Agora, Inc. Q2 FY2026 earnings call

• Top Line and Profitability Progress

  • Delivered third consecutive quarter of accelerating top line growth, seventh consecutive quarter of GAAP net profitability
  • GAAP net income was $2.2 million, up 50% YoY, with a net margin of 5.4%
  • Recorded a GAAP operating loss of $1 million, improved from a $3.1 million operating loss YoY, with a goal to achieve quarterly GAAP operating profitability by the end of 2026
  • Ended the quarter with $361.7 million in total cash and cash-equivalent assets; repurchased ~$3.7 million of ADS in Q2, with $159.9 million in total repurchases completed under the current program that expires February 2027

• Conversational AI Product and Commercial Momentum

  • Saw strong accelerating adoption of voice AI agents for global call center use cases, with validated performance matching or surpassing human agents for outbound lead qualification, consumer insight surveys, and other tasks while delivering substantial customer cost savings
  • Voice AI agents currently serve early easy-to-automate use cases, with a long multi-year runway to expand into more complex call center use cases across financial services, gaming user acquisition, and debt collection
  • Partner RoboPoint expanded its companion device powered by Agora's conversational AI into Japan and other international markets, with positive initial feedback; Agora also partnered with multiple specialized chip makers to expand compatibility across a wider range of smart devices and robots

• Ecosystem and Technology Developments

  • Launched Agora Skills and Agora CLI, new developer tools that enable AI coding assistants to work with Agora's latest SDKs and best practices for building real-time engagement and conversational AI applications
  • Announced a strategic partnership with Gradium, a leading open source voice AI platform, to enable low-latency integration of Gradium's speech technology into Agora's conversational AI engine
  • The company's foundational software-defined real-time network (SDRTN) becomes even more critical for conversational AI, as human-AI voice interactions require ultra-low latency inference and transmission, giving Agora a unique competitive advantage

• Strategic Priorities

  1. Accelerate the transition of conversational AI solutions from proof of concept to large-scale production across use cases, refining technology to unlock additional demand
  2. Continue targeted investment in real-time inference and communication infrastructure to maintain competitive advantage in conversational AI
  3. Strengthen partner and developer ecosystems; will host the annual IRTE (Intelligent Real-Time Engagement) conference in Beijing in October 2026

Agora operates two core product segments: Core Real-Time Engagement (RTE) and Conversational AI. Total company revenue for Q2 2026 was $40.4 million, growing 18% year-over-year (YoY), above the high end of prior guidance. Gross profit for the quarter was $25.7 million, with an overall gross margin of 63.7%. The Core RTE segment drives the vast majority of total revenue, with continued stable growth across domestic and international markets. Its gross margin is the baseline for the company's overall profitability. The Conversational AI segment is in a subscale early commercialization stage, and is targeted to reach 5% of total annual revenue by the end of 2026 (on a Q4 2026 run rate basis). Its current gross margin is near break-even, lower than the core RTE segment due to subscale volume and experience-focused (rather than cost-focused) optimization to date. For the full 2026 year, Conversational AI's total revenue contribution will be less than 5%.

• Q3 2026 revenue is guided between $41 million and $42 million, representing 15.8% to 18.6% YoY growth, consistent with the company's current accelerating growth trajectory
• Management maintained the prior target of 5% revenue contribution from conversational AI (Q4 2026 run rate) by the end of 2026, with significant expected growth in conversational AI revenue in 2027
• Long-term, management expects conversational AI to be transformational for Agora, but has not provided specific 3-5 year revenue penetration guidance as the market remains in early stages of development
• Management expects conversational AI gross margin will reach parity or exceed current core RTE gross margins once the segment achieves scale and cost optimization becomes a higher priority
• The company's stated goal of achieving quarterly GAAP operating profitability by the end of 2026 is maintained

• Forward-looking statements regarding conversational AI adoption, growth, and profitability are subject to inherent risks and uncertainties, including slower-than-expected customer migration from proof of concept to production, competitive pressures, and changing market conditions that could cause actual results to differ materially from management projections
• Conversational AI product expansion requires sequential development of use cases one-by-one, which is a gradual multi-year process that may progress slower than currently expected
• The conversational AI segment is currently subscale, leading to lower near-term gross margins that may take time to improve as scale increases
• General macroeconomic and market conditions can impact demand for both core RTE and conversational AI solutions across different regions

Q: Harry Zhao (B of A Securities) asked for an overview of domestic vs international demand, key growth drivers, additional conversational AI use cases, end-of-year revenue contribution, and the overseas competitive landscape. / A: On the core RTE side, demand is stable in China with recovering demand from social, entertainment, and education customers, and healthy growth in the U.S. and international markets for live shopping, financial services, and gaming use cases. Management remains on track to hit a 5% Q4 2026 run rate revenue contribution from conversational AI; beyond call centers, conversational AI is seeing traction in companion smart devices and robots with expansion into new Asian markets. Agora competes across the layered conversational AI market by focusing on low-latency infrastructure and audio optimization, areas where it has deep existing expertise, and management is confident in its competitive positioning.

Q: Yushu (China Security Co.) asked for an update on Combo AI revenue, conversion timelines for AI use cases, and AI revenue trends for 2027. / A: The commercialization cycle for conversational AI use cases takes several months from initial proof of concept to large-scale deployment, with expansion across use cases happening gradually rather than all at once. Management reaffirmed the 5% Q4 2026 run rate target, meaning full-year 2026 conversational AI contribution will be lower than 5%. Given the current strong customer pipeline, management expects significant conversational AI revenue growth in 2027 and remains optimistic about the segment's trajectory.

Q: Zhongxuan Yang (CITIC Securities) asked for long-term (3-5 year) guidance on conversational AI revenue penetration and gross margin. / A: Management noted that the global call center market is extremely large, with ~20 million workers worldwide. Over the long term, a large middle segment of call center tasks (between simple automated notifications and high-complexity tasks that require human agents) will shift to AI agents, which would be transformational for Agora even at a small market share. The market is still in very early stages, so specific long-term penetration targets are not yet available. Current low conversational AI gross margins are only due to subscale volume and experience-focused optimization; long-term, gross margins are expected to match or exceed core RTE gross margins.

Q: Tristan Yang (Double Line Capital) asked about the status of CEO Tony Zhao's planned $20 million additional share purchase, capital return plans, and potential take-private transaction. / A: The CEO's open market purchase has not yet started due to legal insider trading blackout restrictions, and is expected to begin in September 2026. The company has already returned ~$160 million to shareholders via share repurchases, a substantial amount relative to its market capitalization, and will continue this approach. A special dividend has not been considered at present, and management has no plans to take the company private, preferring to remain public and focus on operational and technical progress to build long-term value.