Appian (APPN) Q4 2025 Earnings Call Transcript

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Date

Thursday, February 19, 2026 at 8:30 a.m. ET

Call participants

• Chairman and Chief Executive Officer — Matthew Calkins
• Chief Financial Officer — Srdjan Tanjga

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Risks

• Non-GAAP gross margin declined to 73% from 77% in the prior year, reflecting increased expense pressure despite revenue growth.
• Professional services non-GAAP gross margin fell to 23%, decreasing from 27% in the prior year and 31% in the prior quarter.
• Quarterly operating cash flow dropped to $1.1 million from $13.9 million in the prior-year quarter, indicating short-term cash conversion volatility.
• Management expects only "flat" non-cloud subscription revenue next year, reflecting limited growth from legacy or on-premise products.

Takeaways

• Cloud subscriptions revenue -- $117 million, up 18% year over year, with constant currency growth of 16%.
• Total subscriptions revenue -- $162.3 million, representing 19% year-over-year growth.
• Total revenue -- $202.9 million, reflecting 22% year-over-year growth and 19% growth on a constant currency basis.
• Professional services revenue -- $40.6 million, up 36% year over year, noted as highest growth in eight years.
• Adjusted EBITDA -- $19.7 million, above company guidance of $10 million–$13 million.
• Cloud Net ARR expansion -- 114%, up from 113% in the prior-year period and 112% in the prior quarter, indicating higher upsell activity.
• Non-GAAP gross margin -- 73%, compared to 77% in the prior year and 74% in the prior quarter.
• Subscription non-GAAP gross profit margin -- 86%, unchanged sequentially but down from 88% in the prior year.
• Professional services non-GAAP gross margin -- 23%, compared to 27% in the prior year and 31% in the prior quarter.
• Cash and equivalents plus investments -- $187.2 million as of year end, up from $159.9 million last year.
• Operating cash flow -- $1.1 million in the quarter, and $62.9 million for the year, up from $6.9 million the prior year.
• Customers with $1 million+ ARR -- 140, up from 115 last year.
• $50 million share repurchase program -- Announced, intended to offset dilution from stock grants and mark the start of a recurring capital return policy.
• $500 million ten-year Army enterprise agreement -- Signed in the quarter, described as "a wonderful badge of seriousness" by management.
• AI monetization -- Customers upgrading to the AI license tier have paid an average price increase of 25%; management noted "a meaningful number" upgraded each quarter.
• AI usage growth -- Platform AI usage grew fourteen times year over year.
• 2026 cloud subscription revenue guidance -- $502 million–$510 million, at 16% midpoint growth; total revenue guidance of $801 million–$817 million, at 11% growth midpoint.
• 2026 adjusted EBITDA guidance -- $89 million–$99 million with approximately 12% margin at midpoint.
• 2026 non-GAAP EPS guidance -- $0.82–$0.96, about 46% midpoint growth, assuming 74.8 million diluted shares.
• Change in customer definition and metrics -- Customer count now aggregated at parent-company level; cloud net ARR expansion replaces prior gross renewal/net revenue retention reporting.
• 2026 non-cloud subscription revenue outlook -- Expected to be flat year over year.
• Professional services revenue growth projection -- Expected in the “teens” for Q1 and high single digits for full-year 2026.
• Significant deals -- Seven-figure software deals secured with a European pharmaceutical research organization and a North American aerospace manufacturer, the latter forecasting $60 million in three-year savings.
• Public sector positioning -- Multiple large federal deals, including deployment to more than 100,000 users in a U.S. military branch.
• Sales organization investment -- Renewed sales capacity build underway, with management citing sustained sales productivity improvement.

Summary

Appian (NASDAQ:APPN) reported 22% year-over-year total revenue growth, 18% cloud subscription revenue growth, and adjusted EBITDA above guidance, highlighting momentum from large enterprise and public sector deals. The company announced a $50 million stock buyback and a $500 million, ten-year enterprise agreement with the U.S. Army, described as transformational for federal credibility. Guidance indicates cloud-driven expansion and continued investment in sales and engineering resources, supported by measurable AI solution adoption and monetization.

• AI usage on Appian’s platform increased fourteen times, directly supporting higher-tier license sales with a 25% average uplift.
• Cloud Net ARR expansion reached 114%, edging higher and reflecting greater upsells to existing customers within the period.
• Management introduced Cloud Net ARR Expansion as a key new metric and shifted to parent-level customer reporting, phasing out prior retention figures.
• Professional services revenue increased 36%, with leadership attributing growth to customer reliance on Appian implementation in high-stakes use cases, but signaled more moderate growth rates for the coming year.
• The Army contract enables $500 million in software and services purchases over a decade, which management framed as material for both internal scale and influence across federal markets.

Industry glossary

• Cloud Net ARR Expansion: Year-over-year percentage change in annual recurring revenue from the same set of cloud customers, measured in constant currency.
• DocCenter: Appian product leveraging AI to parse documents and communications, automate workflows, and accelerate data entry and response times.
• ELA (Enterprise License Agreement): Multi-year contractual framework enabling large organizations, such as the U.S. Army, to purchase significant amounts of software and services under a single agreement with defined total value.

Full Conference Call Transcript

Brian Denyeau from ICR. Please go ahead. Good morning, and thank you for joining us. Today, we will review Appian Corporation’s Fourth Quarter 2025 financial results. With me are Matthew Calkins, Chairman and Chief Executive Officer, and Srdjan Tanjga, Chief Financial Officer. After prepared remarks, we will open the call for questions. During this call, we may make statements related to our business that are considered forward looking.

These include comments related to our financial results, trends, and guidance for the first quarter and full year 2026, the benefits of our platform, industry and market trends, our go to market and growth strategy, our market opportunity, and our ability to expand our leadership position, our ability to maintain and upselling with some customers, and our ability to acquire new customers. These statements reflect our views only as of today and do not represent our views as of any subsequent date. We will not update these statements as a result of new information unless required by law. Actual results may differ materially from expectations due to the risks and uncertainties described in our SEC filings.

Additionally, non-GAAP financial measures will be discussed on this conference call. Reconciliations of GAAP to non-GAAP financial measures are provided in our earnings release. With that, I would like to turn the call over to our CEO, Matthew Calkins. Matt?

Matthew Calkins: Thanks, Brian. Thanks, everyone, for joining us today. In the 2025, Appian Corporation’s cloud subscriptions revenue grew 18% to $117,000,000. Subscriptions revenue grew 19% to $162,300,000. Total revenue grew 22% to $202,900,000. Adjusted EBITDA was $19,700,000. For the full year, Appian Corporation’s cloud subscriptions revenue grew 19% to $437,400,000. Subscriptions revenue grew 18% to $576,500,000. Total revenue grew 18% to $726,900,000. Adjusted EBITDA was $76,800,000. 2025 was a successful year for Appian Corporation for several reasons. First, we executed our strategy to sell big deals to leading organizations. The number of customers that purchased over a million dollars of software this year grew 50%, nearly doubling the value of our seven-figure transactions. I will share two quick examples.

A European pharmaceutical research organization purchased a seven-figure software deal to digitize its clinical trial site selection. Appian Corporation will accelerate its selection process with AI, improving patient selection efficiency and reducing trial costs. Separately, a North American aerospace manufacturer purchased a seven-figure software deal to automate a core manufacturing system and save the company nearly $60,000,000 over the next three years. The second reason Appian Corporation had a successful 2025 is that our position within the US public sector strengthened partly due to structural changes. We closed big deals as the new administration emphasized efficiency and changed how it purchases and implements technology.

For example, a US military branch named Appian Corporation its cornerstone platform to modernize operations and increase efficiency. In Q4, it signed a seven-figure software deal to unify systems and deploy them to over 100,000 users. The federal government has shifted to partner more directly with software vendors and reduce its reliance on intermediaries. Appian Corporation stands to benefit as indicated by the enterprise agreement that the US Army awarded us this quarter. The Army is already an eight-figure ARR customer. This new framework allows it to purchase $500,000,000 in Appian Corporation software and services over the next ten years.

This agreement shows the Army's ambition and commitment to use Appian Corporation to modernize systems and transform operations with process and AI. The third reason Appian Corporation had a successful year is that we continue to increase our operational efficiency. We have now increased our go to market efficiency in 10 sequential quarters, know this metric means a lot to me. I always mention it. Appian Corporation generated 11% adjusted EBITDA margin for the full year 2025, compared to just to negative 8% just two years before. We created $63,000,000 in operating cash flow, compared to a loss of $110,000,000 two years ago. Credit these efficiency improvements to tighter resource allocation in sales, global diversification, and back office AI enhancements.

We are creating an operating model that is built to drive further margin expansion going forward. Appian Corporation’s strong financial performance puts us in a position to start consistently returning capital to shareholders. Today, we are announcing a $50,000,000 stock buyback. Finally, I will tell you the best thing about 2025. The best thing is that it has become common knowledge over the past six months that AI needs process, also known as workflow. Without a process framework, AI cannot add value to complex work streams or collaborations. Market analysts and researchers like Gartner and MIT published papers on the topic. Customers, prospects, and partners have all confirmed the trend.

Our competitor shifted their messaging, began talking about workflow, and added rudimentary process technology. This trend validates Appian Corporation’s long standing position on the issue and recognizes the synergy between AI and process that we built our strategy around. I will take a moment to explain why. AI needs process.

Srdjan Tanjga: AI is probabilistic.

Matthew Calkins: Which is to say it is slightly unpredictable. Most important work at the large organizations Appian Corporation targets requires total reliability. So AI needs a deterministic framework like our process layer. That deterministic layer provides direction, and guardrails and certain functionality you would not ask AI to write on its own. Code is becoming cheap. But mistakes are not. So the more important the work, the more essential is the deterministic layer. In the coming years, AI will do a lot of work and write a lot of software, but it is not going to do it alone. Where AI goes, process must also go. Our technology is an essential enabler of AI.

Appian Corporation has been a process leader for more than 20 years. We were a pioneer in this market back when they called it business process management. We led providing BPM in the cloud. We led in building a process centric suite. Our unitary platform provides workflows, data fabric, process mining, and built in security. We led again embedding AI in our processes. We have earned trust at the largest firms and are executing mission critical processes to the highest standards. Two thirds of the world's top 10 life science firms, asset managers, and non Chinese banks are Appian Corporation customers, as well as all 15 cabinet level agencies and military branches in the US government.

These groups use our platform for complex, mission critical processes like customer onboarding, claims management, patient intake, regulatory compliance, and procurement. Exponential growth in our AI traffic shows that our platform is becoming an AI vehicle for large organizations. AI use on our platform plat grew 14 times year over year. AI use on our platform grew 14 times year over year. And we are monetizing that growth. Customers must upgrade to Appian Corporation’s AI license tier, which comes with an average price increase of 25%. A meaningful number of customers make this upgrade every quarter, including this quarter. Much of our revenue, profit, and pipeline growth in 2025 is a result of our synergy with AI.

Most of the seven-figure software deals we booked this year were driven by a desire to access our advanced features like AI. Here are three examples. First, a leading pharmaceutical company deployed Appian Corporation AI into an existing application this quarter. The application tracks interactions between the company's sales team and health care practitioners to ensure compliance with international regulations. We are deploying an Appian Corporation product called DocCenter that uses AI to parse incoming emails, documents, and other communications. DocCenter uploads data, prepopulates forms, triggers workflows, and accelerates response times, in this case, by 88%. Next, a top advocacy organization representing over 100,000,000 Americans and seven-figure ARR customer named Appian Corporation an enterprise standard this year.

It recognized the importance of deploying AI within an Appian Corporation process after evaluating various AI vendors. In Q4, it purchased a large upgrade to access our latest AI features. The group will deploy Appian Corporation AI agents to reconcile tens of thousands of invoice payments annually. Reconciliations used to take over an hour per invoice. Now the organization expects to complete tie outs in just minutes. Finally, a network of European banks signed a seven-figure software deal this quarter to access our latest AI features. The group already runs know your customer and loan overdraft processes on Appian Corporation. In Q4, they named our platform as an enterprise standard for modernizing core processes.

The conglomerate will use Appian Corporation DocCenter to classify and data from dozens of documents to open cases for processing. The banks expect to save more than €20,000,000 over three years as they scale operations. Recent market moves show investors are concerned that AI poses an existential threat to software firms, including App. There are two main worries. First, that AI will do all the work that software used to do, and second, that AI will write all the applications. I will address each point.

Operator: First,

Matthew Calkins: Appian Corporation leads in a technology that AI cannot thrive without. It is becoming understood now just how much AI needs process. AI is probabilistic technology, not reliable enough for the highest value use cases. Unpredictability is an indelible part of AI's identity. Years of improvement will not make it otherwise, nor will enterprises ever decide to accept AI-level unreliability. A deterministic layer is essential. Something to direct the work, something to detect and remediate the errors, something that can produce perfect outputs from imperfect efforts. Process and workflow is that technology. Long before AI, process orchestration was developed to best utilize that other unpredictable worker, the human being.

As repeated studies attest, AI is not yet transformative in the enterprise. In PwC research last month, most CEOs report AI having no impact on revenue or cost. But impact is coming when AI is connected to valuable work streams, and Appian Corporation is leading the way. With the help of a process layer, AI will be a very productive worker indeed, and very widely deployed. Providing a framework so that AI can address the world's most important work is like selling pickaxe in a gold rush.

Operator: Second,

Matthew Calkins: about AI writing code. We sell to our customers value and safety, not code. Approximately 80% of our revenue comes from highly regulated industries and the government sector. Customers buy Appian Corporation for performance, precision, and peace of mind. We sell compliance to regulations, reliable customer service, accurate decisions. We sell the reassurance of a community of practitioners and 24-hour expert support. AI-generated code cannot provide these things. Only with Appian Corporation’s deterministic framework can AI create applications and perform work to meet the most exacting requirements. This is the reason why no Appian Corporation buyer has ever suggested to me that they would vibe code a critical system. They know better.

This current concern about AI-generated code reminds me of the open source scare years ago. Open source seemed to threaten the pricing power of the entire sector, but in the end, it proved that code is not the center of value in enterprise software. The value comes from the community and the support and the corporate commitment to reliability. Since open source became a popular term in the late nineties, the global software industry has grown by a factor of over 5x. Appian Corporation has faced open source competitors in our market. They appeal best to low-end buyers and had no impact on our growth. I expect AI-generated code to be adopted in mistake tolerant and low value use cases.

To write enterprise code, AI needs a platform like ours that facilitates careful specification, developer collaboration, revision, and the strategic reuse of preexisting assets. In conclusion, the more organizations use AI, the more they need process orchestration. Process mitigates AI's shortcomings. Together, AI and process can address the world's most critical jobs. But AI cannot do it alone. Before I end my segment, I would like to welcome Dave Link to Appian Corporation’s board of directors. Dave is an expert in scaling enterprise software companies and applying AI to complex, globally distributed systems. He is the CEO of ScienceLogic, an AI-driven observability and IT operations platform. I am excited to welcome him to our team.

I also want to thank Jack Bittle for his exceptional contributions over the course of many years on the Appian Corporation board. And with that, I will hand the call to Serge. Thanks, Matt. Before turning to our fourth quarter results,

Srdjan Tanjga: I want to cover some changes that we are making in our reporting in order to give investors better insights into our financial performance. First, we have reclassified certain IT, cybersecurity, and facility expenses from our G&A expense line item into other line items on our P&L. There is no change to our total expenses, just which line item they are shown in. We believe this new presentations of our financial is more comparable to those of other software company. Second, we are introducing a new metric, Cloud Net ARR expansion.

This metric is calculated by taking the ARR of our cloud customers at the end of the prior year period and measures the ARR of those same customers at the end of the current quarter. We report Cloud Net ARR expansion in constant currency. We believe this metric gives investors a more timely insight into our business and is more comparable to how other software companies report expansion from existing customers. Going forward, we will no longer report cloud gross renewal rate and net revenue retention. Finally, we refine our definition of a customer. We now aggregate entities based on their ultimate parent company or an equivalent government entity, whereas previously, we counted at a more granular level.

As with our other changes, we believe this new methodology is more common practice. Please refer to the earnings call supplemental deck for further information on these changes. Now let me turn to our Q4 results. We had a strong quarter of new business, driven by continued AI traction and ongoing momentum our focus on the high end of the market. The standout performer was our commercial North America theater, with the fastest new business growth in over three years. Cloud net new ACV bookings were approximately 70% of total net new software bookings in Q4, compared to 65% in the prior year. Q4 cloud net new ACV growth was the strongest we have seen in almost three years.

Appian Corporation met or exceeded the guidance ranges we provided on our key metrics of cloud revenue, total revenue, and adjusted EBITDA. Cloud subscription revenue was $117,000,000, an increase of 18% year over year. We achieved the high end of our guidance even as FX contributed approximately $1,000,000 less than what was assumed in our guidance. On a constant currency basis, cloud subscription revenue increased 16% year over year. This quarter was more back end loaded than normal in terms of new business, resulting in relatively little revenue contribution from new business in the quarter. Our constant currency cloud ARR growth, which represents the exit run rate, was stable versus Q3.

Total subscription revenue was $162,300,000, an increase of 19% year over year. On a constant currency basis, total subscription revenue grew 916% year over year. Professional services revenue was $40,600,000, up 36% compared to the 2024. Total revenue was $202,900,000, an increase of 22% year over year. On a constant currency basis, total revenue grew 19% year over year. Our Cloud Net ARR expansion was 114% in Q4, compared to 113% a year ago and 112% in the prior quarter. The uptick was driven by a particularly strong quarter of upsells to existing customers in four. We ended the year with 140 customers with $1,000,000 plus of ARR compared to 115 a year ago. Now let us turn to profitability.

Non-GAAP gross margin was 73% compared to 77% from the year ago period and 74% in the prior quarter. Our subscription non-GAAP gross profit margin was 86%, compared to 88% in the year ago period and 86% in the prior quarter. Professional services non-GAAP gross margin was 23%, compared to 27% in the year ago period and 31% in the prior quarter. Total non-GAAP operating expenses were $131,500,000, up from $109,800,000 in the year ago period. Adjusted EBITDA was $19,700,000 ahead of our guidance of $10,000,000 to $13,000,000 and compared to adjusted EBITDA of $21,200,000 in the year ago period. This outperformance relative to our guide was largely driven by greater than expected revenue.

Non-GAAP net income was $11,100,000 or $0.15 per diluted share, compared to a non-GAAP net income of $13,200,000 or $0.18 per diluted share for the 2024. This is based on 74,900,000 diluted shares outstanding for the 2025 and 74,600,000 diluted shares outstanding for 2024. Turning to our balance sheet. As of 12/31/2025, cash and cash equivalents and investments were $187,200,000, compared to $159,900,000 at the end of last year. For the fourth quarter, cash provided by operations was $1,100,000 compared to $13,900,000 for the same period last year. For the full year 2025, cash provided by operations was $62,900,000 compared to $6,900,000 in 2024.

Turning to guidance, we are expecting to deliver another year of solid cloud subscription revenue growth and our third consecutive year of adjusted EBITDA margin expansion. Our focus is on consistent execution and capitalizing on the opportunity in front of us. Starting with the 2026. Cloud subscription revenue is expected to be between $119,100,000 and $121,000,000, representing year over year growth of 20% at the midpoint of the range. Total revenue is expected be between $189,000,000 and $193,000,000, representing year over year growth of 15% at the midpoint. Adjusted EBITDA for the 2026 is expected to be between $19,000,000 and $22,000,000. Non-GAAP earnings per share is expected to be between $0.16 and $0.20.

This assumes 75,100,000 fully diluted weighted average shares outstanding. For the full year 2026, our cloud subscription revenue is expected to be between $502,000,000 and $510,000,000, representing year over year growth of 16% at the midpoint of the range. Total revenue is expected to be between $801,000,000 and $817,000,000, representing year over year growth of 11% at the midpoint. Adjusted EBITDA is expected to range between $89,000,000 and $99,000,000 for an approximately 12% margin at the midpoint of the range. Non-GAAP earnings per share is expected to be between $0.82 and $0.96, approximately 46% growth at the midpoint. This assumes 74,800,000 fully diluted weighted average shares outstanding. Our guidance assumes the following.

First, we anticipate our non cloud subscription revenue be roughly flat on a year over year basis in Q1 and in 2026, as our customers are increasingly opting for the cloud. Second, we expect professional services to grow in the teens in Q1 and high single digits for the full year. Third, total other income and interest expense will be approximately $3,000,000 in Q1 and $12,000,000 for the full year 2026. Fourth, our guidance assumes FX rate as of mid February.

Please note that we expect FX benefit to our reported revenue growth rates in Q1, but we expect FX to be roughly neutral to year over year growth for the rest of the year as we annualize the US Dollar depreciation from April. Finally, as discussed previously, after two years of relatively flat OpEx, we are returning to a moderate pace of investment in 2026. We are investing in the growth of our sales org, as well as the expansion of our engineering capacity in India. Despite these investments, we are forecasting one percentage point of adjusted EBITDA margin expansion in 2026. Before wrapping, let me also touch on our share repurchase announcement.

As most of you know, we are very careful about dilution, evidenced by our stock based compensation expense as a percent of revenue which is less than half that of other software companies our size. As Matt mentioned, thanks to significant improvement in profitability over the last two years, and becoming a meaningful cash flow generator, we are in a position to announce $50,000,000 share buyback. We expect this program will essentially offset the dilution from stock grants issued this year. We see this buyback authorization as the beginning of a consistent capital return policy for our shareholders.

Intention is to scale the size of our share repurchase program in line with the growth in our cash flow in the coming years. We will look to execute on this buyback during 2026. In closing, we are pleased with our Q4 results, in particular, our traction with AI, and believe we are well positioned to deliver a successful 2026. We are excited about the opportunity ahead, and we will continue to invest responsibly to maximize our long term value. Before we move to Q&A, I would like to invite you to our Investor Day in New York on May 14.

We will be sharing updates on our product and strategy, and you will have the opportunity to hear directly from our customers. If you would like to attend, please reach out to investor@appian.com. Now we will turn the call over for questions. Operator?

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please limit yourself to one question and a follow-up. Our first question comes from the line of Sanjit Singh of Morgan Stanley. Your line is now open. This is Salveira on for Sanjit. Yeah. Congrats on the great quarter, guys. Nice to see the cloud net expansion uptick quarter over quarter.

I was thinking maybe on the guide, you know, it looks like Q1 guide is a bit an acceleration from Q4 imagine part of that is that expansion ticking up. But maybe can you help us you know, understand a bit more the visibility and the confidence that you have in given that acceleration? You very much.

Srdjan Tanjga: Yeah. So we are we are happy with how we wrapped up 2025, and we will set up well for, 2026 as evidence by the full year growth rate at 16% for the year. Q1 I guess two things I would say about it. Number one, it will benefit from strong new business, that we had in Q4, which is why on a sequential basis, is a is a robust guide. And then the other thing that I would call out is just that it is a quarter in which we will still benefit from a meaningful FX tailwind. And that is clearly the primary difference between the full year guide and the Q1 guide.

Sanjit Singh: Got it. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Raimo Lenschow of Barclays. Your line is now open.

Raimo Lenschow: Perfect. Thank you. Congrats. That was a great Q4. I have two questions, one for Matt, one for Serge. Matt, if you think about I am totally aligned with you with your vision around AI and agentic needed, like, control layer. Like, how do you think what gives you the right to be that? Because, like, obviously, a lot of other people are kind of trying to eye for that because that kind of position will be very strategic as well. So talk a little bit about, you know, what Appian Corporation brings to the table that, you know, you can go to customers and say, like, I should be that layer. And then I have one per search.

Matthew Calkins: Yeah. Well, I want to say that we have been that layer for a long time. We have been that layer before large language models exploded onto the scene. We have been embedding AI actors, you call them agents, in our software, in our processes for about a decade doing jobs as digital workers because we have been a platform that enables and governs digital workers. So we are not a Johnny-come-lately to the idea of governing a digital worker or an AI agent. In fact, it has been our business, and we have been leading for a decade. So I think it is natural for us to, to inherit the this position as well.

But I also want to say that because we have because we have such a strong governance layer, such a unique ability to detect and remediate errors, such a monitoring layer and a self improvement and an optimization layer I think we are really uniquely equipped for this moment. I think there are some other vendors that went all in on agents and then realized they needed a governing layer, whereas we come into this market with a governing layer and are therefore really well equipped to give agents the structure they need in order to succeed.

Raimo Lenschow: Okay. Perfect. Thank you. And then, Serge, if you if you think about the slight increase in OpEx you talked about on the sales org, etcetera, how do you think about the evolution of sales capacity from here onwards? And I am asking because you know, it does feel like a whole new world is opening, and there are quite a few players in the in the software space that now thinking about, like, we probably should think about sales capacity increases. Is this just a the one off things, or how do you think about that evolution Thank you.

Srdjan Tanjga: Thanks, Raimo. So I guess I will start with a little bit of history. We have done a great job, significantly improvement improving our sales productivity and paybacks on our sales and marketing investment. Really, particularly last year. And that frankly gives us the right to grow our sales org because we want to do it in a financially responsible way. So that is point number one. Point number two is kinda like your point, which is the market is large and growing, and we are very underpenetrated versus the opportunity. So to us, this return to growth of the sales org is the beginning of a of a long term trend.

But it is important to do it consistently over time. What you do not want to do is overextend because it is a it is a difficult operational task. What you want to do is bring in people, make sure they are successful, make sure that they, you know, reach their, productivity, and, and then do it again year after year. And that is fundamentally how you kinda put yourself in a position for a multiyear growth.

Raimo Lenschow: Perfect. Thank you. Good luck.

Operator: Thank you. One moment for our next question. Our next question comes from line of Steven Lester Enders of Citi. Your line is now open. Okay, great. Thanks for taking the questions this morning.

Steve Enders: I guess I just want to start on maybe the around AI, and then, I guess, given the purview that you have in some of these larger customers, just what have you seen so far from how their budgets or their or their purchase decision are changing as they are looking to incorporate AI and I guess, maybe what does that mean? Or, I guess, how do you kind of view the opportunity pipeline and given what that means for '26?

Matthew Calkins: Yeah. AI has been an unalloyed positive for us in our relations with our customers. Maybe causing some consternation in the investing market. But for in our sales situations, it is it is an entire positive. It gets us into higher level conversations. It allows us to speak strategically to the top topic that is on executives' minds. It we are more likely to win according to internal when AI is a factor in the decision. So it is helped our TAM. It is helped our access. It is helped our win rate. We are benefiting in all dimensions from AI.

Srdjan Tanjga: And Steve, if I can just add, just to give you a sense of how that it is sort of playing out over time. Customers begin with, you know, proof of concepts. Then when they are ready for a production use case, they need to upgrade to our advanced tier to have access to AI in production. And we talked about in the past about how the percentage of our customers that is on that tier is growing. And but plenty more that we can upgrade to advanced tier.

Then what we are starting to see is some of those customers that were already upgraded coming for the second or the third workload because they are happy with the performance of the first one, and that gives us incremental opportunities to grow revenue there. And then over time, we will have incremental tiers as more functionality comes online. So that is kind of the process of upselling AI and how it fits into a comp a company's

Matthew Calkins: Yeah. Let me follow on that. We have got this thesis, and you have heard it. Because I just talked about it, that AI belongs in a process and that within the deterministic framework of process orchestration, AI can really attach it itself to valuable work and create new value. So we have detected that some of our solutions are ideal vehicles for demonstrating that thesis. And I mentioned in my prepared remarks this solution called DocCenter, which is a pretty straightforward usage of our technology. Just ingest documents, launches workflows, uploads data, rapid turnaround, high accuracy.

But it is just such a good demonstration that we are focused on driving this into dozens or scores of accounts as quickly as possible this year as we can because everybody who sees this knows our thesis is correct. And this is what I think we need to do in the market. We need to establish that our philosophy is making value out of AI is accurate. Every organization in the world right now is wondering how they can make use of AI, wondering whether AI can have a value proportional to its CapEx. And we have we have on our hands a demonstration of how to make that value. Just embed it within a process, and it goes.

And the results are tremendous, and it is predictable and we can install it quickly. So where we see that we have got some of these winning demonstrations that establish how you could make value with AI, we are we are gonna put the pedal down.

Steve Enders: Okay. That is that is great to hear. Appreciate the context there. Maybe on the Army enterprise agreement, appreciate the color on the eight-figure customer there. But I guess kind of where do you see that spend potentially going? Or do you kind of view you know, I guess, what incremental use cases or how you just kind of view that relationship developing, moving forward with the enterprise agreement

Matthew Calkins: Yeah. This is a threshold for us. This is an important moment in the in the growth of this organization. It represents that I a degree of confidence that an agency has not in the past shown in us. We have done a lot of great work, and we have done some big projects and delivered some wins. But we have never had a $500,000,000, ELA. Like we do now with the Army. And that speaks volumes inside the Army. It allows us to speak to any part of the organization with great credibility, but it also allows us to go to other departments in the government and say, here is here is the department that knows us best.

You know, there is evidence that, of what they see in us. It also allows us to approach our partners and say, like, this is the kind of con this is what we succeed on together and now we want you to help us somewhere else. So this is just a wonderful badge of seriousness. And we are gonna wear it all around Washington. I am really pleased with what that says. As for how we got it, I would say a lot of the conversation is around modernizing legacy applications. And this is something I have spoken about on previous earnings calls, but I did not get into it much this time.

But I do want to mention, that this topic is causing a lot of excitement amongst our customers and prospects. If I mention or demonstrate, even better, the technology that we have today to convert a legacy application into a modern Appian Corporation application, it typically stops the conversation cold. No matter what it is we were talking about, if there is a customer or prospect executive in the room, they want to stop everything and talk about legacy modernization. And we had conversations on that at the Army, obviously has a number of legacy applications of their own. And that provided a lot of the momentum behind this award.

Steve Enders: Awesome. That is great to, great to hear. Thanks for, taking the questions.

Operator: One moment for our next question. Our next question comes from the line of Derek Wood of TD Cowen. Your line is now open.

Derek Wood: Oh, great. Thanks, guys. Matt, I appreciate the, the thoughts on the landscape of, AI versus software given all the concerns out there. My question is when it comes to building software at applications and processes for your customers, how are you guys using AI internally to accelerate that value delivery and then when it comes to the to the LLM vendors, like, what do you think the challenges they might have in trying to build their own software orchestration and governance layer up the stack.

Matthew Calkins: Yeah. Okay. So, yeah. They are they are gonna have some challenges and it makes a world of sense for them to partner with us in order to complement their the power of their model with whole industry is under pressure right now. In 2026, it is a time of testing where AI has to demonstrate that it can create commensurate value to justify the CapEx. And I think it is the question on everybody's lips and every organization is wondering about it, and the 56% of CEOs who report no value in the PwC survey last month are wondering about it. Everyone is wondering where we will find the value. Of course, the answer is actually very simple.

You just have to connect AI to the processes where the greatest value takes place. And that is a slightly complicated connection in order to pull off because AI needs a role and responsibility and a constrained aperture of functioning and checkups and revisions and learning and so on. It is just it needs what a process layer could have given it. And so I feel like this top quest that looms over the economy in 2026 is a question that will not say we have the answer to it, but I say we have a lot to say. We have a lot to say about this question.

I am excited about the ability to prove that answer in concert with the large language models. Of course, we are agnostic. We work with all and many of them. And for that matter, with the clients who are all desperate to find an answer to this question. They are all eager for value but not wanting to take a risk and to move first and to run afoul of the many pitfalls in AI, the unreliability, and the dangers that come with that. What was the first part of your question again?

Derek Wood: Just how you are using AI internally to maybe help accelerate the value you deliver to customers?

Matthew Calkins: Yeah. That is right. Well, we are using it thoroughly. Right? We are we are expecting major increases in all of our development capabilities this year because we are making a prolific use of AI. So I expect that to be excellent for our productivity and engineering. Also, we are using it in every deployment. So when our services teams are on-site creating new applications for our customers, they are invariably using AI, which is terrific for acceleration, for optimization, for recommendations on improvements, just a marvelous way to get to the endpoint. I want to clarify here that the endpoint is not a stack of AI written code.

The endpoint is an Appian Corporation application which provides the structure, the guardrails, the safety, the monitoring that AI alone would not have provided. And also, that Appian Corporation application, once you have once you have used AI as the bridge to an Appian Corporation application, that application now has the flexibility. They will be ability to evolve over time to match new strategic needs or to cultivate greater efficiency or to leverage new technologies. It is a living vehicle instead of what you could call new legacy. Right? You do not want to go from old to new legacy. You want to move to a living vehicle can adapt as your business evolves.

Derek Wood: Great. Thanks for that color. And then for Serge, mean, you guys had 36% growth in professional services. I think that was the highest in eight years. Your on prem business was quite strong as well. Does not sound like you expect that to continue in the upcoming year? You just give a little more color on what drove that outsized strength that seems to be a little more onetime?

Srdjan Tanjga: Yeah. Let me let me take them in order because they are different answers. So we have been very pleased with the demand we are seeing in our professional services business for especially in the back half of twenty five. And it comes down to a couple of things. One is, you know, the world of AI, because as Matt was just talking about, customers want to get the value, they are sensitive to get it at the levels of accuracy and performance that they are accustomed to. So when they choose our software, they usually also partner with us on implementation, because we have done it before.

We bring that implementation know how, which is scarce in the market right now. Now. And that helps us kinda sell both software and services when it comes to AI. And then the second piece is federal. Our success there and the change in how the government likes to deal with vendors has helped our professional services business on the federal side as well. And that really drove our business next year. And frankly, we are expecting it to continue driving that business next year. With 9% growth rate.

We did see an uplift in demand that we are gonna continue seeing growth there, but it is not gonna be a step function as we have as we have experienced here in the 2025. And then on the on prem side, we had a very strong Q4. Frankly, that was all federal. We credit to our teams when the shutdown ended, we were ready to go, and we got the deals that we were gonna get frankly, even better than if the than we would have expected had the had the shutdown not been there. So that is the that is the story of the fourth quarter.

But then as you look forward, I can tell you what we see quantitatively and qualitatively. On the quantitative side, just see a bigger mix of cloud in the in the pipeline than has been the case historically. Then secondly, when we talk to our customers, even our on prem customers, they are looking for incremental deployments, in the cloud. So, for example, one of the largest deals that we have in the pipeline in Q1 we will see if we get it or not, is for a customer who did one of our largest on prem deals last year. And that is not them moving their Appian Corporation workloads from on prem to the cloud. That is incremental deployment.

In line with their own IT strategy and moving to the cloud. Which is why the description or the forecast for the on prem business is what it is. Great. Thanks for the color. Congrats.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Devin Au of KeyBanc Capital Markets. Your line is now open.

Devin Au: Alright. Thank you for taking my questions here. First one I have I mean, you for Serge. You maybe speak to the framework of kinda the '26 revenue guidance I believe last year, given some leadership transition, some uncertainty around PubSac, and changes around go to market. I mean, there could be some more conservatism being embedded in the initial guide in '25. Are you applying kind of similar framework here in '26, or kinda just speak to that a little bit more?

Srdjan Tanjga: Yeah. So how we forecast the business has not really changed internally, and there is no, you know, incremental conservatism or caution. From a macro environment, I think I can speak for the company even though I was not here a year ago. It feels a lot less uncertain than it did a year ago back when, you know, doors were starting and there was a lot of macro sort of headwinds or potential headwinds related to the to the international relations. From that perspective, we feel like we have a perhaps a better handle on the world there we did a year ago.

The thing that I would say specifically, though, is I divide the guide into cloud, and the rest of the business. As you can see, the cloud it is just ratable. It is frankly a little bit easier to forecast, which is why the range there is narrower for the full year as a percent of total business. Whereas then we have a broader range as a percent of the business for the rest of it just because as you have even seen last year, you know, both for different reason, both on prem and professional services can be lumpier. And that is why the range on the on the full year guide is as wide as it is.

Devin Au: Got it. I appreciate the, the context there. And then a quick follow-up on the strength you have been seeing from PubSac. You continue to see momentum there, which is encouraging, and seems like Appian Corporation is really well positioned there. As you guys kinda return to sales capacity growth, could you just speak to, like, you know, how are you guys thinking about the deployment of resources towards that vertical specifically and kinda how you guys are gonna sustain and amplify the success there. Thank you.

Srdjan Tanjga: Yeah. We are growing our capacity in the federal verdict. But we are growing it in other verticals as well. At the end of the day, will just reiterate what I said. The size of our distribution is a limiting factor versus the size of the opportunity. And we do not want to try to address that in a big bang because then you know, you risk you run the risk of, you know, deteriorating execution. We are gonna, you know, hurry up slowly, and we are gonna build sales capacity year in and year out. Certainly, that is the case in the federal space as well.

Devin Au: Great. Thank you, and congrats on the strong results.

Operator: Thank you. One moment for our next question. And our next question from the line of Lucky Schweiner of D.A. Davidson. Your line is now open. Great. I will echo my congrats as well. Had a follow-up question on the guidance You know, coming off a strong quarter, the cloud growth guide, there a lot of deceleration baked into that throughout the year. So I just I am wondering, is that all FX related? Pipeline sounds strong, so there may be conservatism around deal timing or renting a sales capacity? Just curious what is driving your outlook on specifically the cloud growth guide.

Srdjan Tanjga: Yeah. So cloud growth is 20% at the midpoint for Q1 and 16% for the year. And the majority of that really is not anything about the underlying constant currency business. It is really about the fact that we still get one more FX bump in one before it normalizes.

Operator: Thank you. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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