Agora (API) Q3 2025: Conversational AI Usage Surges 150% as Platform Monetization Accelerates
Agora’s conversational AI momentum is translating into tangible customer adoption, with usage up over 150% sequentially and new monetization models emerging in smart toys and call center verticals. The company’s fourth consecutive quarter of GAAP profitability signals a business model inflection, even as R&D intensity rises to support next-generation real-time engagement infrastructure. Investors should watch for broad-based AI revenue contribution as early deployments scale into 2026.
Summary
- Conversational AI Adoption Accelerates: Usage more than doubled sequentially, driven by real-world deployment in call centers and smart devices.
- Profitability Foundation Strengthens: Fourth straight quarter of GAAP profit, despite a 53% YoY ramp in R&D investment.
- AI Revenue Inflection Nears: Management expects meaningful conversational AI revenue to materialize by mid-2026.
Performance Analysis
Agora delivered another quarter of double-digit revenue growth and sustained profitability, highlighting the resilience of its core real-time engagement (RTE, enabling live audio and video) platform. Total revenue reached $35.4 million, up 12% YoY, with both the Agora and Shunwo divisions contributing. Agora revenue rose 15.9% YoY (flat QoQ), led by international live commerce and domestic social/education use cases, while Shunwo climbed 8.4% YoY and 6% QoQ on social, entertainment, and IoT expansion.
Gross margin remained robust at 66%, though down slightly YoY and sequentially, reflecting ongoing investment in AI infrastructure and platform scalability. R&D intensity increased sharply, with expenses up 52.8% YoY, now representing 39% of revenue, as the company accelerates development of its conversational AI stack. Despite this, net income reached $2.7 million (7.8% margin), and operating cash flow turned positive at $0.7 million. Share repurchases continued, with $4.8 million deployed in Q3, signaling management’s confidence in long-term value creation.
- Retention Trends Improve: Dollar-based net retention hit 108% for Agora and 90% for Shunwo, marking four quarters of sequential improvement.
- AI Usage Growth Outpaces Core: Conversational AI usage grew over 150% QoQ, far exceeding overall segment growth rates.
- Cash Position Remains Strong: $374.3 million in liquidity provides ample runway for continued R&D and global expansion.
Agora’s ability to drive both topline growth and margin expansion, while absorbing heavy R&D spend, underscores the leverage in its platform model as AI adoption ramps.
Executive Commentary
"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."
Tony Zhao, Founder, Chairman & CEO
"The share repurchase program demonstrates our dedication to returning value to our shareholders, balanced with our ability to continue investing in strategic growth opportunities."
Jim Bowen, Chief Financial Officer
Strategic Positioning
1. Conversational AI as Core Growth Engine
Agora is pivoting from pure RTE infrastructure to a platform enriched by proprietary conversational AI capabilities. Its recently launched Conversational AI Engine 2.0 integrates advanced audio processing, emotion detection, and adaptive conversation flow, addressing the complexity of real-world, multi-speaker, and noisy environments. The company’s zero-code AI Studio and open-source TAN framework are lowering barriers for developer adoption, with early customer wins in call centers, education, and smart toys (notably with RoboPump, a smart toy manufacturer now monetizing via end-user subscriptions).
2. Global Real-Time Inference Cloud
Agora’s distributed inference cloud, spanning North America, South America, Europe, and Asia, is designed for ultra-low latency AI workloads. This infrastructure differentiates Agora from legacy CDN (content delivery network) players by focusing on real-time inference for conversational agents, rather than static content delivery. Management sees this as a foundation for cross-selling new AI-driven services to enterprise and developer customers globally.
3. Monetization Model Evolution
Subscription-based pricing for AI-powered products, such as smart toys, is emerging as a sustainable revenue lever. Management highlighted the transition from proof-of-concept to production deployments in call centers and education, with customers beginning to pay for recurring access to Agora’s AI solutions. The company expects these verticals to drive the first wave of sizable AI revenue in 2026, with broader adoption to follow as use cases mature.
Key Considerations
Agora’s Q3 underscores a business in transition: the company is balancing near-term profitability with aggressive investment in AI capabilities and global infrastructure. The following considerations are critical for investors evaluating the durability and scalability of the model:
- AI Adoption Curve: Early conversational AI usage is ramping rapidly, but revenue contribution will lag until customer deployments reach scale and recurring monetization stabilizes.
- R&D Leverage: The step-change in R&D spend is essential for sustaining technical leadership, but creates near-term margin pressure that must be offset by future high-margin AI revenue.
- International Vertical Diversification: Growth in live commerce, IoT, and social/entertainment verticals is mitigating geographic and sector concentration risk.
- Retention and Upsell Dynamics: Improving net retention rates suggest expanding customer wallet share, especially as new AI modules are layered onto existing RTE deployments.
Risks
Execution risk remains high as Agora transitions from infrastructure provider to AI platform, with monetization of conversational AI still in its early innings. Competitive pressures from both cloud hyperscalers and emerging AI startups could compress margins or slow adoption. Regulatory uncertainty, especially around data privacy and AI usage in international markets, is a persistent overhang. Finally, the pace of customer migration from proof-of-concept to scaled production remains a key variable for 2026 revenue visibility.
Forward Outlook
For Q4 2025, Agora guided to:
- Total revenue of $37–38 million, representing 7.2%–10.1% YoY growth.
- Sequential net income growth, with continued GAAP profitability.
For full-year 2026, management targets:
- Full-year GAAP operating profit, with net profit improvement over 2025.
Management highlighted:
- Broader adoption of conversational AI in call center, education, and smart device verticals as the primary driver for future revenue growth.
- Ongoing R&D investment to sustain technical differentiation and support global expansion.
Takeaways
Agora’s Q3 2025 marks a strategic inflection as conversational AI usage begins to scale, with the business model shifting toward recurring, high-margin software revenue. The company’s ability to maintain profitability while investing heavily in R&D and global infrastructure bodes well for long-term leverage, though near-term revenue from AI remains nascent.
- AI Usage Scaling Rapidly: Over 150% sequential growth in conversational AI usage, with first production deployments in high-value verticals.
- Profitability Underpins Growth: Four consecutive quarters of GAAP profit provide a margin buffer as R&D spend accelerates.
- 2026 Will Be Pivotal: Investors should monitor the pace of AI revenue ramp and the stickiness of new subscription models as key signals of sustainable platform transition.
Conclusion
Agora’s Q3 results signal an operational and strategic pivot: the company is leveraging its real-time engagement foundation to power the next wave of conversational AI, with early customer traction and a robust cash position supporting the transition. The next twelve months will test the scalability and monetization of its AI investments, but the groundwork for durable, high-value growth is clearly underway.
Industry Read-Through
Agora’s rapid conversational AI usage growth and monetization progress reflect a broader industry shift: vertical-specific, real-time AI applications are moving from experimentation to production, especially in customer service, education, and smart devices. The company’s focus on ultra-low latency inference and developer-friendly orchestration tools sets a new bar for infrastructure providers seeking to capture the conversational AI wave. Competitors in the RTE, CPaaS (communications platform-as-a-service), and cloud AI sectors should note the importance of integrated, scalable AI stacks and recurring revenue models as adoption accelerates in 2026.