I Predicted This Small-Cap Stock Would Be a Winner in 2025. It Didn't Happen, But Here's Why It's Poised for a Breakout This Year.

Product analytics company Amplitude (NASDAQ: AMPL) went public in 2021, and like other software-as-a-service (SaaS) stocks, it struggled in the post-pandemic economy. As companies pulled back on software spending, Amplitude took a hit, tumbling from its lofty valuation.

Since then, the company has churned through those customer headwinds, built out its platform through new product launches and acquisitions, and launched several AI agents, leveraging the power of AI to help customers gain more insights into how their customers are using their products.

Nearly a year ago, I predicted that Amplitude would be a winner in 2025. I was wrong. The stock finished up 9.8% for the year, but fell 8% from when I wrote it on March 2, underperforming the S&P 500 in both intervals.

Getting the timing of a stock breakout isn't easy, but momentum is building for Amplitude. Here's why I think we could see a surge in the stock in 2026.

Image source: Getty Images.

The fundamentals are improving

After building out its platform and launching new AI products, Amplitude is now growing faster than it has in years.

In the third quarter, revenue rose 16% to $347 million, with remaining performance obligations up 37% to $391.9 million, showing that its customers are signing longer contracts as they get more comfortable with Amplitude's product.

The company is also rapidly expanding its product portfolio with features like AI visibility, a tool that gives marketers the ability to see how their brand performs in AI search results, and web experimentation, which allows marketers to run experiments three times faster than they could previously without the need for developer assistance.

Amplitude currently counts 27% of the Fortune 500 as its customers, and new features will help it bring in more revenue from those customers and add new ones.

It's also considered the leader in product analytics, as Forrester Wave rated it as a leader and customer favorite in digital analytics and it was named best in product analytics by G2.

The price is right

Amplitude currently trades at a price-to-sales ratio of just 4, which looks like a great price for a small-cap cloud software with accelerating growth. The company is operating at close to break-even on an adjusted basis, but that's normal for the software sector.

Currently, Wall Street analysts have only modest expectations for 2026, calling for revenue growth of 14%, leaving considerable room for a beat, considering that generally accepted accounting principles (GAAP) revenue growth improved to 18% in the third quarter.

At a market cap of $1.4 billion, a double or triple from the stock is well within reach if it can improve on its high-teens revenue growth in 2026.

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