What Management Said
Read the full Q3 2025 transcript ↗We're pleased to report our fourth consecutive quarter of GAAP profitability in Q3, supported by double-digit revenue growth and expanding margins. Our GAAP net profit for the quarter was $2.7 million, with a GAAP net margin of 7.8%. We expect our revenue and net profit to continue growing on a quarter-over-quarter basis in Q4. As you can see, our core real-time engagement path business is rebounding strongly and is on track to deliver its first full-year revenue growth since the pandemic, providing a stable, profitable foundation for us.
Just a few months ago, Greylock Partners, a leading venture capital firm, published a blog post titled, "Voice Agents: Easy to Use, Hard to Build." They nailed the core challenge. In short, we're not just providing the transmission pipeline for voice and video. Early adoptions from customers around the world have been encouraging, and our pipeline of use cases and prospects continues to grow as we head into next quarter. Our recent Convo AI and RTE Conference attracted more than 3,000 on-site attendees, a record for us, and made it the largest gathering focused on conversational AI technology globally.
Let me start by first reviewing financial results for the third quarter of 2025, and then I will discuss outlook for the fourth quarter. Total revenues for the third quarter reached $35.4 million, up 12% year-over-year, representing a third consecutive quarter of double-digit organic growth. If we look at the two business divisions, Agora revenues reached $18.2 million in Q3, representing 15.9% year-over-year growth and flat quarter-over-quarter. The strong year-over-year growth reflects our successful market penetration and growing adoption in verticals such as live shopping.
- Reported a fourth consecutive quarter of GAAP profitability with net income of $2.7 million and a 7.8% net margin, a significant improvement from a year earlier.
- Total revenue reached $35.4 million, up 12% year-over-year, marking a third consecutive quarter of double-digit organic growth.
- Core real-time engagement business rebounded, on track for its first full-year revenue growth since the pandemic; the Agora division grew 15.9% year-over-year to $18.2 million and Shengwang grew 8.4% year-over-year to RMB 122.4 million.
- Dollar-based net retention improved for a fourth straight quarter, reaching 108% for Agora and 90% for Shengwang.
- Operating cash flow turned positive at $0.7 million (versus negative $4.6 million a year earlier), aided by cost discipline that lowered R&D, sales & marketing and G&A expenses year-over-year.
- Advanced its AI roadmap: launched Conversational AI Engine 2.0 and Conversational AI Studio, drew a record 3,000+ attendees to its Convo AI and RTE Conference, and saw growing traction for the open-source TEN Framework.
- Gross margin slipped to 66%, down 0.7 percentage points year-over-year and 0.8 percentage points sequentially, on the subscale mix of conversational-AI products.
- Conversational AI revenue remained immaterial as most customers were still in proof-of-concept; sizable revenue was not expected until the first half of 2026.
- Shengwang (China) dollar-based net retention stayed at 90%, still below 100%, indicating net contraction in that customer cohort.
- Management stressed that real-time conversational AI remains technically hard (background noise, latency, turn-taking), lengthening the path from demo to production adoption.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Total revenue | Q4 2025 | $37M-$38M (7.2%-10.1% YoY growth) |
| GAAP net profit | Q4 2025 | Expected to grow sequentially versus Q3 |
| GAAP operating profit | Full-year 2026 | Target: achieve full-year GAAP operating profit |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +12% | Third consecutive quarter of double-digit organic growth led by US and international live commerce plus recovering China social, entertainment and IoT demand |
| Agora (overseas) revenue | +15.9% | Market penetration and adoption in verticals such as live shopping |
| Shengwang (China) revenue | +8.4% | Continued expansion in social, entertainment and IoT verticals |
| R&D expense | -52.8% | Cost discipline against an outsized prior-year base (R&D had been 92.7% of revenue in Q3 2024) |
| GAAP net income | improved to $2.7M (7.8% margin) | Revenue growth combined with operating leverage and lower operating expenses |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Conversational AI maturity | Initial product launches | Engine 2.0 and Studio launched; three lead use cases (call center, education, companionship toys) moving from POC to production | — |
| Gross margin | Roughly 66-67% range | 66%, a modest decline driven by subscale conversational-AI mix | — |
| Capital return | Ongoing buyback program | $132.1 million cumulatively repurchased since the February 2022 authorization ($4.8 million in Q3) | — |
Q&A Summary
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