Agora (API) Q2 2026 earnings call transcript

With that, let me turn the call over to Tony. Hi, Tony.

Hey, thanks, I'm the operator, and welcome everyone to our earnings call. Let me begin with the review of our operating results for the quarter. I'm pleased to report another quarter of accelerating top-line growth, as well as our seventh consecutive quarter of gap profitability. Total revenues for the second quarter of 2026 reached $40.4 million, an increase of 18% year-over-year.

This performance reflects both the continued strength of our core real-time engagement business And the growing contribution from our conversational AI products as more customers move from proof of concept to commercial production. Our gap net profit for the quarter was $2.2 million, up 50% year over year, which demonstrates improved operating leverage and disciplined cost management across the organization. Our most important progress this quarter occurred in call centers across the globe. We are seeing strong momentum in adoption of our voice AI agents. Trained on the best sales and customer service playbooks, these agents deliver consistent, high-quality performance across every conversation. They do not experience fatigue, lose focus, or worry in performance based on workload or time of day.

They also maintain time and steady interactions, even during challenging calls. Further, customers are now seeing substantial cost savings from deploying our worst AI agents. Indeed, we're beginning to see them match or even surpass human performance in an increasing number of tasks in achieving parted business outcomes. The first example is outbound marketing and buyer interest capture. Our voice AI agents are now being used to initiate calls, qualifying leads, collect information, and schedule meetings with prospective customers.

At a similar conversion brief with human reps, our voice AI agents also outperform in two other important areas. The volume of calls they can handle and the unique economics they deliver.

The second example is marketing service. Our WSI agent can conduct in-depth interviews for consumer insights and product feedbacks. While capturing structured data throughout each conversation, the high concurrency of our solution compresses the time it takes. to conduct large-scale surveys that traditionally takes weeks or days into just a few hours. Marketing and surveying are only two examples of how voice AI agents can reshape call centers worldwide. We see similar opportunities in financial services outreach, gaming user acquisition and retention, debt collection, and many other areas. We are already working with customers across these sectors, and we expect several of them to move from proof of concept to large-scale deployment in the coming quarters. At the same time, we continue to invest in our developer ecosystem.

This quarter, we launched Agora Skills and the Agora CLI. Agora skills package our platform knowledge so that AI coding assistants, including call code, cursor, or codex, can work with our latest SDKs and best practices when building real-time engagement or conversational AI applications.

The Agoa CLI complements this with a simple command line interface for coding agents to do their work. Together, these tools make it easier for both human developers and AI coding agents to build and deploy real-time engagement applications with us. We are also continuing to strengthen our technology ecosystem through strategic partnerships. This quarter, we announced a partnership with Gradium, a leading voice AI platform recently founded by the research team behind Moshi and Tidiki. Two speech models with strong recognition in the open source community. Through our partnership, developers can enable Gradium TDS within our conversational AI engine through a simple configuration without introducing additional latency hops.

Looking ahead, we will first remain laser-focused on accelerating the transition of our conversational AI solutions from pilot to production across use cases. Each use case will present its own set of talents, but each will also help us refine our technology. We believe that continued improvements in our solutions will unlock additional demand and drive industry's shift towards AI-led workflows in call centers.

Second, we will continue to invest in our real-time infrastructure. Our software-defined real-time network, or SDRTN, has long been a foundational advantage for us. As we expand into human-to-AI interactions, the importance of this infrastructure does not diminish. On the contrary, it becomes more critical. Because smooth conversations require ultra-low latency inference and transmission, We are confident that our investment in real inference and the communication infrastructure will serve as a decisive factor in our ability to compete and succeed in the conversational AI arena And third we will continue to strengthen our partner ecosystem and build up developer manager On October 23rd and 24th we will host our iconic annual conference IRTE or Intelligent Real Engagement in Beijing We look forward to bringing together developers, partners, enterprises, and industry leaders to explore the next phase of real-time engagement and conversational AI.

In summary, we believe the center of quality in the AI industry is increasingly shifting from model capabilities towards infrastructure and harness layer required to operate with AI agents reliably at scale. At intersection of real-time engagement, AI, and global infrastructure, we believe Agora is uniquely positioned to help enterprise market to help enterprise make this transition and create sustainable long-term value for both our customers and shareholders.

Before I conclude, I would like to thank our customers, developers, partners, and shareholders for their continued trust and support, and our global Agora and Shenlong teams for their dedication and innovation.

With that, let me turn it over to Jingwei, who will review our financial results.

Jingwei Wang Thanks, Tony. Hello, everyone. Let me start by first reviewing financial results for the second quarter of 2026. Then I will discuss outlook for the third quarter. Total revenue for the second quarter, which is 40.4 million, above the high end of the guidance range, and representing 18% year over year growth. This marks a third consecutive quarter of accelerating growth, driven by continued expansion of our real-time engagement services across sectors, such as e-commerce, As well as growing customer adoption of conversational AI solutions. A dollar-based net retention rate fourth quarter was 104%, compared to 94% in the second quarter of 2025. This represents a meaningful improvement and moves us back above 100%. Growth profit first quarter was 25.7 minutes, representing 12.5% increase year over year.

Growth margin was 63.7% compared to 66.8% in the same period last year and 63.4% in the first quarter of 2026. On a year-over-year basis, the decline was primarily due to product exchange, as conversational air products continue to see growing usage during the quarter, but it remained at a subscale stage.

On the sequential basis, the increase was mainly driven by technical optimization. Turning to expenses, R&D expenses were 15.4 million in Q2, up 10.2% year-over-year. R&D expenses represented 38.1% of total revenue in the quarter, compared to 40.8% in the same period last year. The increase was primarily due to our continued investment in conversational air products. Those and marketing census were 6.4 million in Q2, down 1.5% year over year. Sales and marketing census represented 15.9% of total revenues in the quarter compared to 19% in the same period last year. The decrease was primarily due to discipline expense management. General and administrative expenses were 5.5 million in Q2, down 9.5% year-over-year.

G&J expenses represented 13.5% of total revenue in the quarter, compared to 17.6% in the same period last year. The decrease was primarily due to a lower allowance for current expected credit loss as customer credit conditions and collection outcomes improved.

According to operating results, we recorded a gap operating loss of one million in the second quarter compared to a loss of 3.1 million in the same period last year. Thanks for continuing improvement in operating leverage. Based on our current business momentum, our goal is to achieve quarterly gap operating profitability by the end of this year.

Moving on to the bottom line, we deliver net income of 2.2 men in K2, up 50.3% year-over-year, and representing net income margin of 5.4%. Now turning into cash flow. Operating cash flow was negative 2.1 million in Q2 compared to negative 0.4 million in the second quarter of 2025.

Moving on to balance sheet. We ended Q2 with 361.7 million in cash, cash equivalents, bank deposits, and financial products issued by banks. The decrease in our cash balance was mainly due to annual bonus payment as well as shared purchase during the quarter. During year two, we repurchased approximately one million ADS for approximately $3.7 million. As of June 30, 2026, we had repurchased approximately 44.6 In total, for approximately $159.9 million under the current share repurchase program. As of June 30, 2026, we had 83.8 million ADS outstanding compared to 87.3 million ADS at the end of 2025. The current share repurchase program will expire at the end of February 2027.

Now turning to guidance, based on currently available information, we expect to the revenue for the third quarter of 2026 to be between $41 and $42 million, representing year-over-year growth of 15.8% to 18.6%. This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change.

In closing, this was another strong quarter for us, both in terms of revenue growth and profitability. At the same time, we are increasingly encouraged by the usage momentum and commercial potential in conversation with Agora, And we will continue to invest with discipline to support our long-term growth.

Thank you all for joining today's call. Let's open it up for questions.

Okay, in terms of demand, I will talk about the RTE side, and Tony can talk about the AI side. So, on that side, actually, things haven't changed that much. Overall, what we see this quarter in both China and U. S. international markets are largely the same as the last quarter. So, in China, thanks to a more stable operating environment, so demand from social and entertainment and education customers continue to recover. So, things are looking pretty stable here. On the US and international side, demand from live shopping, financial services, gaming use cases continue to grow. So demand looks healthy on the RT side.

Yes, and on the AI side, I think it's fair to say our vision has been validated and reinforced on a daily basis with a rapid development and a continued improvement we achieve on the ground. In call centers, as I mentioned in the remarks, WIBI agents are matching and sometimes even surpass human reps on certain tasks with solid, measurable business outcome for the enterprise customers. This is just the beginning of a very, very long run, and I believe we will witness the transition from human call center reps to WIBI agents around the world. This slide, how large-angle model has reshaped the software engineering. This is actually a very good thing for people and the society because it will free people from a very tedious and stressful line of work.

Keep talking to different person for hours about the same task and keeps the conversation strictly professional is very exhausting and emotionally draining.

Yeah, so in terms of the use case for commercial, I can talk about two verticals, right, call cost and nerve and companionship devices, but Tony already talked about a lot, covered a lot on the cost and nerve, but I want to highlight one point. When we talk about cost centers, it's not a single use case. It's a collection of many, many use cases, each with different features and different domain knowledge. And when we talk about these use cases, actually, in terms of the difficulty for replacement by both data agents, actually they form a spectrum from the easy one on the left-hand side to the hard one on the right-hand side. And now we are only beginning to explore a few use cases on the lesson side, such as open marketing survey.

But these are the low high influence. As we continue to refine our solutions and accumulate more experience working with our customers, we will convert more and more use cases from impossible to proof of concept to real world production. So it has a very long runway. It's not that you want to see one single use case we can conquer in one quarter or in one year. It's going to be a multi-year process. And secondly, on the compassion initiative device, we talked about customer over voice in the past. In this quarter, they actually expanded into new markets in Japan and other countries, and the initial market feedback has been quite encouraging. We also partnered with several chip makers to make our solution compatible with more chips, because these are not mobile phone chips, these are very specialized LTE chips, and this will make our solution available on wide range of smart devices, including robots.

So, overall we are still targeting 5% revenue contribution from conversational by the end This year. Competition, Tony, do you want to talk about competition? Okay, you want to talk about gross margin or not? No, it's not.

Okay, so about competition, especially on conversational AI. Conversational AI has several distinct technology layers, from the agent layer that off-street and optimize the call center, the call experience, to model layer that includes large-dumns model and worst models, such as SR or TTS. And finally, infra layer such as telecom APIs and cloud. Different layers, different players attack this market from different angles. For example, a trader would leverage its strengths in telecom APIs and phone numbers from their C-Cast business. And we are focused on the voice models, audio pre-processing and post-processing, low-legency cloud infrastructure, and agent layer to deliver the best possible call experience. Given the huge potential of the conversational AI market, it is natural to have competition.

In fact, a lot of the technology in conversational AI involves audio processing, such as handling noise, echoes, or packet loss. Obviously, we have a lot of experience in those areas, which can hugely improve conversational AI experience. So, we remain confident about our position in this market.

I'll take the question. So we already talked a lot about the use cases. So first of all, I want to explain that it actually takes quite some time for use case to really ramp up from the start of the POC to the point where the agents can deliver consistent performance and can be deployed at scale. It usually takes several months. And I talk about there are many, many use cases we need to attack them one by one. Also, we can do a few in parallel, but still it's gonna be a gradual process. So as I mentioned earlier we targeting 5 revenue contribution by the end of the year So basically our goal is in Q4 or in terminology run rate AR run rate we want to achieve 5 by the end of the year Obviously, that means for the full year of 2026, it's not going to be 5%, it's going to be smaller than that.

But once we, if we achieve 5% by the end of the year, and given the strong pipeline we already have on hand, we will only become bigger by the end of the year. We believe there will be still significant room for growth next year. Yeah, so we remain quite optimistic about how Z are looking in this market.

All right, I'll take the question. In the end, the call center market will have three segments. First is the easiest task, such as simple notifications. This will be handled by NLP-based technology, which has no real intelligence, but can understand simple keywords from humans. The second would be the hardest task or most important tasks, such as handling complaints from high-value customers or emergency situations, which will continue to be handled by humans. Even if the AI agent is technically able to handle the task, in some cases, only humans can take certain responsibilities, such as in a 911 call. The third would be everything else in the middle of the previous two. Those will be handled by WSIA agents with real intelligence.

It's hard to say exactly how big this part will be, but it will be a significant portion of the entire market.

So, yeah, so Tony talked about the, the certified, you all look for the call center market, which is a huge market. There are literally close to 20 million people working in call center today in the world. And as Tony said, there will be three categories in the future, and probably the middle category will be the biggest, and that will be handled by other agents. So, even taking a small part of the market, that would be a transformational for our company. So, at this point, it's hard to give a clear number as this market is still at a very, very early stage. And the overall penetration of AI agents is still very low, so it's hard to say exactly how big this will become, but it certainly will be transformational for us.

And in terms of the gross margin, today the gross margin is not high for us. We talked about that last quarter, it's crossing the next possible line, so it's still around there. But it's not because fundamentally, and a fundamental reason, it's because one, we are subscale. The volume is small and the volume happens at different geographies. So at each single geography, the volume is even smaller. So it's subscale. And secondly, we haven't really focused so much on the technical optimization. By now, all victimization is more focused on the experience, not the cost. So once we have a larger scale and also be more focused on the technical optimization on cost, we believe in the end, the cross margin will be similar to, if not higher, than what we have right now in the RTE business.

Let me answer this question because it's more technical. So basically, Tony has not started due to certain blackout and legal restrictions, but once these are cleared, he will start repurchase. So, obviously, he's an insider, and he has a previous purchase in the past, beginning of this year, so there are certain legal restrictions. So, as to the $20 million dollar, that has not started yet.

We have returned, up to this point, about $160 million of capital back to the shareholders, so share repurchase. And that compares to what about $400 million, $350 million market cap of the company, which is substantial and probably among the most substantial among any public company in the world. So we will continue to do that. But at this point, we have not considered a special dividend, which we might consider in the future, but not as present.

I think my purchase will start in like two, three weeks, right? September.

Yeah, it's a substitute for certain conditions. Okay.

I don't think we will consider taking the company off the market. We will want to keep communicating with the capital market and for ourselves, focus on the business operation and improve our overall technical and operation stress. We still are very confident that the future of our direction has a very big potential, and we think by focus on our business operations and technical, technical advancement, we will be able to make a lot of value for our customers, our shareholders, and our employees.