管理層發言
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 the session, you will need to press *11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. The company's earnings results press release, earnings presentation, SEC filings and a replay of today's call can be found on the IR website at investor.agora.io. Joining me today are Tony Zhao, Founder, Chairman and CEO, and Jingbo Wang, the company's CFO. During this call, the company will make forward-looking statements about future financial performance and other future events and trends. These statements are only predictions that are based on the company's beliefs 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 which the company discussed in detail in its filings with the SEC, including today's call, earnings press release, and the risk factors and other information contained in the final prospectus relating to its initial public offering. Agora Inc. remains under no obligation 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, everyone. Thank you, operator, and welcome everyone to our earnings call. I will start with a review of our operating results for the quarter. I am 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, with growth further accelerating from 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 an 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 continued to make progress in bringing conversational AI to real-world production, deepening the abilities of our real-time engagement infrastructure and expanding our ecosystem partnerships. In March, we officially launched an Agent Studio, a visual low-code environment that enables developers and enterprises to rapidly build, test, and deploy 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 integrating multiple technology layers while maintaining low latency, reliability, and a natural conversational experience at scale. In addition, effective enterprise deployment requires domain-specific expertise. A successful voice AI agent must do more than respond accurately; it must reflect the tone, personality, and workflow of the industry it serves. For example, a car sales assistant and a debt collection agent need very different conversational styles, content scenarios, and customer engagement approaches. Our solution is designed to eliminate this complexity through a fully integrated stack that combines three core components that allow enterprises to design, test, and deploy AI agents in minutes rather than weeks or months. Second, our conversational AI agent orchestrates ASR, large language models, and TTS capabilities with intelligent interruption handling, noise suppression, multi-role support, and domain-aware conversation design, enabling more natural and human-like interactions. Third, our global real-time network infrastructure delivers sub-second latency and carrier-grade reliability worldwide. We are already seeing strong early validation from real-world deployments. In Q1, one customer implemented a story-telling agent that matched a 10% conversion rate of human agents. This allowed them to scale data collection and reward distribution far more cost-effectively without adding operational headcount. Overall, enterprise feedback has been highly encouraging. Customers increasingly recognize that scalable conversational AI requires not only powerful models, but also real-time infrastructure capabilities capable of delivering a seamless interaction and 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 increases AI-powered capabilities such as real-time transcription, translation, intelligent meeting summaries, and automated follow-up workflows that can connect with customers' existing business systems. This solution addresses growing enterprise demand around content security, data 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 native AI models such as Google's Gemini Live and other 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 into 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 NetEase's expertise in AI and content moderation with our leadership in real-time engagement infrastructure. We believe this partnership is a meaningful validation 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 Shengwang 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. As I see it today, I am no longer asking whether customers 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 positions us to help customers solve exactly these challenges. With that, let me turn things over to Jingbo.
Who will review our financial results. 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 we will no longer separately disclose these metrics for Agora and Shunghwa.
We have 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 DBNER. 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 million to $37 million and reflected continued expansion of usage growth of our real-time engagement services in sectors such as US live shopping, social and entertainment, and financial services. DBNER for the first quarter was 99% compared with 95% in the first quarter of 2025. Gross profit for the 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 changes, especially conversational AI products remaining at a subscale stage. Turning to expenses, R&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 AI products. Sales and marketing expenses were $5.9 million in Q1, down 4.8% year over year. Sales and marketing expenses 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 and administrative expenses were down 3.4% year over year and were $6 million in Q1. 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. Turning to the bottom line, we delivered a GAAP net income of $1.1 million in Q1, more than double the GAAP 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, including interest received, was $5.7 million in Q1, versus negative $4.3 million. Compared to $17.6 million in Q1 last year, which included interest received of $17.8 million. Moving on to the balance sheet, we ended Q1 with $166 million in cash, cash equivalents, deposits, 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 B ordinary shares, or 3.1 million ADS, 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 ADS, for approximately $156.2 million under our share repurchase program, which represented 78.1% of a $200 million share repurchase program. The current program will expire in 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 million and $40 million 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. Thank you.
分析師問答
As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. First question comes from the line of Harry Zhao from Bank of America Securities. Please go ahead.
Hi, management. Thanks for taking my questions, and congratulations on the strong first quarter and solid Q2 guidance. I have three questions here. The first, the company did not disclose the revenue breakdowns by region, so we would like to know the growth trend in overseas and China markets and what verticals are driving the growth behind that. Secondly, in terms of conversational AI, I would like to know the primary application scenarios at the current stage and what revenue scale could the company achieve by the end of this year? And third, it is about the operating profit target. What is the operating profit target for 2026 and any timeline for operating-level breakeven? Thank you.
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. In terms of growth rate, the US business is still a little bit faster, and they are both approaching very healthy rates. So in terms of the demand in both markets, I will talk about the demand in the real-time engagement market first; Tony will talk about demand in the AI market. For real-time engagement, in China, demand for the traditional verticals—social, entertainment, education—most of those verticals' demand continues to recover. In the US and international markets, demand for live shopping, financial services, and healthcare were among the strongest, and we have a pipeline of new customers in these verticals as well. So overall, real-time demand looks quite healthy.
About the demand on the AI side: from the beginning of this year, we are closely watching the progress on our front. We were the first to introduce AI into the whole real-time technology stack and offer the first generation of products empowered by those capabilities. Since then, we have 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. Those claims are not fake, but many of those claims are overstatements that are far ahead of what is happening on the ground. Most of it oversimplifies the practical challenges and actual adoption process. Since early last year, we have been seeing demand from call centers, education, digital services—this is happening over the past few quarters in different regions. In each of those areas, we actually had certain partners and customers and worked with them to go into real production, make progress in the overall experience, capture the token economy, and drive customer use case adoption. At this moment, we see fairly large demand from the call center side. The technology of voice agents is increasingly able to communicate and resolve many communication tasks; leveraging large language model intelligence is improving day by day. On the IoT side, after successfully helping to launch the companion toy for ZuZu, similar demand is expanding. ZuZu's growth itself is also very promising; it can get enough monthly subscription revenue from its most sticky user group every month. So it is not just a one-time sale of the hardware toy. We are seeing a similar trend in other use cases of conversational AI.
So Tony just talked about the demand for conversational AI, and I will also answer partly the second question. For revenue contribution this year, I would believe call center and IoT will be the biggest contributors. Tony has talked about that in his opening remarks that since we released our commercial AI engine product in March last year, its usage has been growing at more than 150% sequential growth every single quarter. The revenue contribution at the moment is still relatively low. We expect to see revenue quickly ramp up and possibly reach somewhere around 5% revenue contribution by year-end. So in terms of the 2026 operating target, given the current growth trajectory and the seasonality, we expect operating income and net income to both grow sequentially every quarter from Q1 to Q4. In terms of GAAP net profit, we expect GAAP net income will be significantly higher than last year, and our goal is to achieve GAAP operating profit in the second half of this year. Thanks.
Very clear. Thank you.
Just a moment for our next question, please. Next, we have Rachel Han from CICC. Please go ahead.
Thanks. Hi, this is Rachel 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 Super Bowl live shopping event. Could you give us an update on 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 the domestic China business. I know you shared some color on the growth drivers for the domestic business this year, but I noticed we announced the NetEase Smart Enterprise partnership this quarter. How should we think about its potential impact on Shunghwa's growth in 2026? Thank you.
Sure. On the commerce use case, I want to say that in the US market and in probably all developed markets in general, video-based live shopping is still very nascent. We mentioned Whatnot last quarter. After that very successful event, it did not turn off their user acquisition or customer stickiness. So we continue to see growing demand from that customer. In addition, we recently won another fast-growing video-based e-commerce customer in the US market from a competitor. On top of that, last quarter was a masterclass for the industry, so now everybody in the industry is watching and several other players are trying to host similar events in the future. We are already discussing with a few of them. So we do expect this vertical to have long-run growth, and we are making solid progress on that front. In terms of the business in China, as I said earlier, demand from main internet-based use cases—social, entertainment, education—is showing steady recovery at a moderate rate. Also, from verticals such as IoT, cameras, doorbells, cars, and some other wearable devices, the demand for our technology is growing very fast; it has been very fast in the past two to three years. We also see renewed demand from digital transformation customers who want additional AI features. In terms of the partnership, I think it is certainly very helpful in and of itself, and it reflects further consolidation of the real-time engagement market in China. To give more examples, one of our cloud competitors in this market repurchased all of its venture capital investors and started to focus more on profitability rather than scale. That company used to be a competitor and is now our largest partner. We also see another large private cloud vendor that has further reduced its staff on the real-time engagement business. So we do believe this easing competition and consolidation trend will gradually help our revenue growth as well. Thanks, that is very helpful, and hope all the best.
Thanks.
Thank you. Just a moment for our next question, please. Last question comes from Yu from China Securities. Please go ahead.
Hi, management. Thanks for taking my question, and congrats on the strong quarter. Just two quick ones. First, are we seeing an improvement in the domestic competitive landscape, and how should that translate into pricing power and revenue growth? Also, excluding the initial gross margin drag from conversational AI, what is the underlying gross margin trend for our core business? Second, since the conversational AI business's cost is partly hardware and unique economics, if AI progress comes in below expectations, how should we think about your target of turning operating profit margin positive by Q4 2026?
Sure. On competition and margins, I will talk about real-time engagement and Tony will talk about AI. I mentioned earlier the market in China is moving toward further consolidation, with more players who no longer prioritize scale over profitability. We do believe that will help with revenue growth as well as margin improvement in the coming quarters. As you can see, overall gross margin in this quarter was lower compared to the same quarter last year, but that is mostly due to the initial negative gross margin of the conversational AI business. Excluding conversational AI, gross margin of the core real-time engagement business has remained relatively stable in the first quarter.
On the AI side, there is a lot of competition for conversational AI in Silicon Valley and the US market. The market is still at an early stage, and there are different players trying to attack it from diverse angles. Because it is still a growth market, every company has a chance to win from different angles and still make progress. We focus more on the fundamental technology, trying to enable the most promising use cases through the ultimate quality of conversation. Customer demand is strong, and we are adapting to that demand and improving conversational quality so it can resolve communication tasks at a higher and better level, making it more effective. The China market is quite different; most AI companies can only make a fraction of revenue in China compared to their peers in other regions. The market is quite hard to get into at this moment. However, there is similar demand on the conversational AI side, and the technology and product progress are also similar.
So in terms of the unit economics of the conversational AI product, I think it is still too early to be definitive. In the first quarter, the reason we have a negative gross margin for this product is because we have a lot of POC customers and a lot of experimentation that has generated limited revenue but significant cost. We believe as we continue to scale, as customers move from POC to deployment and scale usage by the end of the year, we expect to see meaningful revenue contribution, and at that point the gross margin should turn positive and be at a healthy level. In the longer term, we actually expect the conversational AI business to generate similar, if not higher, gross margin than the current real-time engagement products because of higher pricing and more technical differentiation and value creation for customers. As to the question about if AI progress comes in below expectations, we have considered the investments we need to make on that front, and it will not affect our goal of achieving profitability in the second half of this year.
Thank you.
Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. Thank you. With that, this concludes today's Q&A session and conference call. Thank you again, everyone, for attending the company's call today. As a reminder, the recording and the earnings release will be available on the company's website at investor.agora.io and if there are any further questions, please feel free to email the company. Thank you. Bye-bye.