APPFOLIO INC (APPF) Q3 2025 Earnings Summary

Executive Summary

Q3 2025 delivered strong topline and KPIs: revenue grew 21% year-over-year to $249.353M; total units under management rose 7% to 9.1M, and non-GAAP operating margin was 23.5% .
Versus consensus, revenue beat ($249.353M vs $245.390M*) but EPS missed ($1.31 vs $1.452*); EBITDA was below consensus ($40.482M* vs $73.933M*) as mix, AI infrastructure costs, and a bonus accrual compressed margins* .
Guidance raised for FY 2025 revenue to $945–$950M (from $935–$945M) but non-GAAP operating margin lowered to 23.5%–24.5% (from 24.5%–26.5%); diluted weighted average shares lowered to ~36M (from ~37M) .
Near-term catalysts: increasing premium tier adoption (Plus/Max), accelerating Realm‑X AI use cases, resident experience initiatives (FolioSpace, Onboarding Lift), and an investor meeting on November 18 that will detail AI and resident experience momentum .

What Went Well and What Went Wrong

What Went Well

Revenue growth and VAS momentum: Revenue +21% y/y to $249.353M; Value Added Services +22% y/y to $192.092M, driven by risk mitigation, screening, online payments, and greater card usage .
KPI strength and customer expansion: Units under management reached 9.1M; customers 21,759 vs 20,403 a year ago (+7% for both), evidencing share gains .
Strategic AI/product execution: “Our Performance Platform, built on an AI-native architecture, drives real performance outcomes…our customers are winning.” – CEO Shane Trigg . Realm‑X Performers introduced to automate leasing, maintenance, and resident messaging, with measurable user outcomes (e.g., vacancies filled 5+ days faster, renewals +20%) .

What Went Wrong

Margin compression: GAAP operating margin fell to 14.1% (from 20.7% in Q3’24) and non‑GAAP operating margin to 23.5% (from 28.7% y/y), as cost of revenue rose to 36% of revenue (vs 34%) and operating expense mix increased .
Bonus accrual impact: An incremental ~$13M (5.5% of Q3 revenue) year‑to‑date bonus accrual depressed Q3 margins; excluding this, operating margin would have been ~29% .
EPS miss vs consensus and elevated AI infrastructure spend: Primary EPS missed consensus*, and rising data center spend to support growing AI capabilities added to cost pressures .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$205.733	$217.702	$235.575	$249.353
GAAP Operating Income ($USD Millions)	$42.568	$33.783	$40.512	$35.046
GAAP Operating Margin %	20.7%	15.5%	17.2%	14.1%
Non-GAAP Operating Income ($USD Millions)	$59.135	$52.953	$61.610	$58.638
Non-GAAP Operating Margin %	28.7%	24.3%	26.2%	23.5%
GAAP Diluted EPS ($USD)	$0.90	$0.86	$0.99	$0.93
Non-GAAP Diluted EPS ($USD)	$1.29	$1.21	$1.38	$1.31
Cash from Operations ($USD Millions)	$57.770	$38.465	$52.643	$86.007

Segment Revenue Breakdown

Segment ($USD Millions)	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Core Solutions	$46.030	$49.513	$52.473	$53.752
Value Added Services	$157.726	$164.706	$180.145	$192.092
Other	$1.977	$3.483	$2.957	$3.509

KPIs

KPI	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Units Under Management (Millions)	8.5	8.8	8.9	9.1
Customers	20,403	—	—	21,759

Estimates vs Actuals

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue Consensus Mean ($USD Millions)*	$220.417 [GetEstimates]*	$231.296 [GetEstimates]*	$245.390 [GetEstimates]*
Revenue Actual ($USD Millions)	$217.702	$235.575	$249.353
Primary EPS Consensus Mean ($USD)*	$1.224 [GetEstimates]*	$1.283 [GetEstimates]*	$1.452 [GetEstimates]*
Primary EPS Actual ($USD)	$1.21	$1.38	$1.31
EBITDA Consensus Mean ($USD Millions)*	$59.972 [GetEstimates]*	$64.000 [GetEstimates]*	$73.933 [GetEstimates]*
EBITDA Actual ($USD Millions)*	$40.038 [GetEstimates]*	$46.362 [GetEstimates]*	$40.482 [GetEstimates]*

Values with * retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2025	$935–$945	$945–$950	Raised
Non-GAAP Operating Margin %	FY 2025	24.5%–26.5%	23.5%–24.5%	Lowered
Diluted Weighted Avg Shares (Millions)	FY 2025	~37	~36	Lowered

Management framed lower margin guidance as driven by product mix, scaling sales capacity, increased spending to support AI/resident capabilities, and the bonus overattainment accrual .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
AI/technology initiatives	Q1: Invested to accelerate resident experience; connected LiveEasy with partners via FolioSpace . Q2: 96% of customers used one or more AI-powered solutions; expanding AI adoption .	Introduced Realm‑X Performers (Leasing, Maintenance, Resident Messenger); AI‑native architecture emphasized; measurable outcomes (faster leasing, higher renewals) .	Accelerating AI deployment with agentic capabilities; deeper integration driving usage and outcomes .
Resident experience	Q1: Strategy accelerated via FolioSpace and partnerships (Zillow, Second Nature) .	Launched Resident Onboarding Lift with Second Nature; reimagined move‑in workflow; FolioSpace highlighted .	Expanding tools and services at “moments that matter,” monetization via value-added services .
Revenue mix & VAS	Q1/Q2: VAS growth driven by screening, payments .	VAS +22% y/y; increased card usage and contributions from LiveEasy and Second Nature .	Mix shift toward VAS and premium tiers supporting topline .
Costs/margins	Q1/Q2: Non‑GAAP margins mid‑20s%; CORev % ~35% .	CORev % rose to 36%; bonus accrual (~$13M) compressed margin; ex‑accrual margin ~29% .	Elevated infrastructure spend for AI usage and mix effects pressuring margins .
Partnerships/ecosystem	LiveEasy integration; newer partners mentioned (Zillow, Second Nature) .	New Stack partner Procore; continued Second Nature collaboration .	Broadening ecosystem to capture more workflows and value .
People/culture & leadership	CFO appointed (effective July 30) .	Recognitions: Fortune Future 50; Best Workplaces in Technology . Departure of Chief Trust Officer announced .	Employer brand strengthening; leadership transitions noted .

Management Commentary

Strategy: “Our Performance Platform, built on an AI-native architecture, drives real performance outcomes…Our success is aligned to our customers' success, and this quarter reflects that our customers are winning.” – Shane Trigg, CEO .
Financial drivers: “In Q3, we accrued an additional year-to-date expense of approximately $13 million…as a result of the performance levels we now expect to attain under our annual corporate bonus plan…Excluding [this], operating margin was approximately 29% of revenue.” – Tim Eaton, CFO .
Product outcomes: “Customers fully adopting Realm‑X are seeing…vacancies filled more than five days faster, renewal rates increasing by 20%, and NOI almost 3% higher…” – Shane Trigg .
Guidance rationale: Lower margin guidance reflects product mix, sales capacity growth, increased spending to support AI/resident capabilities, and bonus overattainment .

Q&A Highlights

The transcript provided prepared remarks and concluded without a detailed Q&A session; management emphasized margins, bonus accrual impacts, and AI strategy in prepared commentary .
Clarifications delivered: CFO quantified the bonus overattainment accrual (~$13M; 5.5% of Q3 revenue) and its margin effect; noted rising data center spend tied to AI usage and mix shifting costs upward .

Estimates Context

Q3 2025: Revenue beat ($249.353M vs $245.390M*), EPS missed ($1.31 vs $1.452*), and EBITDA undershot consensus ($40.482M* vs $73.933M*), reflecting higher cost of revenue (card mix), AI infrastructure spend, and the bonus accrual .
Sequentially: Q2 had beats on revenue and EPS vs consensus*; Q1 revenue slightly below consensus* while EPS was near inline* .
Implications: Street models likely raise FY revenue to new guidance range and trim near-term margin/EPS to reflect mix, AI infrastructure, and incentive costs; management’s ex-accrual commentary (~29% margin) provides a helpful reference point for normalized run-rate .