Agora (NASDAQ:API) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Agora Inc. reported a 13.5% year-over-year increase in revenue for Q1 2026, reaching $37.7 million, with a GAAP net profit of $1.1 million, more than doubling from Q1 last year.

The company launched Agent Studio, a no-code environment for AI agents, and expanded its conversational AI capabilities, emphasizing its potential to automate significant customer interactions.

Agora Inc. predicts Q2 2026 revenue between $39 and $40 million, indicating a year-over-year growth of 13.7% to 16.6%, with a focus on further revenue acceleration.

The company strengthened its enterprise collaboration market position with the Intelligent Meeting Engine product, offering enhanced AI-powered features and data security.

A new strategic partnership with NetEase Enterprise Service Division was announced, aiming to enhance real-time video content moderation and AI agent solutions.

Management expressed confidence in the AI segment's growth, targeting around 5% revenue contribution by the end of the year and anticipating GAAP operating profit in the second half of 2026.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to The Agora Inc. First Quarter 2026 Financial Results Conference call. To ask a question during this session you will need to press star 11 on your telephone. 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 earnings result, press release, earnings presentation, SEC filings and a replay of today's call can be found on its IR website at Agora Inc's Investor Relations website. Joining me today are Tony Zhao, Founder, Chairman and CEO Jimbo Wang, the Company's CFO. During this call, the Company will make forward looking statements about its future financial performance and other future events and trends. These statements are only predictions that are based on what the Company believes today. 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 in which the Company discussed in detail in its filings with the sec, including today's call, earnings, press release and their risk factors and other information contained in a final prospect relating to its initial public offering. Agora Inc. has no obligations to update any forward looking statements the Company may make on today's call. Now with that, let me turn it over to Tony Hi Tony,

Tony Zhao (Founder, Chairman and CEO)

thank you operator and welcome everyone to our earnings call. I'll start with a review of our operating results for the quarter. I'm pleased to report our sixth consecutive quarter of GAAP profitability alongside another quarter of strong top line growth. Total revenue for the first quarter of 2026 reached $37.7 million, up 13.5% year over year growth, further accelerating our prior quarters. GAAP net profit was $1.1 million, more than double the level of Q1 last year. These results reflect the continued expansion of our real time engagement use cases globally as well as increasing contribution from AI related applications and products built with our solutions. Now let me turn to our business product and technology update for the quarter. Over the past several months we continue to make progress in bringing conversational AI to real world production, deepening the capabilities with our real time engagement infrastructure and expanding our ecosystem partnerships. In March we officially launched Agent Studio, a visual no code environment that enables developers and enterprise to rapidly build, test and deploy with AI agents at scale. We also introduced conversational AI agents for inbound use cases such as customer service as well as outbound use cases focused on sales and marketing. The market opportunity here is enormous. According to Gartner, Conversational agents are expected to automate 70% of customer interactions by 2027 and by 2028, AI agents are projected to outnumber human sellers by 10 to 1. At the same time, many enterprises still struggle to deploy voice AI in production environments. The challenge is not simply the AI model itself, but the complexity of multiple technology layers while maintaining low latency reliability and the natural conversational experience at scale. In addition, enterprise deployment require domain specific expertise. A successful voice AI agent must do more than respond accurately. It must reflect the tone, personality and workload of the industry it serves. For example, a car sales assistant and debt collection agent need very different conversational styles, content scarlets and customer engagement approaches. Our solution is designed to eliminate this complexity through a fully integrated stack that combines three core components. That allows enterprise to design, tests and deploy AI agent in minutes rather than weeks or months. Second, our conversational AI agent orchestrates ASR, large language model, and TTS capabilities with intelligent interaction handling, noise suppression, multilingual support and domain aware conversation design enabling more natural and human like interactions. Third, our global real time network infrastructure delivers subsecond latency and carrier grid reliability worldwide. We are already seeing strong early validation from real world deployments. In Q1, one customer implemented a serving and pulling agent that matched 10% conversion rate of human agents. This allowed them to scale data collection and reward distribution far more cost effectively without adding operational headcounts. Overall, enterprise feedback has been highly encouraging. Customers increasingly recognize that scalable conversational AI requires not only powerful models but also real time infrastructure's capability of delivering and seamless integration. We believe we are uniquely positioned at the intersection of these capabilities. Last month we also strengthened our position in the enterprise collaboration market with the launch of our Intelligent Meeting Engine product. Intelligent Meeting Engine offers end to end encryption, flexible deployment options including on premises and private cloud and full data isolation to help ensure that customer meeting content remains entirely within their controlled infrastructure. At the same time it increase AI powered capabilities such as real time transcription, translation, intelligent meeting summaries and automated follow up workflows that can connect with customers existing business system. This solution addresses growing enterprise demand around content. Sovereignty, sovereignty and intelligent workflow automation and has been well received in industries including finance, government and healthcare. Turning to ecosystem partnerships, we continue to integrate the latest AI models such as Google's Gemini Live and XAI squawk models into our conversational AI solutions. In particular, Google has featured Agora as a recommended partner for building real time conversational AI, validating our technology leadership in this space. In addition, we recently entered a strategic partnership with NetEase Enterprise Service Division NetEase Smart Enterprise today. Together we will provide integrated solutions spanning real time video content moderation and AI agents. This partnership combines NET is expertise in AI and content moderation with our leadership in real time engagement infrastructure. We believe this partnership is meaningful allocation of our technology from one of China's leading Internet companies while also expanding our go to market opportunities across education, customer service, digital entertainment and enterprise collaboration. Before I conclude, I want to thank the Agora and Shen Wang teams for their continued dedication and execution and thank our shareholders for their ongoing trust and support globally, Conversational AI is rapidly moving from proof of concept to large scale deployment. Since the official launch of our conversational AI engine product last year, usage has demonstrated remarkable momentum with over 150% sequential growth every single quarter. Enterprises today are no longer asking whether they should adopt conversational AI. Instead they are asking how to deploy it at scale with reliability, low latency and seamless integration. We believe our decade of experience in real time engagement infrastructure uniquely position us to help customers solve exactly these challenges. With that, let me turn things over to Jimbo who will review our financial results.

Jimbo Wang (Chief Financial Officer)

Thank you Tony hello everyone. Let me start by first reviewing financial results for the first quarter of 2026. Then I will discuss outlook for the second quarter. Starting this quarter, we have simplified our disclosure approach for revenues and active customers and will no longer separately disclose these metrics for Agora and Shengwang. We've also refined our dollar-based net retention rate or DBNER methodology. We now compare quarterly revenue from the same cohort of paying customers year over year to calculate dbaer. This change aligns DBNER more closely with our quarterly revenue growth rate, making it easier for investors to compare the two. Total revenue for the first quarter reached $37.7 million, representing 13.5% year over year growth. Those results exceeded the high end of our guidance range of 36 to 37 million dollars and reflected continued expansion and usage growth of real time engagement services in sectors such as US Live, shopping, social and entertainment and financial services. DBNER first quarter was 99% compared to 95% in first quarter of 2025. Gross profit first quarter was 23.9 million, representing a 5.7% year over year increase. Gross margin was 63.4% compared to 68% in the same period last year, mainly due to product mix change, especially conversational air products remaining at a subscale stage. Turning to expenses, R and D expenses were 14.4 million in Q1 up 2.9% year over year R&D expenses accounted for 38.1% of total revenues compared to 42.1% in the same period last year. The increase was primarily due to continued investment in conversational layer products, so the marketing census of 5.9 million in Cuba down 4.8% year over year. So the marketing census represented 15.6% of total revenues in the quarter compared to 18.7% in Q1 last year. The decrease was primarily due to disciplined expense management, including lower personnel and promotion expenses. General administrative expenses was $6 million in Q1, down 3.4% year over year. G&A expenses represented 15.9% of total revenues compared to 18.8% in Q1 last year. The decrease was primarily due to a lower allowance for current expected credit losses, mainly as a result of improved customer credit conditions and collection outcomes. Moving onto the bottom line, we delivered net income of 1.1 million in Q1, more than double the net income in the first quarter last year, representing a 2.9% net income margin. This marks our sixth consecutive quarter of GAAP profitability and reflects continued improvement in our operating leverage. Now turning to cash flow. Operating cash flow was $5.7 million in Q1 including interest received of 4.3 million, compared to 17.6 million in Q1 last year, which included interest received of 17.8 million. Moving on to balance sheet, we ended Q1 with 356.1 million in cash, cash equivalents and stakeholders and financial products issued by banks. Net cash outflow in the quarter was mainly due to share repurchase. During the quarter we repurchased approximately 12.5 million Class A ordinary shares or 3.1 million ADFs, representing approximately 3.6% of our total outstanding shares at the beginning of the quarter for approximately $13.1 million. As of March 31, 2026, we have repurchased 174.7 million Class A ordinary shares or 43.7 million ADF for approximately $156.2 million under our shirt purchase program, which represented 78.1% of a $200 million share repurchase program. The current program will expire at the end of February 2027. Now turning to guidance based on currently available information, we expect total revenues for the second quarter of 2026 to be between 39 and 40 million dollars, compared to 34.3 million in the second quarter of 2025, representing year over year growth of 13.7 to 16.6%. Notably, even at the low end of this range we expect to deliver faster revenue growth than we did in the first quarter. In closing, I want to thank our teams for their focused execution. In the first quarter we beat revenue guidance and net income more than doubled year over year. Our second quarter outlook also points to a further acceleration in revenue growth. We will continue to invest in AI with discipline and we are confident that it will become an increasingly important driver of long term growth. Thank you all for joining today's call. Let's open it up for questions.

OPERATOR

Thank you. 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 and A roster. First question comes from the line of Harry Zhao from Bank of America securities. Please go ahead.

Harry Zhao (Equity Analyst)

Hi. Thanks Benjamin for taking my questions and congratulations on the strong first quarter results and solid guidance. I have three questions here. The first one since the company did not disclose the breakdowns by region so we would like to know the growth trend in overseas and China market and what are the verticals driving the growth behind. And secondly in terms of the conversational AI, we would like to know the primary application scenarios at current stage and what revenue scale could the company achieve by the end of this year. And thirdly, it's about the operating guidance. What is the operating profit target for FY26 and any timeline for operating level breakeven. Thank you.

Benjamin

Thank you on the first question. First of all, in this quarter both the China business and the US international business are growing very rapidly. So the growth rate the US business still is still a little bit faster. The two are approaching both at very healthy rates. So in terms of the demand in both markets, I'll talk about the demand in the RTE market first and Tony will talk about demand in the AI market. So for RTE in China, demand for non the traditional vertical social entertainment education for multiple verticals demanded continue to recover. And in the US and international markets demand from live shopping, financial services and gaming use cases are among the strongest and we have a very healthy pipeline of new customers in these verticals as well. So overall RTE demand looks quite healthy.

Tony Zhao (Founder, Chairman and CEO)

About the demand on AI side from the beginning of this journey, closely watching the progress on our front we were the first to introduce AI into the whole RTE technology stack and offer the first generation of products empowered by those capabilities. Since then we've been closely working with customers on practical demand. The thing is, in the last few years there has been a lot of hype around how AI can change people's lives and those claims are not fake. But many of those claims are overstatements that far ahead of what's happening on the ground, mostly oversimplify the practical challenge and actual adoption process. Since early last year we've been seeing demand from call center, education, digital avatar, et cetera. I think we talked about that last year. This is happening over the past few quarters in different regions. In each of those areas we actually had certain partners and customers to work with them to grow into real production with them. We made progress in the overall experience, practical total economy and customer use case adoption. At this moment we see fairly large demand from the call center side as the technology of voice agent is increasingly able to communicate and resolve many communication tasks. Leveraging large language model intelligence is improving day by day on IoT side. After the successfully helping after successfully helping to launch the companion toy Fuzhou, similar demand is expanding. Fuzhou's growth itself is also very promising. It can get enough monthly subscription revenue from the most sticky user group every month. So it's not just one time sale of the hardware toy. We're seeing a similar trend in other use cases of conversational AI.

Benjamin

Yes, so Tony just talked about the demand for conventional assets. I think that's also answered partly the second question. So yes, for revenue contribution this year we believe call center and IoT will be the biggest contributors. And I think Tony also talked about that in his opening remarks that since we released our conversational AI engine product in March last year, its usage has been growing at more than 150% sequential growth rate every single quarter. So also the revenue contribution at moment is still relatively low. We expect to see this revenue to quickly ramp up and towards somewhere around 5% revenue contribution by the end of the so in terms of the 2026 operating target. So given the current growth trajectory and seasonality, we expect operating income and net income to both grow sequentially every quarter from Q1 to Q4. And in terms of the full year profit, we expect the GAAP net income will be significantly higher than last year and our goal is to achieve GAAP operating profit in the second half second half of this year. Thanks Benjimen. Very clear. Thank you.

OPERATOR

Thank you. Just a moment for our next question please. Next we have Rachel Hahn from cicc. Please go ahead.

Rachel Hahn

Thanks. Hi, this is Rehan Richel from cicc. Thanks for taking my questions and congrats on another solid quarter, especially with revenue coming above the high end of guidance. My first question is on E Commerce overseas last quarter. I remember you highlighted Whatnot and the Superboard live shopping event. So could you give us an update how this vertical has been developing since then and how should we think about the potential revenue contribution from overseas E commerce for the rest of 2026? My second question is on domestic China business. I know we share some color on the growth drivers for the domestic business this year, but I noticed we announced Net E Smart enterprise partnership this quarter. So should we think about its potential impact on our Shengwang growth in 2026? Thank you.

Benjamin

Sure. So first question on commerce use case. So I want to say that in the US market and in probably all developed markets in general, video-based live commerce is still a very new set. So we mentioned Whatnot last quarter. So after that event, very successful event actually it did one in terms of new user acquisition and customer user stickiness. So we continue to see growing demand from that customer. In addition, we recently won over another fast growing video based E commerce customer in the US Market from a competitor. And on top of that even last quarter was a milestone in the industry. So now everybody in the industry is watching and several other players are trying to host similar events in the future and we are discussing with a few of them already. So we do expect this vertical to have live on forefront and we are making solid progress on that front. So in terms of the business in China, as I said earlier, demand from these Internet-based use cases, social entertainment, education, we see demand recovery also static module and also from verticals such as IoT cameras, doorbells, cars, some wearable devices. Demand from IoT is growing very fast. It has been very fast in the past two, three years and also digital transformation customers with additional AI features. We also see renewed demand for growth from digital transformation traditional enterprise customers. In terms of the I think it's certainly very helpful on its home but also it reflects the further reflects a further consolidation of the RTE market in China. So recently to just give some more examples where there's recently a private competitor in this market repurchased all of its venture capital investors and started to focus more on profitability rather than scale. And that used to be a competitor now and we also see another cloud large public cloud competitor has further reduced its staff on the ERT business. So we do believe this trend of easing this trend of consolidation will gradually help revenue growth as well. Okay, thanks that's very helpful and hope all the best going forward. Thanks.

OPERATOR

Thank you. Just a moment for our next question please. Last question comes from Yuxiu from China securities. Please go ahead.

Yuxiu

Hi manjun thanks for taking my question and congrats on the strong Just two quick ones. First, are we seeing further improvements in the domestic competitive landscape and how should that translate into pricing power and revenue growth? Also, excluding the initial growth margin drag from conversational AI, what is the online gross margin trend for our core business? Second question, as the carbon AI scales, how are its unique economic spending? If AI progressing comes in below expectation, how should we think about our target of turning OP margin positive by Q4 or 2026?

Benjamin

Sure. So first question on competition and the margin. So I will talk about RTE and Tony will talk about AI. So okay, I just talked about a little bit about the competition in the China market. We see that the market is moving to further consolidation with more players, more players to no longer going after scale. So we do believe that will help with revenue growth as well as margin improvement in coming quarters. So as you can see overall the gross margin in this quarter was a few compared to the same quarter last year. But that's mostly due to the initial gross margin of the conversational AI business. Excluding conversation gross margin of the core IT businesses remain relatively stable in the first quarter.

Tony Zhao (Founder, Chairman and CEO)

And on the AI side there's a lot of competition for conversational AI in Silicon Valley and US market, the market is still at the early stage and there are different players trying to attack it from quite diverse angles because it's still a growth market. So every company has a chance to attack from different angles and still making progresses. We are the ones who focus more on the fundamental technology trying to enable the most promising use cases through the ultimate quality of conversation. The customer demand is strong as we see the status is actually adapting to those customer demands and improving the conversational quality so that it can resolve communication tasks at a higher and better level, making it more effective. China market is quite different. As you can see, most of the AI companies can only make a fraction of revenue in China market compared to their US peers. The market is quite hard to enter at this moment. However, there is similar demand on conversational AI side and the technology and product progress are also similar.

Benjamin

Okay, so yeah, so in terms of the unique economics of the conversational effort I think it is still too early to talk about for example in first quarter the reason we have an active gross market for this product is because we have a lot of Proof of Concept (POC) customers, a lot of experimentation that basically generated no revenue but has a lot of cost. So we believe as we continue to scale as customers move from Proof of Concept (POC) to a deployment and scale usage by the end of the year we expect to see meaningful revenue contribution and at that point the gross margin will certainly turn positive and also will be at a healthy level in the long run. We actually expect the conversational air business to generate similar if not higher gross margin than the current RTE products because of one higher pricing and to the more technical sophistication and value creation for customers if the AI progress is low does not meet the expectation. But actually we have considered all the investments we need to make on that front and it will not affect our goal of turning operating profitability in the second half of this year. Thank you.

OPERATOR

Thank you. As a reminder to ask a question, please press Star one one on your telephone and wait for your name to be announced. Thank you. With that, this concludes today's Q and A session and conference call. Thank you again everyone for attending the Company's call today. As a reminder, the recording and the earning release will be available on the company's website at investor Agora Inc.'s website and if there's any further questions, please feel free to email the company.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.