Q3 2025 Agora Inc Earnings Call
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Operator: Financial results conference call. To ask a question during the session, you need to press star one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. The company's earnings results, press release, earnings presentation, SEC filings, and the replay of today's call can be found on its IR website at investor.agora.io. Joining me today are Tony Zhao, founder, chairman, and CEO, and Jingbo Wang, the company's CFO. During this time, the company will make forward-looking statements about its future financial performance and future financial and future events and trends. These statements are early predictions that are based on what the company believes today, and the actual results may differ materially.
Operator: Financial results conference call. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. The company's earning results, press release, earning presentation, SEC filings, and the replay of today's call can be found on its IR website at investor.agora.io. Joining me today are Tony Zhao, founder, chairman, and CEO, and Jingbo Wang, the company's CFO. During this time, the company will make forward-looking statements about its future financial performance and future events and trends. These statements are only predictions that are based on what the company believes today, and the actual results may differ materially.
You need to press star one on your telephone keypad.
Well then he an automated message advising yohan is raised.
Two of your question. Please press star one again.
Please be advised that today's conference is being recorded.
The company's earnings results press release earnings presentation.
E C filings and a replay of today's call can be found on its IR website at <unk> dot.
I thought I R.
Joining me today are attorneys al founder Chairman and C. R.
And Jim <unk>, the company's CFO.
During this time the company will make forward looking statements about its financial.
About its future financial performance and future financial and future events and trends.
These statements are only predictions based on what the company's beliefs today.
And the actual results may differ materially.
These forward looking statements are subject to risks uncertainties assumptions and other factors that could affect the company's financial results and the performance of its business and wish the company discussed in detail in its filing with the SEC.
Operator: These forward-looking statements are subject to risk, uncertainties, assumptions, and other factors that could affect the company's financial results and the performance of its business, which the company discusses in detail in its filings with the SEC, including today's earnings press release, risk factors, and other information contained in the final prospectus relating to its initial public offering. Agora, Inc. remains under no obligation to update any forward-looking statements the company may make on today's call. With that, let me turn the call over to Tony. Please go ahead.
Operator: These forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could affect the company's financial results and the performance of its business, in which the companies discuss in detail in its filing with the SEC, including today's earnings press release and risk factors and other information contained in the final prospect relating to its initial public offering. Agora, Inc. remains to no obligations to update any forward-looking statements the company may make on today's call. With that, let me turn the call over to Tony. Please go ahead.
Including today's earnings press release, and risk factors and other information contained in the final prospect relating to its initial public offering.
And Gaurav, Inc remains no obligations to update any forward looking statements. The company may make on today's call risk.
With that let me turn the call over to Tony. Please go ahead.
Thanks, operator.
Welcome everyone to our earnings call.
Tony Zhao: Thanks, operator. Welcome everyone to our earnings call. I'll first reveal our operating results from the past quarter. We're pleased to report our fourth consecutive quarter of GAAP profitability in Q3, supported by double-digit revenue growth and expanding margins. Total revenue in Q3 reached $35.4 million, up 12% year-over-year. Our GAAP net profit for the quarter was $2.7 million, with a GAAP net margin of 7.8%, and 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 task 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. At the same time, we are significantly increasing our investment in conversational AI.
Tony Zhao: Thanks, Operator. Welcome everyone to our earnings call. I'll first reveal our operating results from the past quarter. We're pleased to report our fourth consecutive quarter of GAAP profitability in Q3, supported by double-digit revenue growth and expanding margins. Total revenue in Q3 reached $35.4 million, up 12% year over year. 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 task 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. At the same time, we are significantly increasing our investment in conversational AI. Voice-based human-machine interaction is not new, yet most conversational AI solutions today still disappoint users. Why?
I'll first review, our operating results from the past quarter.
We're pleased to report our whole foods concept.
Third quarter of GAAP profitability profitability in Q3 supported by double digit revenue growth and expanding margins over revenue increase rate.
$5 $4 million up 12% year over year, our GAAP net profit for the quarter was $2 $7 million with a GAAP net margin of seven 8% and we expect our revenue and profit to continue growing on a quarter over quarter basis.
In Q4.
As you can see our core real time engagement Pos business is rebounding strongly.
And is on track to deliver its first full year revenue growth since the pandemic.
Joining a stable profitable foundation for us.
At the same time.
Our significantly increasing our investment in conversational AI.
Voice based human machine interaction, it's not new yet most call official AI solution today still disappoint users.
Tony Zhao: Voice-based human machine interaction is not new, yet most conversational AI solutions today still disappoint users. Why? Because building voice agents that can converse naturally with a human is just hard. 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. Behind the simplicity users expect lies immense complexity, system abstraction, real-time audio processing, latency management, and compliance requirements. Consider the issue of background noise and multiple speakers, just two of the many technical challenges. In real-world setting, like a busy home, office, or car, clean audio is the exception, not the norm. A voice agent must accurately isolate a user's voice from overlapping speech and ambient sounds. Without this, transcription becomes unreliable, intent is misunderstood, and the agent's reasoning falters, undermining the whole interaction.
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Of course building was agent kind of commerce naturally with the human is just part.
Tony Zhao: Because building voice agents that can converse naturally with a human is just hard. 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. Behind the simplicity users expect lies immense complexity: system orchestration, real-time audio processing, latency management, and compliance requirements. Consider the issue of background noise and multiple speakers, just two of the many technical challenges. In a real-world setting, like a busy home, office, or car, clean audio is the exception, not the norm. A voice agent must accurately isolate a user's voice from overlapping speech and ambient sounds. Without this, transcription becomes unreliable, intent is misunderstood, and the agent's reasoning falters, undermining the whole interaction. Furthermore, as Andrew Tapassi has pointed out, there is often a significant gap between a working demo and a production-ready product.
Just a few months ago Greylock partners, a leading venture capital firm published a blog post titled.
Once agents easy to use hard to build the nose of the core talent behind the simplicity expect life immerse complexity.
Extrusion real time audio processing literacy measurement and compliance requirements.
So the issue of by bone loss and the multiple speakers with two.
Two of the many technical challenges.
Cohort study that could be the whole office or car clean audio is the exception not the norm.
I was agent must accurately isolate a user's voice from overlapping speech and ambient fault.
With all this transcription becomes unreliable intent is misunderstood and the agents reasoning vouchers.
Mining the whole interaction.
Furthermore.
Andrew capacity has come on top.
Tony Zhao: Furthermore, as Andrej Karpathy has pointed out, there is often a significant gap between a working demo and a production-ready product. Conversational AI is no exception. For instance, in our discussions with customers and prospects, many have expressed frustration with the reliability and the scalability of current solutions, especially when users are distributed across geographics or when concurrent usage is high. Our investment in conversational AI is specifically aimed at addressing these challenges. Recently, we launched our Conversational AI Engine 2.0. It integrates over a decade of advanced audio research and development, including AI-powered noise suppression, acoustic echo cancellation, a proprietary audio codec, and adaptation across thousands of device types to ensure that AI hears and speaks with consistent clarity. In addition, the engine also tackles core interaction challenge: selective attention, turn-taking, interruption handling, emotion detection, and natural conversational flow.
There is often a significant gap between our working demo and the production ready product.
Conversational AI is no exception.
For instance.
Tony Zhao: Conversational AI is no exception. For instance, in our discussion with customers and prospects, many have expressed frustration with the reliability and scalability of current solutions, especially when users are distributed across geographies or when concurrent usage is high. Our investment in conversational AI is specifically aimed at addressing these challenges. Recently, we launched our conversational AI engine 2.0. It integrates over a decade of advanced audio research and development, including AI-powered noise suppression, acoustic echo cancellation, a proprietary audio codec, and adaptation across thousands of device types to ensure that AI hears and speaks with consistent clarity. In addition, the engine also tackles core interaction challenges: selective attention, turn-taking, interaction handling, emotion detection, and natural conversational flow. In short, we're not just providing the transmission pipeline for voice and video. We're building the behavioral intelligence that powers truly responsive, human-like conversational AI agents.
In our discussions with customers and prospects many have expressed frustration with the rollout.
Ability and the scalability of current solutions.
Especially when users are distributed across Geographics all of them come from user usage is hot.
Investment in conversational AI is specifically aimed at addressing those challenges.
Recently, we launched our conversational AI engine to downhole, it's integrated over a decade of advanced audio research and development, including AI powered noise suppression acoustic echo cancellation.
Proprietary audio codec and adoption.
Pension.
Cost thousands of device types to assure that AI shears and speaks with consistent quality.
In addition, the engine also tackles core interaction talent.
Our pension Turner picking interruptions handling emotion detection and natural and natural conversational flow in short, we're not just providing the transmission pipeline for voice and video we're building the behavioral intelligence that pulse truly responsive tumors.
Tony Zhao: In short, we're not just providing the transmission pipeline for voice and video. We're building the behavioral intelligence that powers truly responsive, human-like conversational AI agents. To help developers build voice agents more easily, we announced our Conversational AI Studio at our recent Convo AI and RTE conference in late October, which allows developers to create, configure, and deploy voice agent through a zero-code interface. Complementing this, our Conversational AI Benchmark and Orchestration Platform allows developers to evaluate, mix, match, and optimize both our proprietary and third-party modules, so they can identify the best performing combination for their specific use case. Our open source TEN framework, designed for building voice agents, continues to gain traction in the developers' community.
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So half door for spirit was agents more easily.
Tony Zhao: To help developers build voice agents more easily, we announced our Conversational AI Studio at our recent Convo AI and RTE conference in late October, which allows developers to create, configure, and deploy voice agents through a zero-code interface. Complementing this, our Conversational AI benchmark and orchestration platform allows developers to evaluate, mix, and match, and optimize both our proprietary and third-party modules, so they can identify the best-performing combination for their specific use case. Our open-source term framework, designed for building voice agents, continues to gain traction in the developers' community. Recognized for its high concurrency architecture and deep cross-platform integration, it has been adopted by multiple cloud providers and major enterprises for their agent orchestration platforms. All these products are backed by our global distributed real-time inference cloud.
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Late October which allows developers to create to.
To create coffee bar and deploy was agent through a neural code.
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Complementing this our conversational AI benchmark and orchestration platform.
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So they can identify the best performing combination for their especially could use case.
Our open source term framework designed for building was agents.
Continues to gain traction in the door first community.
Recognized for its high concurrency architecture, and deep cross platform integration. It has been adopted by multiple cloud providers and major enterprises for their aging Oxfordshire and platforms.
Tony Zhao: Recognized for its high concurrency architecture and deep cross-platform integration, it has been adopted by multiple cloud providers and major enterprises for their agent orchestration platforms. All these products are backed by our global distributed real-time inference cloud. Over the past several months, we've expanded this infrastructure to cover key regions across North America, South America, Europe, and Asia, ensuring consistent latency, reliability, and performance, even under high concurrency and varying network conditions. Early adoptions from customers around the world has been encouraging, and our pipeline of use cases and prospects continue 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.
All of these products are backed by a global distributed real time insurance call.
For the past several months.
We expanded this infrastructure to call or key regions across North America, South America, Europe and Asia.
Tony Zhao: Over the past several months, we've expanded this infrastructure to cover key regions across North America, South America, Europe, and Asia, ensuring consistent latency, reliability, and performance, even under high concurrency and varying network conditions. 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. Our customers and developers are deploying our conversational AI solutions to build voice agents for outbound marketing, inbound customer service, tutoring, and many other applications. Hardware manufacturers are also integrating our technology into smart toys, enabling voice-powered companionship and learning experiences.
They're shorter consistent literacy.
Reliability and the performance, even under high concurrency and borrowing network conditions.
Early adoptions from customers around the world has been encouraging and our pipeline of used cases and the prospects continue to grow as we head into next quarter.
Our recent color AI in Rte contrast attracted more than two three installed an onsite attendees.
A record for us and made it the largest gathering focused on conversational AI technology globally.
Our customer and developers are deploying our conversational AI solutions to build was agent for all of our marketing inbound customer service touring and minor other many other applications.
Tony Zhao: Our customer and developers are deploying our conversational AI solutions to build voice agent for outbound marketing, inbound customer service, tutoring, and many other applications. Hardware manufacturers are also integrating our technology into smart toys, enabling voice-powered companionship and learning experiences. In conclusion, the convergence of advanced AI models and robust real-time infrastructure is unlocking a new era of possibilities. Backed by proven scalability, deep technology expertise, and a forward-looking product suite, we're well-positioned to empower this next chapter, enabling truly human-like, reliable, and scalable voice agents. With that, let me turn things over to Jinbo, who will reveal our financial results.
<unk> manufactures are also integrating our technology into smart pause, enabling was powered companionship and learning experiences.
In conclusion, the convergence of our advanced AI models and robust real time infrastructure is unlocking a new era of possibility.
Tony Zhao: In conclusion, the convergence of advanced AI models and robust real-time infrastructure is unlocking a new era of possibilities. Backed by proven scalability, deep technology expertise, and a forward-looking product suite, we're well-positioned to empower this next chapter, enabling truly human-like, reliable, and scalable voice agents. With that, let me turn things over to Jingbo, who will reveal our financial results.
By proven scalability.
This technology expertise and our forward looking product suite.
Well positioned to empower this next chapter.
Nobody is truly a human like reliable and scalable was agents.
With that let me turn things over to <unk>, who will review our financial results.
Thank you Tony.
Hello, everyone.
Let me start by first reviewing financial results for the third quarter of 2025.
Jingbo Wang: Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for Q3 of 2025, and then I will discuss outlook for Q4. Total revenues for Q3 reached $35.4 million, up 12% year-over-year, representing our third consecutive quarter of double-digit organic growth. If we look at the 2 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. Shengwang revenues reached RMB 122.4 million in Q3, up 8.4% year-over-year and 6% sequentially, driven by continuous business expansion and adoption in key verticals such as social, entertainment, and IoT.
Jingbo Wang: Thank you, Tony. Hello, everyone. 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. Shenwang revenues reached RMB 122.4 million in Q3, up 8.4% year-over-year and 6% sequentially, driven by continued business expansion and adoption in key verticals such as social, entertainment, and IoT. Dollar-based net retention rate is 108% for Agora and 90% for Shenwang, marking the fourth consecutive quarter of improvement for both businesses.
I will discuss our outlook for the fourth quarter.
Total revenues for the third quarter reached 35 four.
$4 million up 12% year over year, representing our third consecutive quarter of double digit organic growth.
If we look at the two business divisions.
Core revenue reached $18 $2 million in Q3, representing 15, 9% year over year accruals.
Quarter over quarter.
The strong year over year growth reflects our successful market penetration.
Adoption in verticals such as life shopping.
<unk> revenues reached RMB $122 4 million in Q3 up eight 4% year over year.
6% sequentially.
Driven by continued business expansion and adoption in key verticals, such as social entertainment.
Alrighty.
Other based natural depletion rate is 108% flora and 90% for Shlomo, marking the fourth consecutive quarter of improvement.
Jingbo Wang: Dollar-Based Net Retention Rate is 108% for Agora and 90% for Shengwang, marking the fourth consecutive quarter of improvement for both businesses. Gross margin for Q3 was 66%, slightly decreased 0.7% year-over-year and 0.8% sequentially. Moving on to expenses. R&D expenses were $13.8 million in Q3, decreased 52.8% year-over-year. R&D expenses represented 39.1% of total revenues in the quarter, compared to 92.7% in Q3 last year. Sales and marketing expenses were $6.5 million in Q3, decreased 5.6% year-over-year. Sales and marketing expenses represented 18.3% of total revenues in the quarter, compared to 21.7% in Q3 last year. G&A expenses were $5 million in Q3, decreased 48.4% year-over-year.
<unk> businesses.
Gross margin for the third quarter was 66% slightly decreased <unk>, 7% year over year and 8% sequentially.
Jingbo Wang: Gross margin for the third quarter was 66%, slightly decreased 0.7% year-over-year and 0.8% sequentially. Moving on to expenses, RMD expenses were $13.8 million in Q3, decreased 52.8% year-over-year. RMD expenses represented 39.1% of total revenues in the quarter, compared to 92.7% in Q3 last year. Sales and marketing expenses were $6.5 million in Q3, decreased 5.6% year-over-year. Sales and marketing expenses represented 18.3% of total revenues in the quarter, compared to 21.7% in Q3 last year. G&A expenses were $5 million in Q3, decreased 48.4% year-over-year. G&A expenses represented 14.1% of total revenues in the quarter, compared to 30.8% in Q3 last year. Moving on to the bottom line, we delivered net income of $2.7 million in Q3, representing a 7.8% net income margin. This result represents a significant improvement from last year and marks our fourth consecutive quarter of GAAP profitability.
Moving on to expenses.
R&D expenses.
$13 $8 million in Q3.
52.
8% year over year.
R&D expenses represented 39, 1% of total revenues in closure.
Compared to 92, 7% in Q3 last year.
So the marketing expenses were $6 5 million in Q3.
Decreased five 6% year over year.
So the marketing expenses represented 18, 3%.
Total revenues in the closure.
Compared to 21, 7% in Q3 last year.
G&A expenses were five minute interesting deal.
<unk> 48, 4% year over year.
G&A expenses represented 14, 1% of total revenues in the quarter.
Jingbo Wang: G&A expenses represented 14.1% of total revenues in the quarter, compared to 30.8% in Q3 last year. Moving on to the bottom line. We delivered net income of $2.7 million in Q3, representing a 7.8% net income margin. This result represents a significant improvement from last year and marks our fourth consecutive quarter of GAAP profitability. Based on our current business momentum and the visibility into Q4, we expect net income to grow sequentially compared to Q3. Now turning to cash flow. Operating cash flow was $0.7 million in Q3, compared to $-4.6 million last year. Moving on to balance sheet. We ended Q3 with $374.3 million in cash equivalents, bank deposits, and financial products issued by banks.
Paired with 38% in Q3 last year.
Moving onto the bottom line, we delivered net income of $2 7 million in Q3.
Representing seven 8% net income margin.
This is a result.
Presents a significant improvement from last year and marks our fourth consecutive quarter of GAAP profitability.
Based on our current momentum and visibility into the fourth quarter, we expect net income to grow sequentially compared to Q3.
Jingbo Wang: Based on our current business momentum and visibility into the fourth quarter, we expect net income to grow sequentially compared to Q3. Now turning to cash flow, operating cash flow was $0.7 million in Q3, compared to negative $4.6 million last year. Moving on to balance sheet, we ended Q3 with $374.3 million in cash, cash equivalents, bank deposits, and financial products issued by banks. Net cash outflow in the quarter was mainly due to share repurchase of $4.8 million. In the third quarter, we repurchased 5.2 million ordinary shares of 1.3 million ADS, representing 1.4% of our outstanding shares at the beginning of the quarter. Since our board approved the share repurchase program in February 2022, we have repurchased $132.1 million worth of shares through 30 September 2025.
Now turning to cash flow operating cash flow was.
<unk> 7 million in Q3.
Compared to negative $4 6 million last year.
Moving on the balance sheet.
We ended Q3.
$374 3 million in cash cash equivalents and deposits and financial products each buybacks.
Net cash outflow in the quarter, mainly due to share repurchase of four pillars.
Jingbo Wang: Net cash outflow in the quarter was mainly due to share repurchase of $4.8 million. In Q3, we repurchased 5.2 million ordinary shares or 1.3 million ADS, representing 1.4% of our outstanding shares at the beginning of the quarter. Since our board approved the share repurchase program in February 2022, we have repurchased $132.1 million worth of shares through 30 September 2025. The share repurchase program demonstrates our dedication to returning value to our shareholders, balanced with our ability to continue investing in strategic growth opportunities. Now turning to guidance.
Yeah.
In the third quarter, we repurchased five 2 million ordinary shares.
In outlet three meaning Etfs.
Representing one 4%.
Boston Ishares at the beginning of this quarter.
Since our board approved a share repurchase program in February 2022.
We haven't repurchased $132 1 million dollar worth of shares through September 32025.
The share repurchase program demonstrates our dedication to returning value to our shareholders balanced with our ability to continue investing in strategic growth opportunities.
Jingbo Wang: The share repurchase program demonstrates our dedication to returning value to our shareholders, balanced with our ability to continue investing in strategic growth opportunities. Now turning to guidance for the fourth quarter of 2025, we currently expect total revenues to be between $37 and $38 million, compared to $34.5 million in the fourth quarter last year, representing year-over-year growth rate of 7.2% to 10.1%. This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change. In closing, I would like to express my gratitude to our outstanding teams in Agora and Shenwang. Our sustained double-digit revenue growth and profit expansion are a direct reflection of your hard work and strategic focus. To our shareholders, thank you for your continued trust. We remain focused on executing our roadmap to build a durable, market-leading company at the forefront of AI innovation.
Now turning to guidance.
For the fourth quarter of 2025.
Currently expect total revenues to be between 37 and $38 million.
Jingbo Wang: For Q4 2025, we currently expect total revenues to be between $37 and $38 million, compared to $34.5 million in Q4 last year, representing year-over-year growth rate of 7.2% to 10.1%. This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change. In closing, I would like to express my gratitude to our outstanding team in Agora and Shanghai. Our sustained public issue revenue growth and profit expansion are a direct reflection of your hard work and strategic focus. To our shareholders, thank you for your continuous trust. We remain focused on executing our roadmap to build a durable market-leading company at the forefront of AI innovation. Thank you all for joining today's call. Let's open it up for questions.
Compared to 34.
5 million in the fourth quarter last year.
Representing year over year growth rate of seven 2% to 10, 1%.
This outlook reflects <unk> current and preliminary views on the market.
Operational conditions.
Which are subject to change.
Yep.
In closing I would like to express my gratitude to all our standing team quite well.
Our sustained double digit revenue growth and profit expansion.
Reflection of your hard work and strategic focus.
Well shareholders. Thank you for your continued trust.
We remain focused on executing on our roadmap to build a durable market leading company and fulfillment.
Sure.
Thank you all for joining today's call, let's open it up for questions.
Jingbo Wang: Thank you all for joining today's call. Let's open it up for questions.
Thank you very much.
As a reminder to ask a question. Please press star one on your telephone.
Operator: Thank you very much. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by as we compile the Q&A roster. First question comes from the line of Harry Zhao from Bank of America Securities. Please go ahead.
Operator: Thank you very much. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by as we compile the Q&A roster. First question comes from the line of Harry Zhuang from BofA Securities. Please go ahead.
And wait for your name to be announced.
She was Joel your question. Please press star one again.
Please standby as we compile the Q&A roster.
Yeah.
First question comes from the line of Harry <unk> from Bank of America, a P. O S. AA Securities. Please go ahead.
Thanks management for taking my question congratulations on another quarter of double digit growth.
Harry Zhuang: Thanks management for taking my question. Congratulations on another quarter of public issue growth and a solid guidance for Q4 this year. I have three questions. First is regarding the demand outlook. Could management share about the key trends in both domestic and international market for the coming quarters? What are the key downstream sectors that are driving the demand growth? Second question is regarding the AI application. Could management share the latest update on the development of AI? Also what are the key scenarios that could drive meaningful revenue contribution in near term? Thirdly is on the profitability outlook.
Harry Zhao: Thanks, Management, for taking my question. Congratulations on another quarter of double-digit growth and solid guidance for the fourth quarter this year. I have three questions. First is regarding the demand outlook. Could Management share about the key trends in both domestic and international markets for the coming quarters, and what are the key downstream sectors that are driving the demand growth? Second question is regarding the AI application. Could Management share the latest update on the development of AI, and also what are the key scenarios that could drive meaningful revenue contribution in the near term? Thirdly is on the profitability outlook. Could Management share the profitability outlook for both fourth quarter this year and also for 2026 on the operating profit level, and also the net profit level? Thanks.
<unk> guidance for the fourth quarter this year.
I have three questions firstly regarding the demand outlook.
Each year about the key trends in both domestic and international market.
For the coming quarters, and one other key downstream sectors.
I mean, the demand growth.
Second question is regarding the application.
The.
And management share the latest update on the development of AI and also what are the key scenario.
Could drive meaningful revenue contribution.
Near term.
And thirdly, just on the profitability outlook.
So can management share the.
Profitability outlook for both the fourth quarter this year and also.
Harry Zhuang: Could management share the profitability outlook for both Q4 this year and also for 2026 on the operating profit level and also the net profit level? Thanks.
Six.
Operating profit level.
Also the net profit level.
Alright, I will take the first two questions and to move on to the last one.
Tony Zhao: All right. I'll take the first two questions, and Jingbo will take the last one. For the demand in China, the overall demand recovery trend continues. With a stabilized regulatory environment, and demand from social entertainment and education customers refunded and gradually goes up, demand from IoT and digital transformation customers are experiencing rapid growth. In US and international markets, live commerce demand continued its rapid growth, and other verticals generally show growth as well. The overall growth rate is slightly faster than in China. As to the AI demand and the trend, before I answer the question, I want to first clarify the difference between voice AI and conversational AI. We are actually focused on conversational AI, which is very related to our real-time engagement business, and it means the real-time human-AI voice interaction. On the other hand, voice AI is a much broader concept.
Jingbo Wang: All right. I'll take the first two question and Jingbo takes the last one. For the demand in China, the overall demand recover trend continues. With stabilized regulatory environment and demand from social entertainment and education customers rebounded and gradually goes up. Demand from IoT and digital transformation customers are experiencing rapid growth. In US and international markets, live commerce demand continued its rapid growth, and other verticals generally shows growth, show growth as well. The overall growth rate is slightly faster than in China. As to the AI demand and the trend, you know, before I answer the question, I want to first clarify the difference between voice AI and conversational AI.
For the demand in China, the overall demand recover trend continues.
With stabilized through regulatory environment and demand from social Entertainment education customers rebounded in the Gratulate goes up.
Demand from Iot and digital transformation customers experiencing rapid growth.
U S and international markets live Commerce demand continued its rapid growth in other verticals generally shows growth.
Those are show growth as well the overall growth rate is slightly faster than in China.
As to the AIA demand.
The trend.
Before I answer the question I wanted to first clarify the difference between voice AI conversational AI, we are actually focused on conversational AI, which is related to our real time engagement business and.
Jingbo Wang: We are actually focused on conversational AI, which is very related to our real-time engagement business. You know, it means the real-time human AI voice interaction. On the other hand, voice AI is a much broader concept. It includes both real-time conversation and non-realtime functionalities such as audio recognition and generation. The non-real time, you know, use case is actually much more broad. Non-real time audio recognition generation is also much more easier to achieve usability and to find practical use cases. In the past two years, audio generation or text-to-speech has been widely used in non-real time content production. For example, most of the short video clips people watch today are using AI-generated voiceover.
Means the real time, human AI voice interaction.
The other hand was AI is a much broader concept.
Crews, both real time conversation and non real time functionalities, such as audio recognition.
Tony Zhao: It includes both real-time conversation and non-real-time functionalities, such as audio recognition and generation. The non-real-time use cases actually are much more broad, and non-real-time audio recognition generation is also much easier to achieve usability and to find practical use cases. In the past two years, audio generation or text-to-speech has been widely used in non-real-time content production. For example, most of the short video clips people watch today are using AI-generated voiceover. Those have been growing in the last two years in the social media and a lot of other markets. However, when we move to real-time conversation, the complexity of the technology makes the whole experience much more challenging, as I stated in the opening remark, and takes longer to mature and gain adoption.
Generation.
The non real time use cases actually is much more broad.
<unk> real time audio recognition generation.
It's also much more easier to achieve usability and to fund the practical use cases.
So in the past two years audio generation or capital speech has been widely used in non real time content production. For example, most of the short video clips.
People watch today are using AI generally avoids over.
So those have been growing in the last two years in the in the in the social media and a lot of other market.
Tony Zhao: Those have been growing in the last 2 years, in the social media and a lot of other markets. However, when we move to real-time conversation, the complexity of the technology makes the whole experience much more challenging, as I stated in the opening remark, and takes longer to mature and gain adoption. In conversational AI applications, currently, there are 3 use cases, you know, have progressed to more advanced stage. Namely, call center, education, and companionship toys. For these use cases, we already see some customers have moved from proof of concept phase to real-world production. Given the vast scale and the potential usage of these verticals, we expect the success of these customers will drive broader adoption.
However, when we look to move to real time conversation.
The complexity of the technology makes the whole experience much more challenging.
State in the opening remark and takes longer to mature and gain adoption.
In conversational AI applications currently.
Tony Zhao: In conversational AI applications, currently, there are three use cases that have progressed to a more advanced stage, namely call center, education, and companionship toys. For these use cases, we already see some customers have moved from proof-of-concept phase to real-world production. Given the vast scale and the potential usage of these verticals, we expect the success of these customers will drive broader adoption. We already have customers in production today, but usage is still ramping up. We expect to see some sizable conversational AI revenue in the first half of next year, and hopefully, Convo AI will become a meaningful revenue contributor towards the end of next year.
There are three use cases.
Regress that to a more advanced stage, namely call Center education and companionship twice.
For this use cases, we already see some customers move from proof of concept phase to reward production.
Given the loss of that scale and the potential usage of this word of course, we expect the success of these customers will drive broader adoption, we're already have customers in production today, but it is still ramping up.
Tony Zhao: We already have customers in production today, but usage is still ramping up. We expect to see some sizable conversational AI revenue in H1 of next year, hopefully Convo.ai will become a meaningful revenue contributor towards the end of next year.
We expect to see some sizable conversational AI revenue in the first half of next year and hopefully come AI will become a meaningful revenue contributor towards the end of next year.
Okay.
Question. So for Q4 this year.
Jingbo Wang: Okay. Third question. For Q4 this year, given that Q4 is normally a strong season for us, we expect to achieve GAAP operating profit, so operating profit per season in Q4. Therefore, the GAAP net profit will further grow on top of the Q3 level. For next year, our target is to achieve GAAP operating profit for the full year of 2026. GAAP net profit, well that's, first of all, a big improvement over 2025 already. In terms of the GAAP net profit, that will have some level of uncertainty due to the potential interest rate cut. Under the current forecast, we expect year-over-year net income improvement over 2025 as well.
Jingbo Wang: Okay. Third question. For Q4 this year, given that Q4 is normally a strong season for us, we expect to achieve GAAP operating profit per case in Q4, and therefore, the GAAP net profit will further grow on top of the Q3 level. For next year, our target is to achieve GAAP operating profit for the full year of 2026. GAAP net profit, that's for the big improvement over 2025 already. In terms of the GAAP net profit, that will have some level of uncertainty due to the potential interest rate cut. Under the current forecast, we expect year-over-year net income improvement over 2025 as well.
Given that Q4 is normally a strong season for us.
<unk> achieved GAAP operating profit.
So operating profit breakeven in Q4.
Therefore.
GAAP net profit further growth on top of that.
Very helpful.
So for next year, our target is to achieve GAAP operating profit for the full year of 2026.
GAAP net profit.
Well first of all a big improvement over 2025 already.
<unk> GAAP net profit.
We'll have.
Some level of uncertainty due to the.
Interest rate cut.
<unk> current forecast, we expect the year over year.
Our net income an improvement over 2025 as well.
Yeah.
Operator: Thank you. Just a moment for our next question, please. Next question comes from Rachel Han from CICC. Please go ahead.
Thank you Jessa amendments all next question please.
Operator: Thank you. Just a moment for our next question, please. Next question comes from Rachel Han from CICC. Please go ahead.
Next question comes from Rachel Han from CIBC. Please go ahead.
Thank you for taking my questions can you hear me.
Rachel Han: Thank you for taking my question. Can you hear me?
Rachel Han: Thank you for taking my questions. Can you hear me?
Yes.
Hi. This is we have brought the ITC brings.
Jingbo Wang: Yes.
Jingbo Wang: Yes.
First of all congrats on the solid growth this quarter.
Rachel Han: Hi, this is Rachel Han from CICC. First of all, congrats on the solid growth this quarter and especially the continued improvement in profitability. I have two questions. First, I noticed that our Q3 revenue came in slightly above the midpoints of the guidance range. Could you give us more color on what drove this solid performance? My second question is on the AI side, which downstream applications are showing the strongest momentum so far? In particular, how is the adoption trend for AI companionship toys, and when should we expect these use cases to start contributing to your financial results? Thank you.
Rachel Han: Hi, this is Ray Han from CICC. First of all, congrats on the solid growth this quarter, and especially the continued improvement in profitability. I have two questions. First, I noticed that our third quarter revenue came in slightly above the midpoint of the guidance range. Could you give us more color on what drove this solid performance? My second question is, on the AI side, which downstream applications are showing the strongest momentum so far? In particular, how is the adoption trend for AI companionship toys, and when should we expect these use cases to start contributing to your financial results? Thank you.
Especially the continued improvement in profitability.
Two questions.
I notice that our third quarter revenue came in slightly above.
Midpoint of the guidance range.
Could you Keith bass Mook Heather Watts.
What drove the solid performance.
Second question is.
On the AI side.
Downstream applications are showing does congress momentum so far.
Particularly there.
Oh talks between AI companionship twice.
And when should we expect these use cases to start contributing to you our financial results.
<unk>.
Okay I'll take the first question.
As Tony mentioned earlier.
Jingbo Wang: Okay, I'll take the first question. As Tony mentioned in earlier question. For Q3, actually, we see pretty strong demand from US and international market, as well as the China market. In the US and international market, live commerce continued to grow very strongly. It's especially in more developed markets. The other verticals, such as social and fintech are also going pretty well in Q3. In China, First of all, we had the summer vacation in Q3, which was generally the strong season for social apps and also for education apps.
Jingbo Wang: Okay. I'll take the first question. As Tony mentioned in the earlier question, for Q3, actually, we see pretty strong demand from the US and international market as well as the China market. In the US and international market, live commerce continued to grow very strongly, especially in more developed markets. The other verticals, such as social and fintech, are also growing pretty well in Q3. In China, first of all, we had the summer vacation in Q3, which is generally the strong season for social apps and also for education apps. In addition, the IoT sector, so smart cameras, smart wearable devices like watches, and also the smart toys, are all experiencing very rapid growth.
Your question. So for Q3 actually we see pretty strong demand from U S and international market as well as the China market in the U S International market.
<unk> Commerce continues to grow very strongly.
And that's it.
Especially more developed markets and the other verticals such an assertion.
So sure.
And.
Fintech.
Also growing pretty well in Q3.
And in China.
<unk>.
First of all.
We had the summer vacation because really cause.
Generally a strong season for social apps and also for clarification.
Attribution apps.
In addition.
Our <unk> sector.
Jingbo Wang: In addition, the IoT sector, so smart cameras, smart wearable devices like watches, and also the smart toys are all experiencing very rapid growth.
Smart.
Commerce.
Smart.
Oh wearable devices.
Yes.
Also the smart hoist.
Experiencing very rapid growth.
Yes, so for.
For the.
Tony Zhao: Yeah. For the AI sort of use cases side, there are quite strong pipeline of customers and the prospects for call centers, including outbound marketing and inbound customer services. For AI companionship toys, we see strong momentum from our customer, Robopoet. Their sales and usage number are quite impressive, and they also started to charge end user monthly subscription fees, which we believe is a more healthy and sustainable business model and also a breakthrough in similar kind of toys. A couple of other toys manufacturers are also in the process of integrating our solutions, and we expect to see them coming to market in the next few months.
Tony Zhao: Yeah. For the AI sort of use cases side, there are quite strong pipelines of customers and prospects for call centers, including outbound marketing and inbound customer services. For AI companionship toys, we see strong momentum from our customer, RoboPong. Their sales and usage numbers are quite impressive, and they also started to charge end-user monthly subscription fees, which we believe is a more healthy and sustainable business model, and also a breakthrough in similar kind of toys. A couple of other toy manufacturers are also in the process of integrating our solutions, and we expect to see them coming to market in the next few months.
Sort of use cases side.
Quite strong pipeline of customers and the prospects of all call centers, including outbound marketing and inbound customer services for.
For EA companionship twice, we see strong momentum from our customer Roper pump.
Sales and use this number are quite impressive and we also started to charge and user monthly subscription fees, which we believe is a.
More healthy and sustainable business model and also a breakthrough in some of that kind of.
Twice a couple of other plus manufacturers also in the process of integrating our solutions and we expect to see the coming to market.
See them coming.
Two marketing.
That's a few months.
Thank you okay. Thank you for your detailed downstairs.
Rachel Han: Thank you.
Operator: Thank you.
Rachel Han: Okay. Thank you for your detailed answers. I wish our company continued growth and success. Thank you.
Our company continued growth and success.
Rachel Han: Okay. Thank you for your detailed answers. I wish our company continued growth and success. Thank you.
Thank you.
Tony Zhao: Thank you.
Tony Zhao: Thank you.
Jingbo Wang: Thank you.
Rachel Han: Thank you.
Our next question comes from you're seeing from China Security. Please go ahead.
Operator: Our next question comes from Yu Sing from China Securities. Please go ahead.
Operator: Our next question comes from Yuxing from China Security. Please go ahead.
Okay.
Hi management, Thanks for taking my question and congrats on the strong execution cultures and.
Yu Sing: Hi, Len, thanks for taking my question, and congrats on the strong execution quarters. My first question relates on AI usage. Could you share the sequential growth trend for AI-related usage? Looking at our current customer pipelines, when could we see sign of meaningful scale for this AI applications? My second question relates on maybe strategic expansion. We could see some CDN vendors expanding into edge GPU inference and security. Given our RTE infrastructure, can we see a similar path to maybe offer also or just a cross-sell on edge site inference or security features?
Harry Zhao: Hi, Management. Thanks for taking my question, and congrats on the strong execution quarters. My first question relates on AI usage. Could you share the sequential growth trend for AI-related usage? Looking at our current customer pipeline, when can we see signs of a meaningful scale for these AI applications? My second question relates on maybe strategy expansion. We could see some CDN vendors expanding into edge GPU inference and security. Given our RD infrastructure, could we see a similar path to maybe offer or just a cross-sell edge-side inference or security features?
So my first question relates on our usage could you share the sequential growth trend.
For AI related usage.
At our current customer pipeline.
Can we see a meaningful scale for this area.
Vacations.
And my second question relates on maybe strategy.
I don't know, we could see some CDN vendors expanding into edge GPU inference and securities given our RG infrastructure can we see or is there more power.
To maybe offer or just the cross sell.
Alright, and grids or security features.
Yeah.
Yes, so conversational AI usage increased.
Tony Zhao: Yeah. conversational AI usage increased, you know, by more than 150% on a quarter-over-quarter basis. It's quite fast. Although as I mentioned, you know, the voice AI is matured for years already, current AI is still at, you know, the early stage, we do see a strong pipeline of customers and prospects. We believe we are not far from broader adoption and proliferation of voice agents. For the, you know, second question, we're not a CDN company, we do have a global distributed network and a large number of data centers, distributed across every major regions. It's a good question. In fact, we have opportunities that are similar but from a different perspective. Specifically, we're targeting real-time inference services for conversational AI.
Tony Zhao: Yeah. Conversational AI usage increased by more than 150% on a quarter-over-quarter basis, so it's quite fast. Although, as I mentioned, the voice AI has matured for years already, Convo AI is still at the early stage. We do see a strong pipeline of customers and prospects. We believe we are not far from more broader adoption and proliferation of voice agents. For the second question, we're not a CDN company, but we do have a global distributed network and a large number of data centers distributed across every major region. It's a good question. In fact, we have opportunities that are similar but from a different perspective. Specifically, we're targeting real-time inference services for conversational AI. This is what we build for our own product.
By more than 150% on a quarter over quarter basis, So it's quite fast.
And although as I mentioned.
What is the AI is mature for years already but Oklahoma.
It's too early.
Early stage and we do see a strong pipeline of customers and prospects. We believe we are not far from more broader and broader adoption and.
Proliferation of voice agents.
For the.
Second question, we're not seeding company, but we do have a global distributed network and a large number of datacenters distributed across every major regions. So it's a good question. In fact, we have opportunities that are similar but from a different perspective.
Specifically, we're targeting real time insurance services for conversational yet this is what we build for our own product.
Tony Zhao: This is what we build for our own product. This inference service needs to connect with multiple distributed ASR, TTS, large language model, and service, as well as our self-developed and deployed modules, you know, in different locations. This kind of, you know, capability, is, is a must to support the call process in a way that it has to be very low latency so that the real-time nature of the interaction could be enabled. Such infrastructure service are of great value to any agent that requires ultra-low latency or real-time inference. This is also an opportunity we could expand in the future.
This insurance service needs to connect with multiple distributed ESR, Pts large unusual modal service as well as our soft deploy south development developer and deployed modules.
Tony Zhao: This inference service needs to connect with multiple distributed ASR, TTS, large language model service, as well as our self-developed and deployed modules in different locations. This kind of capability is a must to support the call process in a way that it has to be well-ladened so that the real-time nature of the interaction could be enabled. Such an infrastructure service is of great value to any agent that requires ultra-low latency or real-time inference. This is also an opportunity we could expand in the future. Okay. Thank you. That's very helpful.
In different locations.
This kind of.
That's a liquidity.
It is.
To support our call process in a way that it has to be wired load entity. So that the real time nature of the interaction could be enabled.
Such a infrastructure service.
Of great value to any agent that requires ultralow latency, our real time insurance so.
This is also an opportunity.
We could expect in the future.
Okay. Thanks.
Very helpful.
Yu Sing: Okay. Thank you.
Okay. Thank you.
Operator: Thank you.
Yu Sing: That's very helpful.
As a reminder to ask a question. Please press star one one.
Operator: Thank you. Just a reminder, to ask a question, please press star 11 on your telephone keypad. 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's any other questions, please feel free to email the company. Thank you.
Operator: Thank you. Just a reminder to ask the question, please press star 11 on your telephone keypad. 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's any other questions, please feel free to email the company. Thank you.
Telephone keypad.
Okay.
Thank you there are no further questions that concludes today's Q&A session.
Thank you everybody for attending the Companys call today.
As a reminder, the recording in the earnings release will be available on the company's web site at Investor The Agora II.
And if there's any other questions. Please feel free to email the company. Thank you.