Klaviyo - Earnings Call - Q3 2025

Executive Summary

• Q3 FY25 revenue was $310.9M, up 32% YoY; non-GAAP diluted EPS was $0.18, with non-GAAP operating margin of 14.5%. International revenue grew 43% YoY, and NRR rose to 109%.
• Results beat Wall Street consensus: revenue beat by ~$11.0M (+3.7%) and EPS beat by ~$0.04; EBITDA came in below consensus on SPGI’s definition. Management raised FY25 guidance, citing broad-based strength and AI tailwinds. Values retrieved from S&P Global.*
• Guidance raised: FY25 revenue to $1.215–$1.219B (+30% YoY) and FY25 non-GAAP operating income to $161.8–$164.8M; Q4 FY25 revenue guided to $331–$335M and non-GAAP operating income $43.5–$46.5M.
• Strategic catalysts: rapid adoption of Klaviyo Service (Customer Hub, Customer Agent, Helpdesk), launch of Marketing Agent, and continued momentum in mid-market/enterprise (3,563 customers >$50k ARR, +36% YoY).

What Went Well and What Went Wrong

What Went Well

• AI-driven product momentum: Marketing Agent and Service GA with fastest adoption of any product, enabling autonomous campaign creation and personalized service; “agentic AI is a force multiplier” for growth.
• International acceleration: EMEA/APAC revenue up 43% YoY; EMEA up 48%; >35% of total revenue now outside the Americas.
• Large customer expansion and NRR: record net adds into >$50k ARR cohort (3,563, +36% YoY) and NRR at 109%, evidencing strong multi-product expansion and retention.

What Went Wrong

• GAAP profitability remains a headwind: GAAP operating loss of $(10.8)M and GAAP net loss of $(0.4)M despite non-GAAP profitability; heavy stock-based compensation continues to be a significant recurring expense.
• Gross margin seasonality expected: management flagged typical Q4 non-GAAP gross margin pressure from elevated messaging volumes; implies near-term margin headwinds despite scale benefits.
• EBITDA (SPGI-defined) underperformed consensus and was negative on an “actual” basis for Q3 despite non-GAAP operating income beat, highlighting definitional differences and cost mix (e.g., messaging and infrastructure) *. Values retrieved from S&P Global.

Transcript

Operator (participant)

Please stand by. Good afternoon, everyone, and welcome to the Klaviyo third-quarter fiscal 2025 earnings conference call. To ask a question today, please press star one on your telephone keypad. Also, today's call is being recorded. With that, I would like to turn the call over to Andrew Zilli, Vice President of Investor Relations. Please go ahead, sir.

Andrew Zilli (VP of Investor Relations)

Good afternoon, and thanks for joining Klaviyo's third-quarter 2025 earnings call. Our earnings press release, investor presentation, SEC filings, and a replay of today's call can be found on our IR website at investors.klaviyo.com. With me on the call today are Andrew Bialecki, Co-founder and CEO, and Amanda Whalen, CFO. As a reminder, our commentary today will include non-GAAP measures. Reconciliations to the most directly comparable GAAP measure can be found in today's earnings press release or earnings release supplemental materials, which can be found on our investor relations website. Additionally, some of our comments today contain forward-looking statements that are subject to risks, uncertainties, and assumptions, which could change. Should any of these risks materialize, or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements.

A description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results are included in our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. With that, I'll now turn it over to Andrew.

Andrew Bialecki (CEO)

Thanks, Zilli, and thank you all for joining us today. We had an outstanding third quarter, delivering revenue of $311 million, up 32% year-over-year. These results demonstrate our ability to build products that create more engaging relationships between consumers and businesses, get those products in the hands of businesses around the world, and build a high-growth software business at scale. We're now serving more than 183,000 customers in over 100 countries, including more than 6,000 enterprise and mid-market global brands like TaylorMade, Mattel, Unilever, and Reebok. A few highlights from the last quarter: we delivered another quarter of record net adds in our $50,000-plus ARR customer cohort. We grew revenue in EMEA and APAC by 43%, and our Klaviyo Service product line, which reached general availability six weeks ago, has the fastest adoption rate of any of our products, including text messaging.

We're firing on all cylinders and see a lot of opportunity ahead, especially with the addition of agentic AI to our products. On this note, I'd like to take a few minutes to explain how AI fits in with the products we're building and how it's helping our customers grow faster. The B2C CRM we offer is made up of three vertically integrated components: a highly scalable, fast database for storing everything a business knows about its consumers and making that data available in real time, a set of applications and infrastructure to market, message, and serve consumers across every channel and modality, and an intelligence layer that finds opportunities to market or serve customers better and can automatically create, deliver, and optimize those marketing and service experiences, leveraging the consumer data we have for real-time personalization.

AI and LLMs have fundamentally changed and leveled up what is possible in real-time personalization, the intelligence layer, and made the entire stack more effective at driving results for our customers. We then share in that accelerating value creation with our customers. The more valuable we make each relationship between a business and an end consumer, the better for that business and the better for us. AI is improving this intelligence layer in three ways. First, it's making it faster and easier for our customers to leverage our integrated database and applications because AI can do the work businesses don't have the time or the bandwidth to do. We'll share a few examples of this in a minute. Second, AI is making the quality of the marketing and service experiences our customers are creating much better.

This is a win-win for both businesses who see greater engagement and revenue and end consumers who get more relevant marketing and service experiences thanks to AI integrated into our stack. Third, as a result of AI, we're able to make Klaviyo more available to more businesses on more platforms because they can interact with Klaviyo through natural language and new applications like ChatGPT. Let me give some examples of products we've delivered and real customer use cases for each of these elements. Many of these are a direct result of products and features we've built in the last few months and released at our largest customer and partner event of the year, Klaviyo Boston, back in September. Let's start with making it faster and easier to do marketing and service.

We've reimagined how marketing will happen in the agentic AI era and launched an entirely new workflow for our customers to do marketing, and we're calling it Marketing Agents. This agent, which is a team of task-specific agents, can augment or do the work our customers don't have the time to do. Klaviyo customers have access to an always-on research, strategy, creative, execution, and brand safety team powered by AI agents running in the background that will suggest and build complete marketing campaigns for businesses to then review, edit, and run. We're progressively rolling out this new technology and experience to our customers, but we're already seeing customers adopting our recommended campaigns and executing them with minimal or no editing on behalf of our users. Now let's talk about making the quality of experiences better.

We're already seeing the quality of campaigns our agent creates is surpassing what some businesses have time to create on their own. For example, a customer in the health industry using Marketing Agent saw a 41% better open rate and generated 24% higher average revenue or Klaviyo attributed value per campaign compared to campaigns they created on their own. Another customer saw a 50% better open rate compared to campaigns they created on their own and a 40% lift on KV per campaign. These results show the real revenue impact agents can have, and we're quite early in what agents are capable of. Today, a Marketing Agent is like adding a solid marketing intern to your team. We're developing its skills to be at the level of a marketer with over a decade of experience and instant memory of all previous marketing campaigns and results.

This is a paradigm shift in how marketing will happen, where businesses and teams can lean on agents to augment their work, and we are leading and excited to accelerate. We hear from our customers and partners, while they love our products, they want to do more with them. With agentic AI, we're delivering this. Agentic AI is also improving where businesses can connect with consumers. Our investments in building messaging and deliverability infrastructure and applications that support rich experiences across channels and modalities are paying off. Our Customer Hub and Customer Agent products, which are both part of our Klaviyo Service product line, which we made generally available last month, now allow businesses to use AI to chat and message with their consumers across the web, email, text messaging, and WhatsApp. We plan to add more channels next year.

This expansion of services is resulting in more consumer engagement and incremental sales for the businesses we serve. For example, by surfacing favorited products and tailored recommendations with Customer Hub, ThirdLove has driven more than $200,000 in incremental revenue so far this year and enabled over 40,000 self-serve interactions that offloaded work from their support team. Incredible results for ThirdLove. Finally, as a result of AI, we're able to make Klaviyo more available to more businesses on more platforms. The launch of our Model Context Protocol, or MCP server, allows companies to seamlessly integrate Klaviyo into AI clients and applications. We launched this a few months ago, built on top of our comprehensive and integrated data marketing and service API infrastructure. We are seeing a lot of engagement from customers who are using it on major AI platforms like ChatGPT and Claude.

This is transforming how our customers and partners use Klaviyo. For example, one of our agency partners built a reporting workflow using the Klaviyo MCP server to dramatically reduce the time their account managers needed to prepare for client updates. Instead of spending hours pulling data manually, they now have an AI application using our MCP server that reviews last month's performance, summarizes results, and finds campaigns that over- or underperformed historical trends, diagnoses the probable causes, and suggests next best actions. This saves them hours of manual work for each client relationship and allows them to spend more time leveling up their conversations with clients. Another partner's creative team is using our MCP server to review past campaigns and identify creative assets that are high-performing and can be reused. They're then creating new campaigns with those assets and mapping specific creative to different consumer segments.

This is not only saving an enormous amount of time, it's allowing them to do better marketing with their clients and produce better results. We're uniquely able to capitalize on these opportunities for a few reasons. First, vertical integration matters. Our bet on an architecture that allows for low-latency coupling is paying off. The tight integration of our database and marketing, service, and analytics applications allows for rich personalization by using profile data as context in real time. Engagement and behavioral data from each application is automatically available to other applications. For example, product recommendations derived from marketing campaign engagement, service conversations, and browsing behaviors are richer by using all available inputs and instantly available across all of our products.

On top of that, our ability to measure and calculate attribution natively creates a closed-loop system. AI can train on the outcomes of marketing campaigns and service experiences to improve its performance. Lastly, we have an incredible ecosystem of thousands of agencies, developers, and system integrators who are building agents around our products and agents that extend functionality and improve customer results, like the example we mentioned a minute ago. Klaviyo Boston, the anchor event of our worldwide tour for customers and partners, put this on full display with over 1,400 attendees sharing how they're using our products and what they're building on top of them. As a result of all of the above, AI is providing tremendous tailwinds to our mission of bringing businesses and consumers closer together and huge opportunities for our growth.

We're rapidly moving towards a world where every business will have access to the technology that can present their products and services in the best possible way, personalized to the individual consumer and available wherever consumers are, and doing this autonomously through AI with human oversight and intervention where the business wants it, not because it's required. This is our vision for the B2C CRM and why we believe defining and delivering the customer experience will be autonomous, and we couldn't be more excited. I'd like to conclude by commenting on a few recent AI developments and why we see them as clear tailwinds for Klaviyo. Businesses win when the friction between a consumer finding them and buying from them is reduced.

That's why we're very excited about agentic commerce and various protocols that are being developed, such as the Agentic Commerce Protocol, or ACP from OpenAI, and the Agent Payments Protocol, AP2, from Google. It drives additional sales in the short run and another consumer relationship businesses can build upon in the long run. One of our core metrics is the number of digital relationships that exist between businesses and consumers. Any new channels that accelerate discovery bodes very positively for Klaviyo. Also, as brands prepare for the rise of GPT commerce, they need solutions for maintaining direct connection with their customers. Klaviyo protects that connection by unifying first-party data in the Klaviyo Data Platform, which allows brands to maintain visibility and turn engagement on agentic services into meaningful, measurable customer experiences across all channels.

We also believe agentic commerce and commerce through natural language interfaces will become more common, and we're excited to integrate those protocols into our messaging infrastructure and marketing and customer agent products. We're offering consumers an alternative to browsing a website or a store and instead chatting or talking to an AI agent from a brand that can handle queries and transactions on its own across multiple channels. We're also excited to see more infrastructure built to create agents and agentic workflows where customers can use Klaviyo outside of our own user experience. While we'll provide customers with agents and algorithms within Klaviyo that are excellent at various aspects of marketing, service, and analysis, we're also building Klaviyo as an open platform so other developers and companies can build agents that integrate into ours.

We're successful when our customers are successful, and we're excited to expand our already large partner ecosystem to include more AI-first developers and builders. To our customers and partners, thank you for the trust and support. We're very excited about what we'll build together. To Klaviyos around the world, thank you for your hard work and dedication to supporting our customers. We're still only 1% done on our mission to empower creators to own their destiny. We're excited to build, invest, and lead in bringing this AI-powered future to businesses of all sizes around the world. With that, I'll turn it over to Amanda.

Amanda Whalen (CFO)

Thanks, Andrew. Q3 was another outstanding quarter for Klaviyo. Demand is strong across every growth engine. AI is amplifying our impact, and we are driving innovation for our customers as the definitive CRM for B2C businesses.

Revenue grew 32% year-over-year to $311 million, reflecting robust demand from new customers and continued multi-product expansion from our existing ones. International revenue growth accelerated for the sixth straight quarter. We had record net adds into our $50,000-plus customer cohort. NRR accelerated to 109%. Adoption of our new service product is already outpacing what we saw from SMS at this same stage, just six weeks after launch. The results are clear. Our growth engines are delivering, and AI is a force multiplier. We're investing for high growth while maintaining strong unit economics. Non-GAAP operating margin this quarter was 14.5%, meaning our Rule of 40 performance was nearly 47%, our highest in four quarters. There are fewer than 10 public software companies who are growing more than 30%, over $1 billion in revenue run rate, and achieving the Rule of 40.

We're proud to be among that top-performing group. At our Investor Day, we outlined three engines driving Klaviyo's long-term growth: multi-product expansion, international acceleration, and mid-market and enterprise momentum, all fueled by AI, which creates tailwinds for our business and positions Klaviyo to be the platform of choice for brands everywhere. In Q3, each of these engines delivered meaningful progress, which underscores the power of our model. Starting with our multi-product platform, the foundation of our growth is our large and growing customer base. In the third quarter, we added 7,000 new customers, bringing us to more than 183,000 customers, up 17% year-over-year. Companies are choosing Klaviyo as their B2C CRM because we help them grow their businesses by unifying their customer data, marketing, service, and analytics applications, and now by bringing agentic AI into that same connected platform.

As we drive success for our customers, they, in turn, are growing their business with us. NRR rose to 109% in the third quarter, driven by email expansion, strong text messaging cross-sell, and momentum from newer products, including marketing analytics. At Klaviyo Boston in September, we accelerated innovation across the platform. In addition to the marketing and customer agents Andrew talked about, we enhanced Klaviyo marketing with new omnichannel capabilities and new channels, including WhatsApp. We also released to general availability our new product line, Klaviyo Service, with Customer Hub, Customer Agent, and Help Desk. Our product philosophy is accelerating, thanks in part to internal AI efforts. We are now deploying product updates 270x a day and have over 50 AI models in production that are predicting customer behavior, surfacing insights in marketing analytics, and helping personalize experiences across Klaviyo Marketing and Klaviyo Service.

Our new Klaviyo Service products are off to a fast start, increasing penetration faster than SMS did at the same point in its launch. Adoption is strong across all sizes of customers, from entrepreneurs all the way up to the mid-market and enterprise. In fact, last week, one of our customers, a large fashion business, signed a seven-figure renewal with us that included adding Customer Agent and Customer Hub across six of their portfolio brands. We view Klaviyo Service as a long-term revenue engine with the potential to rival and exceed our marketing products as it scales. These launches further expand our multi-product platform, making Klaviyo even more powerful for our customers. We consistently hear from customers about the importance of having one unified platform for engagement, and that's driving continued growth across the entire platform, including text messaging, WhatsApp, and marketing analytics as well.

Because our pricing model scales with the value we deliver, not with seats, our success grows directly alongside our customers. We price on a per-profile, message, and resolution basis, which lines up perfectly with the outcome-oriented business models AI is enabling. Today, more than half of our ARR comes from multi-product customers, which is clear proof that customers want to have everything running off of one platform. This deepens our relationships with customers, improves retention, and drives long-term growth. Turning now to international, growth continues to accelerate. Revenue outside the Americas grew 43% year-over-year, our sixth consecutive quarter of faster international growth, with EMEA up 48% and gaining momentum from Q2. In Q3, we added four new languages to the platform, expanded text messaging coverage to 22 countries, and introduced WhatsApp, which was a highly anticipated channel for our global customers.

EMEA and APAC now represent more than 35% of total revenue, reflecting the strength of our international strategy. Our focused investments abroad are doing exactly what we intended. They're driving strong growth and expanding Klaviyo's global opportunity. Momentum in the mid-market and enterprise continues to build. We now serve 3,563 customers with over $50,000 in ARR. That's up 36% year-over-year, including a record 272 net adds this quarter. This was driven by a record number of new lands directly into the cohort. We're proud to welcome and expand with iconic mid-market and enterprise brands such as Bissell, Rhone, Boux Avenue, and Proper Hotels, brands that trust Klaviyo to deepen customer relationships and drive growth. Another global brand that exemplifies the power of what we're building is Meshki, an Australian-founded women's fashion brand now selling in over 190 countries.

Meshki has embraced Klaviyo as its system of action, recently adding marketing analytics to power their omnichannel marketing. With Klaviyo, they're personalizing every touchpoint, from product recommendations and campaigns to customer journeys and interactions, all powered by their own first-party data. Meshki also relies on Klaviyo as a central source of truth. As they scaled their US presence, the team used Klaviyo to guide where to invest in infrastructure, shipping, and local distribution, transforming customer data into operational decisions. It's a great example of what Klaviyo's B2C CRM is built to do: help brands grow faster and turn every interaction into long-term loyalty at global scale. Turning to the P&L, non-GAAP gross margin was steady at 76%, in line with Q2, as benefits from scaling infrastructure balanced out the continued growth of text messaging. Importantly, non-GAAP gross profit growth accelerated, underscoring how we drive operating leverage as we scale.

Non-GAAP operating expenses also saw broad-based leverage this quarter, improving 170 basis points year-over-year as a percentage of revenue, reflecting the power in our operating model and our ability to deliver strong growth while investing to capture an even larger AI-driven opportunity. Non-GAAP operating income for the quarter was $45 million, with a 14.5% margin, up slightly year-over-year. This performance exceeded our guidance, driven by strong top-line outperformance and disciplined execution. We generated $47 million in free cash flow for a 15% free cash flow margin, which was also up year-over-year. Turning now to guidance, we are entering the peak holiday season from a position of strength, supported by robust customer demand. For the fourth quarter, we are increasing our revenue expectations to $331 million-$335 million, representing 23%-24% year-over-year growth. We expect fourth-quarter non-GAAP operating income of $43.5 million-$46.5 million.

Representing a non-GAAP operating margin of 13%-14%. As a reminder, we implemented profile enforcement earlier this year, which reduces seasonality in our Q4 and Q1 revenue, making quarter-on-quarter growth steadier over the course of the year. We do expect our fourth-quarter non-GAAP gross margin to experience typical seasonal impact from increased text messaging volumes. Based on our strong third quarter and our momentum heading into Q4, we are raising revenue guidance for the full year by $18 million at the midpoint, to $1.215-$1.219 billion, for year-over-year growth of 30%. We expect non-GAAP operating income of $161.8-$164.8 million, representing a non-GAAP operating margin of 13%-14%. This will be another year of delivering results above Rule of 40. Rule of 40 is an important metric for us because it represents our commitment to strong growth with good unit economics.

We will continue to invest to be the definitive CRM for B2C businesses, and we strive to deliver Rule of 40 as we do so. Looking ahead to 2026, we're confident in our growth trajectory and in the results we are seeing from our AI-powered growth engines. Based on that progress, we expect to deliver at least 21%-22% revenue growth next year. Our core marketing products continue to deliver a strong foundation for growth. We expect to drive further adoption and expansion, particularly in mid-market, enterprise, and international. We're seeing meaningful early traction from our new AI-powered products. Our 2026 outlook currently assumes limited near-term revenue from these launches. That said, given the pace of adoption, the upside ahead of us is significant and creates clear long-term runway as these products scale.

From a profitability standpoint, we expect to increase our 2026 non-GAAP operating margin by at least 1 percentage point from our updated 2025 guidance. To close, Q3 demonstrated Klaviyo's strengths: high growth, strong unit economics, and continued progress across our three growth engines: multi-product expansion, international growth, and mid-market and enterprise momentum. AI is accelerating our business. It is unlocking new possibilities for customers to use Klaviyo to connect with their consumers in smarter, more personalized ways. It amplifies our growth, and it strengthens our foundation for sustained leadership. We believe this is just the beginning. With our unique combination of first-party data, relentless product philosophy, and agentic AI as a force multiplier, Klaviyo is positioned to be the definitive winner in the next era of consumer engagement. With that, we'll open up the call for questions. Operator?

Operator (participant)

Thank you. Just a reminder, it is star one to ask a question. We would like to incorporate as many analysts as possible, so please limit yourselves to one question before returning to the queue. Our first question comes from Derrick Wood from TD Cowen.

Derrick Wood (Managing Director and Senior Equity Research Analyst)

Great. Thanks. Thanks for taking my questions. AB, this is for you. I guess at your conference, Accenture talked about fatigue in the legacy MarTech market, and there is a lot of desire to change out legacy tech and leverage new AI tech. You talked about seeing a robust replatforming cycle over the next two to three years. I know your new products in AI and CRM are still early, but now that you do have these agents in market, are your conversations or pipelines evolving more around replatforming and AI adoption? I mean, do you see 2026 as a step function in.

These types of engagements, or how do you view this cycle playing out?

Andrew Bialecki (CEO)

Yeah, sure. Thanks for the question. In the mid-market and enterprise segments, we're obviously seeing some really good numbers. We added the most $50,000-plus customers in this past quarter. I think there's really two things going on that are forcing these conversations. Yes, I do see there's a real acceleration there, and for two reasons. The first is a traditional reason, which is what we're doing by combining the underlying data infrastructure with then the marketing service analysis, application stack, and infrastructure, handling things like deliverability on the messaging side, creative design. On the service side, providing that real-time infrastructure so you can have conversations with consumers wherever they are. I think what's happening on top of that is then when you layer in agents, and really here we mean.

Agents and agentic workflows, we're finding a lot of large enterprises say, "Look, there's opportunities I can't get to. I can't do this data analysis. There's creative and design that I wish could get checked by agents, so we can do more of it. Can you help me find more opportunities and execute against those?" Obviously on the customer service side, I think a lot of people look at customer service as not just a, "Hey, when customers have issues, how do I help them?" but also, "How can I proactively give them guidance and look at that as a growth engine?" There was this traditional reason of like, "Look, my software doesn't really talk to each other very well." Now you layer on what LLMs give us in terms of a better logic engine, a better, smarter way to use the tech that we built.

I think this is the future of how CRM is going to work for consumer companies. It's going to be agentic at its core, which means that instead of the operators of that software having to decide, make every decision, drive the software all on its own, it's going to be done in part by agents. I think increasingly some of the work they can't get to or don't want to do is going to get handed off. The fact that Klaviyo provides this closed loop where, "Hey, it's not just that we store the data. Hey, it's not just that we help you find the ideas and execute them." It's that way we can then tell you what's working so you can use machine learning and AI to improve, to optimize over time. That's where this is all going.

I have those conversations with our enterprise customers today, and then folks that we're talking to that are in our pipeline, they're very excited about this future. I think we're in the driver's seat to go deliver for them.

Operator (participant)

Our next question today comes from Samad Samana from Jefferies.

Samad Samana (Research Analyst)

Hi. Good evening, and thanks for taking my questions. I wanted to stick on the AI theme. I know that you guys talked about the Shopify relationship, but I was wondering if you could dig deeper into how the large platforms like OpenAI are working more closely with Shopify and giving them access to maybe millions of consumers and how that ultimately benefits Klaviyo as you think about how those could potentially empower the merchants that you're helping and become more profiles, especially given how embedded you are in the Shopify ecosystem.

How are you thinking about that in particular?

Andrew Bialecki (CEO)

Yeah, for sure. Let's talk a little bit on the AI ecosystem. Klaviyo, since we started, has been very partner-oriented. We've looked at the ecosystem and how do we plug in, how do we work together to build a better experience for the businesses that we serve, ultimately drive better outcomes for them. Let me talk about a couple of things. First, let's talk about as it relates to commerce and acquiring and building more consumer relationships. Obviously, that's a big part of our business model, is we want more businesses connected to more consumers. We think that's an asset that's very important to the businesses we serve. Obviously, that's one of our core monetization axes. We look at things like the ability to do commerce through products like ChatGPT is great.

It's a way for more consumers to find more businesses. It's a more streamlined experience. Ultimately, like we said in the prepared remarks, it results in this medium and long-term growth for them because they now have another connection to another consumer. In fact, we're so excited about the idea of commerce through conversations through chat. It's something we're also working to embed inside of our Customer Agent. We look at the future. We think that every business is going to have its own Customer Agent, its own digital, the best, most knowledgeable person about your product, who has all the answers in real time, 24 by 7. We want to build that technology. Obviously, once we answer a question, like for instance, product recommendations we built in, we want to let consumers then buy directly from that experience.

I think in the future, you'll see these agents, rather than browse a website, you could just chat with an agent provided by a business, and then it could help you consummate that transaction. The last thing I'll say is, when we think about the platforms that are out there, both in terms of end users, like each of us using chat interfaces, we look at that as another way to interact with Klaviyo. We're very excited about that. In fact, we've already seen, and we talked a little bit about in some of the remarks upfront, our customers, partners using some of these AI clients to interact with Klaviyo. It might be, to date, it's been largely to do data analysis, but in the very near future, we think that's going to be to actually designing marketing campaigns and getting going on that.

One of the things I've talked to a lot of our customers about, they feel rate-limited, mostly by their time and how quickly they can scaffold and build and do marketing and service and analysis inside of Klaviyo. We think these new chat interfaces are a great way to speed up that loop, allow them to use more of Klaviyo. We benefit when businesses have more connections and also when they're doing more marketing, delivering more experiences to customers. That's why we're going to build into those. Finally, I think it's early, but a lot of the platforms are now building out these agent builder type experiences. We look at that. That's great.

That's another way we imagine there's going to be workflows in the very near term where folks are building Klaviyo campaigns, optimizing them through some of these workflows and agents that they're building both inside of Klaviyo, but also outside of Klaviyo. Again, that's great. We think if businesses are able to do more marketing, build more customer experiences, understand who their customers are better. Wherever they do that, that's valuable to them, and that's valuable to us.

Operator (participant)

The next question is Matt VanVliet from Cantor Fitzgerald.

Matt VanVliet (Senior Equity Research Analyst)

Hey, good afternoon. Thanks for taking the question. I wonder if you could help us think about the attachment of service already and the fact that it's tracking so far ahead of even some of your best products in history. Are these customers that are replacing something on kind of the legacy marketing stack?

Were they doing things sort of haphazardly, and this brings it all together? Maybe more importantly, how is a new product like Service helping the conversation of multi-product expansion, knowing that you can bring it all on a single platform and have that single source of truth?

Andrew Zilli (VP of Investor Relations)

Yeah. I've been really impressed by what our product engineering teams have done for all three of our Klaviyo Service products in that product line. Let's talk through a little bit about each of them. Just so everybody knows, we released them in general availability just over a month ago. We're watching the tracking literally week over week. Like I said, the trajectory is awesome. In terms of what they're replacing or augmenting, let me take it product by product.

For our Customer Hub and Customer Agent products, those were finding a lot more greenfields. Our Customer Hub product now takes a lot of the personalization that you could do with Klaviyo and messaging on various messaging channels and now brings it directly into a business's website or even in the future, maybe even their mobile application. It gives consumers a way when they go visit a website that the entire web experience is now personalized to them. It is generating incremental revenue, as we talked about. It is actually a fairly easy conversation with customers. We say, "Look, we can take the same goodness that you have seen from us in messaging. You can now bring it to your website. It is accretive to your growth. Why would you not do that?" A lot of these businesses, there was no product there before. Integrated into Customer Hub is our Customer Agents.

If a consumer has a question and they want to chat, both to get help, but also critically to get advice, we're seeing some really amazing conversations inside of our dataset where consumers are coming and having long conversations about what products would be best, best fit for them, and offering them recommendations. Really, service is no longer this sort of like, "Hey, if you have an issue, talk to me." It's now more even pre-sales. That's, again, that's a bit different. People weren't thinking that way before. We're finding a lot of businesses wanting to add that in because, again, it becomes a revenue engine. It helps offload some of the support volume, but it's also a revenue engine for the business. The third product is we've also built a customer service, a help desk product, which also has AI natively integrated.

We have some great features in there, things where if a conversation happens with our AI agent, maybe does some tool calls to pull in product recommendations and associated information, that all gets passed back to whoever that support rep is that then decides that handles the conversation if it makes its way to a human. That's a really great integration. It's speeding up response times and resolution rates. That is a more traditional—for some small businesses, it might be the first time—but that's more where we're replacing some of the customer service software that's out there that might just only have traditionally solved that like, "Hey, we help your support team manage the support workload." I think we're very excited about the trajectory in the first 40 days. We're obviously talking a lot about the impact of artificial intelligence.

I think one of the things we want people to take away is we're expanding where we can use and leverage AI to not just marketing, but also include what happens on your website and what happens in customer service. That's part of our building out the entire consumer CRM. That's part of our strategy there.

Operator (participant)

Siti Panigrahi from Mizuho is up next.

Siti Panigrahi (Managing Director and Senior Equity Research Analyst)

That's great. Congrats on a great quarter. And AB, thanks for all that commentary on AI. That's helpful. Amanda, I want to ask you about your 2026 guidance, that. 21%-22% growth. You have a lot of product announcements there, and also there are pricing model changes as well. What gives you that confidence for next year's growth? What is embedded into that guidance?

Amanda Whalen (CFO)

Yeah. Thanks, Siti. Great question.

The way that I think about it is we are incredibly confident in our growth trajectory. That preliminary 2026 outlook that we gave is a strong baseline for growth next year with clear upside ahead. We have just launched some very exciting new products in AI and expansion into new products and new service categories. We're very excited about the traction that we're seeing. As AB mentioned, service is off to an even faster start than SMS was at this stage. We're really early in the journey. At this point, we're not factoring significant revenue in there for next year. There is even more upside to that number as those products continue to grow. I think the other thing that gives us incredible confidence heading into next year is that our existing growth engines are really delivering.

They have strong momentum as we head into the international or into next year. In international, we saw our sixth straight quarter of increasing revenue growth rates outside of the Americas, which shows that we are really growing and increasing that global opportunity that we have to build the business. In mid-market this quarter, we had a record high number of adds into the 50K customer cohort, which really shows what we talked about at Investor Day, which is that customers are pulling us up into that mid-market and enterprise space because, as we just talked about earlier with AB, they want to replace those legacy tech stacks and have a more modern AI-driven way for interacting with their consumers.

In multi-product, over half of our ARR is coming today from customers who are multi-product, which shows us that those customers really want to consolidate their platforms, and they really want to consolidate their platforms with Klaviyo. We have a huge opportunity ahead of us there with service. We think service could be as big, if not bigger, than our marketing products are today. Of course, AI accelerates all of that. AI makes it faster and easier for our customers to use the product. It opens up new surfaces and new places where we can generate demand and interactions with the product. Importantly, it drives even better results. You heard some of the examples that Andrew shared around marketing agent and the uplift that it's driving in open rates and in KAV or the revenue that our customers drive.

Again, those products are early in market. We're already monetizing Customer Agent today. We're going to start pricing pilots for Marketing Agent in the next few months. As they continue to grow and expand in adoption and usage, we see upside there. Bottom line is that what gives us confidence is that our growth engines are firing on all cylinders, and we're in the early innings of massive AI and multi-product opportunities that are ahead of us.

Operator (participant)

The next question is from Tyler Radtke, Citi. Yeah.

Tyler Radke (Co Head Software Equity Research Analyst)

Thank you very much for taking the question. A lot of great discussions around AI and Service Hub. I wanted to double-click on international. Pretty impressive six consecutive quarters of accelerating growth. Do you think that acceleration could continue going forward? Could you just help us understand what we're going to—what we should expect in terms of future.

Unlocks in that? I know you talked about adding new languages to the platform, expanding text message capability, but sort of what inning of sort of those product unlocks are we? And any view on sort of the durability of that acceleration? Thank you.

Andrew Bialecki (CEO)

Yeah. That's great. I'll give you some commentary on some of the things we're doing, and I'll let me speak to the numbers. 43% year-on-year growth, we're very proud of that, and we believe that we can continue to have that grow at a very high rate over the next several years. Let me give you a little color on why. What we found is we're still relatively early in working in both Europe, and I'd say Europe is even a little bit further ahead than where we are in Asia.

There's a lot that we've done in the last 12, 24 months to get us ready for that. We've expanded our presence in Europe and in Asia and continue to do so, especially in key markets. From a product side, we've done a lot of work. You mentioned internationalization. Very proud of the work that we've done there, both for our products, but also then to just make the various channels that we're in more available. Having SMS now in so many languages obviously helps a lot. We just rolled out WhatsApp globally, and that's obviously very, very important in the European and Asian markets. We have some more channels now that will be coming online following that that are more region-specific. It addresses more of the places where consumers and businesses meet.

Finally, we're expanding our presence not just for our customer teams and go-to-market teams, but also our infrastructure. We already have infrastructure all the way around the world. We're standing up new data centers and planning those out in both Europe and in Asia. I think that will also help, especially for some of our larger customers. It will overlap with some of our enterprise strategy. I'm just very excited. We've got a great set of customers. We're also expanding the weight with the partners that we have there in key markets. I think we've got a long way to go. We're nowhere near saturated.

Amanda Whalen (CFO)

Yeah. In terms of what helps drive that consistency and growth going forward and our outlook in international, it's the product expansion that AB talked about.

It is also the progress that we have on the go-to-market side around building out all of the surround sound around those product innovations. It is getting the local partner network set up, both agency partners and the platform partners as well, great platform partners, not only Shopify, who we have an incredibly strong relationship with, but partners like PrestaShop in France and Shopware in Germany. It is also continuing to build out the customer experience, including the website, the local customer case studies. All of that contributes to making this a really strong, consistent growth platform for us going forward.

Operator (participant)

The next question comes from Rob Oliver from Baird.

Rob Oliver (Managing Director and Senior Research Analyst)

Great. Thank you for taking my question. Good afternoon. I think at the Analyst Day, you guys called out, I think it was over 600 legacy replacements in the last couple of years.

There have been a few questions, Derek's and one other, that have tried to touch on, I think, this opportunity, which is, I think, so exciting for many of us, which is that this combination of service, marketing, and commerce has actually been tried before, and there's buying there. Maybe you can talk about, as we look into the next year and the next couple of years, the pipeline you have building right now, some of the customer examples you called out, the fashion brand, seven-figure renewal. How should we think about that opportunity increasing over that kind of 600 number over the last couple of years? Thank you.

Andrew Bialecki (CEO)

Yeah. Great. We do not have any numbers to share today, but the momentum is awesome. Similar to international, I think there are things we are doing now that we will finish doing that will now bear even more fruit.

As an example, we've only recently spun up our analyst relations program. We're now starting to work with more SIs and global system integrators, which is introducing us to more large enterprises. I think, obviously, enterprise and international go hand in hand. We've already worked with a number of large multinationals, but that will get only better as we do some of the work that we talked about on the international side. Look, the bedrock of this for us is, I think, really the two things I said. The first is, since the beginning, this idea of your data infrastructure should have a tight linkage to how you do marketing, messaging, the infrastructure there, and then now what we're doing with service. Customers love the idea. The enterprise I talked to loved this idea of one database now that's getting more intelligent via LLMs and AI.

Is then distributing that experience to all possible channels. This really, really matters to them that they want this one unified experience. This idea that you can use the data you have at scale to generate things like recommendations and then make those available on all surfaces: websites, mobile apps, messaging, inside of a chat, or in a voice conversation with a customer, all delivered via AI. That is a really enticing value prop. I think that there is a lot we are doing now that the results we are seeing are a little bit of the actions that we have taken the last 12, 24 months. I think there is even more that we can do. Frankly, there is even an element of social proof to all of this.

I talked to businesses that said, "Hey, 12, 24 months ago, they did not think of Klaviyo as an enterprise brand." That we are quickly changing that perception, and I expect to see that snowball.

Operator (participant)

Ryan MacWilliams from Wells Fargo has the next question.

Ryan MacWilliams (Analyst)

Hey, thanks for the question. Great to see you continue strong new customer additions. This question is more in regards to your customers. We are hearing SEO struggles come up more for SMB, and I am just wondering, are you seeing customers look to Klaviyo as a way to support new market activities to combat SEO efficiency getting more challenging, or are you seeing existing customers look to add new use cases as a result?

Andrew Bialecki (CEO)

Thanks. Yeah. It is a great question. I will say two things.

We look at Klaviyo really as the bedrock of how a business operates and works, works with, maintains, and grows its engagement with its most important assets, its customers, those end consumers. We are noticing actually two trends. The first is, for some businesses, they're seeing a lot of growth through AEO and effectively getting discovered through some of the AI applications that are out there. That is driving more consumer relationships. For other businesses, we find them, they're actually, when it's uncertain what their strategy is, they're coming back to Klaviyo to say, "Hey, how can I do more with my existing consumer relationships? How can I nurture those harder?" This is where AI really plays in. I mean, one of the things we want to deliver to them is like, "Look, we ought to automatically, agentically, give every single.

Business for every single one of their consumers a path on what is the absolute best experience they can deliver to that consumer. When they do acquire them, those consumer relationships are more valuable, more durable, higher LTV. It is a bit bifurcated, but I think when there is uncertainty and revenue is really on the blind, we find people come back to us. Just as an example of that, we are about to enter the holiday season. We find that for most of the businesses we work with, especially in retail, this is when they see the highest % of return consumers coming to their business. They know the consumers, when they are shopping for the holidays, come back to businesses they already know. That is why you see so much more incremental usage of Klaviyo.

We're excited, actually, to have all these, some of the AI functionality we've delivered now. Help them do a better job connecting those customers to the exact right product or the exact right service in the most critical time of the year for them.

Operator (participant)

The next question is from Scott Berg, Needham & Company.

Scott Berg (Managing Director and Senior Research Analyst)

Hi, everyone. Really nice quarter here, I guess. One question for me is, we've been to a lot of sales and marketing conferences the last month or two, and we've seen a ton of customer interest in the space, but budgets tend to be just a little bit light right now. The commentary suggests that there should be a lot of expansion of budgets on some of this newer AI functionality as we get into the new calendar year.

Does that track with what you all are seeing today, or are you seeing customers more emphatically kind of spend on some of this functionality here, even in the third or fourth quarters?

Andrew Bialecki (CEO)

Thank you. Yeah. Let me make two comments on that because I think it's probably a bit of a clarification too of how we think about our role in the awareness buying process, what we normally think of as the marketing and sales cycle. The first is, every product that Klaviyo builds, at its core, we make sure that it needs to show its ROI. There needs to be revenue directly attributable back to that product. I think that's the case that not a lot of sales and marketing products can make. Oftentimes, there are tools that you might have a sales team use or a marketing team use.

It is not only like it is productivity to that person, but you might be able to measure the hour saved, but you cannot see the dollars that that product is generating. I get to the second point, which is like, "What is the difference between how we build products for marketing, for sales, for revenue generation versus a lot of what is out there in the market?" This is why it has started to attach to this word agentic. I think there is a big difference between AI products that sort of assist a person doing a job. That is great, and we should want those products, but ultimately, they are just kind of not doing the work for you. They are just helping you do the work.

What we found with a lot of the AI applications inside of Klaviyo, and if you look at what, for instance, our marketing agent is doing, the goal is to help assist a little bit, but it's really doing the job that we find the business we work with, either they don't have the time or maybe the skills to get done, or maybe they just flat out don't want to do it. We've now changed this paradigm where instead of using software as a tool that helps somebody do their job, but still, ultimately, it's the person who you're really measuring the ROI on, we're now literally building algorithms, agents that can do a big chunk of the process, and a human can review the results.

As an example, we talked about with marketing agent, we're now generating not just creative or content, but entire campaigns, who you should send to, what's the purpose. We're giving that to our customers to then review. And then they're telling us, "Hey, whether that's good enough, maybe making some small tweaks," and then they're deploying it. That's a totally different way of doing marketing than having a tool that helps somebody ultimately have to do all the different steps. Then we're learning from that and seeing what the results are and automatically optimizing the content that we show them next, right, or the next campaigns that we generate. This is just a different way about thinking about leveraging AI. I think it's even more ROI driving.

In the conversations I have talked about, you hear the normal things of, "Hey, how do we make sure that the quality meets a certain bar, that you can trust that AI is actually doing the right thing?" We have built so many checks into our marketing agent. We have a whole quality agent that runs that vets everything. People actually are so excited about that. They want to apply it to their human-created content as well. They want to put it on everything they are doing inside of Klaviyo. I think that is the big difference there, is there is a difference between driving actual revenue and actually doing the work versus just being a tool that is part of the process.

Up next is Arjun Bhatia from William Blair. Thank you. I just have a couple of quick ones.

Arjun Bhatia (Partner and Co Group Head of the Technology)

First, Amanda, I think you mentioned you're going to start running sort of pricing pilots for Marketing Agent coming up here. Can you just maybe touch a little bit on what that might look like and what you're starting to experiment with? And then second, we're heading into Q4, important holiday season, as you pointed out. Just. Would love to get your sense on how you think. That's shaping up relative to last year. Thank you.

Amanda Whalen (CFO)

Sure. So on Marketing Agent, we're seeing great results. We talked about on the call some of the outstanding results that our customers are seeing in terms of. Improvements in open rates, improvements in the KAV that they're generating per campaign. It's really helping amplify the work that they were doing and enable them to do more work at higher quality in less time. So there's a lot of excitement about it.

Generating a lot of value. We are going to start experimenting over the next couple of months with what that looks like in terms of a pricing pilot of how we monetize it. Some of it, we are going to continue to build into the product natively, the things that we think are really important for all brands to have access to. A great example of that is some of the image work that we talked about on our last quarterly call. Again, in those places where customers are really seeing that incremental value, we are working on how we charge it. We have great confidence in that because of the results that we are seeing from some of our other areas where we are already using AI in the product, right? We are live right now with customer agents, and customers are seeing great.

Results from that, and it's driving page revenue. Then we're also seeing great results from marketing analytics, which incorporates a lot of AI-driven insights and analytics into helping our customers better target. Examples we've had recently are customers, one customer who's using marketing analytics and its predictive gender feature, which is an AI-enabled feature to predict the gender of a given consumer and better target the campaigns that get sent to them, which is helping them generate higher KAV. Again, seeing great traction there, which gives us real optimism about our ability to monetize it. As it turns to outlook and how we're thinking about holiday, the way that we think about holidays, this is the most important time for our customers. This is where many of them generate a huge portion of their revenue over the course of the year.

They are hyper-focused on what will it take to make that holiday successful. Tough to predict exactly how the holiday is going to unfold. We have seen a lot of news out there recently, but what we can say with confidence is what we have seen over the last couple of years, which is during this holiday season, consumers go back to the brands that they know and love. As our brands and the customers who we work with are thinking about getting ready for the holiday, they are thinking about, "How do I strengthen those relationships with the loyal consumers who I have already got so that I can make my holiday as successful as possible?" The great news is that is exactly what Klaviyo helps these brands do.

It's historically been in how do we help them with marketing to them, but importantly, we're becoming even more critical to their businesses as they also add in service as well and really create this end-to-end consumer experience. We look forward to the holiday. What we believe is we've got confidence in how customers are going to turn to us across whatever, however the holiday unfolds.

Operator (participant)

Our final question today comes from Terry Tillman, Truist Securities.

Connor Passarella (Equity Research Associate)

Great. Good evening. This is Connor Vassarella on for Terry. Thank you for taking the question. I just wanted to follow up on the previous commentary on the holiday season and specifically how that relates to service product adoption. Just for the three service products, there's introductory promotional pricing through December 31.

Is there typically interest from the customer base to committing to these new or to new products during the holiday period of Q4, or do you kind of often have customers that just want to focus on executing into the end of the year? Thank you.

Andrew Bialecki (CEO)

Yeah, thanks. It's a good question. Among the three Klaviyo Service products in that product line, we're seeing some differential in behavior. Let me just walk through them. The first is for our Customer Hub product. We've made the integration into our customers' websites, into their stacks so seamless, literally just a few clicks, and it's already leveraging and trained on all of the data inside of a Klaviyo account. We're finding a lot of customers want to adopt that even leading into the holiday season because they know it'll drive incremental revenue.

We're seeing really good uptake there. I think similarly, where you find where customers have not used a customer agent, an AI that can automatically resolve conversations or help guide consumers, there's some folks that want to test that out and have larger deployments, but we're also seeing really good uptake there. I'd say maybe for larger, and then finally for our help desk, that sometimes, depending on the size of the team, can be more of a bigger build of a, "Hey, I have to learn a new system." We've had a lot of conversations with folks saying, "Hey, this is great. Just talk to me later in December, early January, once I get through the holiday rush." That product might be a little bit delayed a few months.

In general, actually, one thing I'm really excited about is if you think about we launched all these products at the end of September, there's a lot of companies that would say, "Hey, our technology stack is set for the end of the year," and already we're seeing really good growth in a time when you might not expect it. Just to wrap up the call. Look, we've been a public company now for two years, and I just want to reflect a little bit on some of the accomplishments we've had. Amanda touched on these. We've been growing logos. We've now expanded our product portfolio from beyond email and text messaging to now incorporate a lot of marketing channels, customer service, analytics, our Klaviyo Data Platform products. We truly are building out the CRM stack.

We've done a lot of growing in international and with larger accounts in the enterprise. These are all things we said we'd set out to do when we went public. I think we're executing really well against those. We also believe that we want to be one of the highest growth software companies at scale, prove you can do it profitably. I think we're doing a great job of that. Finally, when we think about AI, we look at that as a total unlock for our business and for our customers. When you give our software a logic engine, a brain that it can work on top of customers, our businesses, they're going to do better marketing, build better experiences that it's going to drive LTV with consumers. That's ultimately what we index. When our customers win, that's how we win.

Anyways, thank you, everybody, for taking the time, and we're going to get back to building.

Operator (participant)

Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.