Amplitude, Inc. (AMPL) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The company's earnings call and Q&A reveal a strong focus on AI and product innovation, driving customer interest and adoption. The raised Q4 guidance, multi-year contracts, and strategic investments in AI tools suggest a positive outlook. Despite some unclear management responses, the overall sentiment remains positive, supported by strong pipeline maturity and strategic client relationships. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.

Key Financial Performance

Revenue $88.6 million, up 18% year-over-year. The growth was attributed to better linearity in deal signings earlier in the quarter, growth in services business, and strong net new ARR growth in Q2.

Annual Recurring Revenue (ARR) $347 million, up 16% year-over-year and $12 million sequentially. This reflects strong enterprise strategy execution and multi-product adoption.

Non-GAAP Operating Income $0.6 million, reflecting improved operational efficiency and cost optimization.

Customers with more than $100,000 in ARR 653 customers, an increase of 15% year-over-year. Growth driven by enterprise customer expansion and cross-sell expansions.

Gross Margin 76%, down 1 point from the third quarter of 2024 but up 1 point since last quarter. Improvements were due to hosting cost optimization and monetizing services engagements.

Sales and Marketing Expenses 43% of revenue, a decrease of 1 point from the second quarter, reflecting improved sales efficiencies.

General and Administrative (G&A) Expenses 13% of revenue, down 3 points from the third quarter of 2024, indicating better cost management.

Research and Development (R&D) Expenses 19% of revenue, up 3 points from the third quarter of 2024, reflecting increased investment in talent and innovation.

Free Cash Flow $3.4 million or 4% of revenue, compared to $4.5 million or 6% of revenue during the same period last year. The decline was due to shifts in contract payment structures.

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Operating Highlights

MCP server: Launched in October, it allows AI agents to interact directly with Amplitude's data, enabling non-technical users to access insights. It connects with tools like Claude, Cursor, and GitHub.

AI agents: Expanded open beta for AI agents that monitor product data, detect anomalies, and surface insights. Focused on Dashboard Agent and Session Replay Agent.

AI Visibility: Launched a free tool to track brand mentions in AI responses, helping marketers improve visibility and ranking in AI-generated content.

AI Feedback: New product launched based on Kraftful acquisition, processes user feedback from multiple sources into actionable insights.

Enterprise customer growth: Secured new and expansion deals with companies like Bentley Systems, FanDuel, Thomson Reuters, Taco Bell, and others.

AI-native adoption: AI-native companies like Granola are adopting Amplitude to accelerate growth and scale.

Revenue growth: Q3 revenue reached $88.6 million, up 18% year-over-year.

ARR growth: Annual recurring revenue grew to $347 million, up 16% year-over-year.

Contract duration: Average contract duration increased to nearly 22 months from 19 months a year ago.

AI-first strategy: Rebuilt the company to be AI-native, reorganized product development, and acquired four AI companies to strengthen AI capabilities.

Multi-product adoption: 71% of ARR now comes from customers using multiple products, reflecting a shift towards platform-based solutions.

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Risk or Challenges

Forward-looking statements: Management highlighted that forward-looking statements are subject to risks and uncertainties, including factors beyond the company's control, which could cause actual results to differ materially from expectations.

AI transformation: While AI is transforming product development, the company faces challenges in scaling and automating the 'use and learn' loop, which remains underdeveloped compared to the 'build and ship' loop.

Product innovation: The company is heavily investing in AI-native products and innovation, which could pose risks if these products fail to meet customer expectations or if competitors outpace them in innovation.

Customer adoption: The success of new AI-native products like MCP, AI agents, and AI Feedback depends on customer adoption and satisfaction. Failure in adoption could impact growth.

Operational efficiency: While operational efficiency has improved, maintaining this efficiency while scaling and investing in innovation could be challenging.

Revenue growth: The company has raised its revenue expectations but faces risks in sustaining this growth, especially with increasing competition and market dynamics.

Contract duration and RPO: Although contract duration and RPO have improved, there is a risk that these metrics could decline if customer retention or new customer acquisition slows.

Economic uncertainties: Broader economic uncertainties could impact enterprise spending on analytics and AI solutions, affecting the company's financial performance.

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Guidance & Outlook

Financial Outlook for Q4 2025: Revenue is expected to be between $89 million and $91 million, representing an annual growth rate of 15% at the midpoint. Non-GAAP operating income is projected to be between $3.5 million and $5.5 million. Non-GAAP net income per share is expected to range from $0.04 to $0.05, assuming diluted weighted average shares outstanding of approximately 142.6 million.

Financial Outlook for Full Year 2025: Revenue is expected to be between $340.8 million and $342.8 million, representing an annual growth rate of 14% at the midpoint. Non-GAAP operating income is projected to range from $0.5 million to $2.5 million. Non-GAAP net income per share is expected to be between $0.06 and $0.08, assuming weighted average shares outstanding of approximately 142 million on a fully diluted basis.

Strategic Growth and Product Expansion: The company plans to introduce new AI-native products over the next few quarters, including automated insights, a global chat assistant, and additional agents. These innovations aim to expand the user base and enhance the value of the analytics platform.

Market Trends and AI Integration: Amplitude is focusing on redefining analytics as an AI-native system that learns, reasons, and acts. The company is leveraging its behavioral data set to create a unified system of improvement, positioning itself as a leader in the AI analytics space.

Enterprise Customer Growth: The company is focusing on gaining new enterprise customers and driving cross-platform sales with existing customers. This includes monetizing data ingested into the platform and cross-selling new products.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is driving the 37% growth in RPO?

A:The growth is driven by strategic efforts to resegment customers, focus on enterprise clients, and align sales incentives. Enterprise clients, defined as those with 1,000+ employees or $100M+ in revenue, are entering multi-year, million-dollar contracts with longer durations, averaging 22 months overall and even longer in the enterprise space.

Q:Where are enterprises investing in the product circle of life?

A:Enterprises are in the early stages of the 'use and learn' side. They are excited about AI's potential to disrupt analytics and are already using AI coding tools. The focus is on mastering quantitative feedback rather than relying on qualitative methods like surveys and focus groups.

Q:Why does Q4 guidance imply revenue deceleration despite strong growth?

A:The guidance reflects a focus on execution and visibility into future revenue, supported by RPO growth. The company balances growth and profitability by making strategic investments and leveraging AI tools to enhance sales productivity without excessive spending.

Q:How have improvements in enterprise go-to-market motion impacted sales trends?

A:Improvements have led to more multi-year contracts, 71% of customers using multiple products, and stronger relationships with clients. The company achieved five 7-figure wins in Q3, reflecting broad-based success across various customer segments.

Q:How does the Agent strategy accelerate multi-product adoption?

A:Currently focused on analytics adoption, the strategy aims to expand into action-oriented features like suggested experiments and user guides. This approach is expected to drive broader platform adoption and increase multi-product usage.

Q:What is the expected seasonality in in-quarter NRR as Amplitude moves upmarket?

A:NRR is higher in the enterprise segment, and as the company increases its enterprise ARR, NRR is expected to improve. While no significant progression was seen this quarter, long-term expectations remain at 115%.

Q:How does new AI functionality expand Amplitude's market opportunity?

A:AI features like MCP and Agents simplify analytics by reducing the need to learn interfaces or data taxonomies. This makes the platform accessible to non-technical users, driving adoption and expanding the market.

Q:Is there an impact on sales productivity from the shift to multi-year contracts?

A:No significant impact on sales productivity is noted. The company sees large expansion opportunities within its existing customer base, with over $150M in potential expansions.

Q:Is there an opportunity to expand the service partner network?

A:Yes, as Amplitude becomes more important to enterprise clients, more partners are expected to develop on the platform, creating additional value.

Q:How is Amplitude balancing adoption and monetization of new AI products?

A:The focus is on driving adoption by delivering value through AI features, which naturally leads to upsells. The company already commands a premium price point and prioritizes consistent value delivery over immediate monetization.

Q:What is the current selling environment?

A:The environment remains cost-conscious, but customers are excited about AI's potential. Demonstrations of AI capabilities are crucial to gaining customer trust and interest.

Q:What are customers looking for in terms of product development?

A:Customers are interested in tighter integration between customer feedback and the product roadmap. They are also excited about AI's potential to reshape analytics and drive growth.

Q:What is the status of marketing analytics as a growth driver?

A:Marketing analytics is still in its early stages but has potential for significant growth. Some customers have already switched from legacy products to Amplitude, and more developments are planned for 2026.

Q:What are the most effective use cases for AI Agents?

A:Dashboard monitoring and session replay are the most effective use cases. Customers value AI's ability to monitor data, deliver root cause analysis, and summarize session highlights.

Q:What factors contributed to the raised Q4 guidance?

A:The guidance reflects strong pipeline maturity, end-of-year sales incentives, and increased visibility from RPO growth. The company remains focused on execution and strategic client relationships.

Q:How does Amplitude approach building versus buying capabilities?

A:Amplitude evaluates both options based on the fastest path to market. Recent acquisitions like Kraftful and Command have accelerated product development, while internal builds are pursued when no suitable external options exist.

Q:What is the pricing strategy for AI features?

A:Amplitude focuses on meter-based pricing, such as events and data volume, rather than outcomes-based pricing. The goal is to simplify pricing while ensuring a fair exchange of value with customers.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific impact of AI features on immediate revenue growth and monetization, focusing instead on long-term adoption and value delivery. Additionally, they did not provide detailed metrics or timelines for the expected progression in NRR or the exact contributions of marketing analytics to overall revenue.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call summary indicates strong financial performance with revenue and ARR growth, a focus on enterprise customers, and product innovation. The Q&A revealed positive analyst sentiment, particularly regarding sales efficiency and strategic deals. The increased revenue guidance and share repurchase program further boost sentiment. While there are some uncertainties about AI monetization and gross margin improvements, the overall outlook is optimistic. Considering the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.

AMPL Slides

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