Appian Shares Just Exploded. Here's Why the AI Stock Could Keep Climbing.

Appian (NASDAQ: APPN) has now been a publicly traded company for nearly 10 years, and its software business has gone through several evolutions during that time -- from a low-code software to process mining to now an artificial intelligence (AI) platform. That transition was made clear from the company's third-quarter earnings report as the stock jumped 30.8% on the news on Thursday.

Appian's Q3 report showed better-than 20% revenue growth since 2022. Appian reported 21% top-line growth to $187 million, which was well ahead of $174.2 million. Cloud subscription revenue, the metric the company prioritizes, was up 21% as well to $113.6 million, and professional services was also a bright spot, climbing 29% to $39.8 million, a direct consequence of the growth of the company's AI platform. As it introduces new products, customer training is in demand, helping to accelerate growth in professional services.

Not only did Appian easily blow by top-line estimates, but it's bottom line surged as well. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) tripled from $10.8 million to $32.2 million. That figure benefited from a shift in $6 million in expenses from Q3 to Q4, but even without it, EBITDA would've been up roughly 150%.

The main reason for that growth is the success of the company's focus on go-to-market efficiency. It improved that metric for the ninth quarter in a row as it controlled sales and marketing expenses while growing revenue. Through the first three quarters of the year, sales and marketing were down 5% even as revenue rose 17%.

On the bottom line, the company reported a net profit, based on generally accepted accounting principles (GAAP), of $7.8 million and an adjusted per-share profit of $0.32, crushing the consensus at $0.05 and showing a dramatic improvement in profitability.

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Appian's breakthrough

Appian's efforts in recent years to streamline its go-to-market approach and invest in new AI products are paying off. More than a quarter of Appian's customers are now using its AI platform, and CEO Matt Calkins believes that the company has passed a proof point where its software has demonstrated that it can be a complement to AI.

As he sees it, AI has introduced both risk and opportunity for the software sector as AI will likely be a substitute for some types of software, effectively displacing them. On the other hand, AI can multiply the potential of other types of software like Appian.

On the earnings call, Calkins noted several examples of customers, including a global pharmaceutical company that used Appian AI to speed up a critical process by 80%. Overall, he said that organizations using Appian AI have reduced invoice processing times by 36%, sped up patient intake by 83%, and tripled audit processing speed.

In other words, Appian's customers are getting real return on their investments in Appian AI at a time when many AI tools have failed to gain adoption and solve customer problems.

What's next for Appian

Appian is confident enough in its AI platform that it is now planning to grow its sales force next year after years of controlling headcount and focusing on efficiency. That's a good sign that 2026 should deliver another round of strong revenue growth for Appian, and it could accelerate from Q3.

Additionally, despite the temporary headwind from the government shutdown, the company has seen its federal business outgrow the overall business, and Calkins said the company was benefiting from the government's focus on efficiency and embrace of software companies like Appian.

Appian's guidance for Q4 called for 16% to 18% revenue growth, but its forecasts are typically conservative. While the government shutdown could present a temporary speed bump, the company looks well-positioned to capitalize on the AI opportunity, especially as most of its customers aren't using Appian AI.

If it can keep up this rate of revenue growth in 2026 or even beat it, the stock could soar as investors were clearly unprepared for this inflection point. At a price-to-sales ratio of just 4, the stock has a lot of upside potential if it can execute over the coming quarters.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Appian. The Motley Fool has a disclosure policy.