases like companionship clients and outbound calling, several use cases are already working.

We will solve more problems this year, and we do think it is not like one single turning point, but we will solve use case by use case and gradually penetrate into more verticals. On the cost side, as we all know, model costs are coming down steadily across the board, so we do not think cost will be a blocking factor.

Operator: Thank you. There are no further questions. That concludes today's Q&A session. Thank you, everybody, for attending the company's call today. As a reminder, the recording and the earnings release will be available on the company's website at investor.agora.io. If there are any other questions, please feel free to email the company. Thank you.

Jingbo Wang: Thank you. Bye-bye.

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