API — Q2 2026 Financial Report Analysis

Agora, which sells the software building blocks that let other apps add live voice, video, chat and AI voice agents, grew revenue 18.0% to $40.4 million in the second quarter of 2026 (three months to June 30), its fastest growth in this run of 2026 releases and above the top of its own forecast. It was the seventh profitable quarter in a row, with net income of $2.2 million. But the profit still comes from interest earned on the company's cash pile: the business itself lost $1.0 million before that interest, although that loss is much smaller than the $3.1 million of a year earlier.

At a glance

• Revenue +18.0% to $40.4 million, up from +13.5% growth in Q1. Agora had guided to $39.0–40.0 million, so it beat the top of its range.
• Net retention of 104%, versus 94% a year ago: the same customers spent 4% more than they did a year earlier. This, not new customers, is where the growth came from — the active customer count rose only 0.4%.
• Operating loss of $1.0 million vs $3.1 million: costs grew 2.8% while revenue grew 18%. Interest income of $3.4 million is what turns that loss into a profit.

Q2 2026 results

Figures in US dollars. Agora's US-listed shares are American Depositary Shares (ADS); one ADS equals four Class A ordinary shares, so EPS here is per ADS.

Where the growth came from

Almost all revenue (98%) is usage-based "real-time engagement" service — customers pay for the minutes of live audio and video their apps carry over Agora's network. That line grew 17.0% to $39.5 million. Agora attributes the quarter's growth "primarily" to "the continued expansion of our real-time engagement service in sectors such as live shopping and financial service." The small on-premise solution line (software installed on a customer's own servers) rose to $1.0 million from $0.5 million.

The customer figures explain the shape of this growth. Dollar-based net retention — revenue this quarter from customers who were paying a year ago, divided by what those same customers paid then — rose to 104% from 94% a year ago and from 99% in Q1. Below 100% means the existing base is shrinking; Agora spent much of 2025 below that line and is now above it. Meanwhile active customers (those paying more than $100 over the past year) were 3,892, barely changed from a year ago and down from 3,946 at the end of March. So Agora is selling more to fewer, bigger accounts rather than widening its base.

The company is also pushing conversational AI — voice agents that talk to people on the phone or in apps. The CEO says the agents are being used for "market surveying, buyer interest capture, and customer service." The release does not break out AI revenue, so there is no way to check from the filing how much of the 18% growth it contributed. What the filing does show is its cost: see gross margin below.

Costs: the margin story cuts both ways

Gross margin — the share of revenue left after paying the direct cost of delivering the service — fell to 63.7% from 66.8%. Cost of revenue rose 28.9%, faster than revenue, which Agora puts down to higher "bandwidth and server costs and costs related to conversational AI products," adding that the AI products are still "at a sub-scale stage." In plain terms: each dollar of AI revenue currently costs more to deliver than a dollar of the older video and voice business.

Below that line, cost control did the work. Total operating expenses rose just 2.8% to $27.3 million:

• Research and development +10.2% to $15.4 million, "primarily due to increased investment in conversational AI products."
• Sales and marketing −1.5% to $6.4 million.
• General and administrative −9.5% to $5.5 million, mainly because the provision for customers who may not pay (the "allowance for credit losses") was lower, which Agora attributes to "improved customer credit conditions and collection outcomes."

Operating expenses fell to 67.5% of revenue from 77.5% a year earlier. That is why the operating loss shrank even as gross margin slipped.

What the headline numbers hide

• The profit is interest income, not operations. Pre-tax income was $2.1 million; interest income alone was $3.4 million. Strip the interest out and the business is still loss-making. That interest is also falling ($3.4 million vs $3.7 million) because Agora has less cash principal than a year ago, partly due to buybacks.
• Cash flow was weaker than profit this quarter. Cash from operations was −$2.1 million against net income of +$2.2 million. For the half-year it was +$3.6 million vs net income of $3.3 million, but that half-year figure includes interest received (Q1 alone included $4.6 million of interest received). The H1 2025 comparison ($17.2 million) was inflated by a $15.3 million drop in prepayments and other assets, so the year-on-year fall is not as alarming as it first looks — but the core business is not yet generating cash on its own.
• Receivables rose faster than sales. Money owed by customers grew to $28.3 million from $24.9 million at December 31 (+13.6% in six months), and the Q2 cash-flow statement shows a $3.9 million increase in the quarter alone. Revenue grew about 7% from Q1 to Q2. At the same time the bad-debt charge fell (to $0.8 million from $1.3 million in Q2 2025), which helped G&A. If collections slip, both effects would reverse.
• One-offs and below-the-line swings. An investment loss of $0.4 million (fair-value changes on equity stakes) compares with a $0.8 million gain a year earlier, a $1.2 million swing that hurt net income. Without it, net income growth would have looked stronger.
• Buybacks flatter EPS. Diluted ADS count fell 5.9% to 92.4 million. Agora spent $3.7 million on buybacks in Q2 and $17.0 million in the half; since the program began it has cut shares outstanding to 335.1 million from 449.8 million. EPS of $0.02 vs $0.01 is a rounding artifact: unrounded it is roughly $0.024 vs $0.015, about +60%, of which share-count reduction contributes a few points and the rest comes from higher net income.
• A large share of assets sits in a headquarters project, not cash. The balance sheet carries $104.5 million of construction in progress and $165.0 million of land use rights for a headquarters project, funded partly by $99.0 million of project borrowings. The quoted $361.7 million of cash and deposits does not count these, and the company's book equity ($556.6 million) includes them.
• Guidance is rising. The Q2 result ($40.4 million) cleared the $39.0–40.0 million guidance set in May, and the new Q3 guide is higher again.

Takeaway: Agora's revenue growth is now genuinely accelerating (13.5% in Q1, 18.0% in Q2) and is driven by existing customers spending more, not by new sign-ups. The weak spot is that the AI products it is betting on are dragging gross margin down, and the business still only shows a profit because of interest on its cash. The thing to watch is whether operating income turns positive before interest income shrinks further.

Outlook

Management guides Q3 2026 revenue of $41–42 million, +15.8% to 18.6% year on year. That implies growth staying in the high teens rather than accelerating further, and sequential growth of roughly 1–4% from Q2's $40.4 million.

Our read: with operating expenses growing in single digits, each extra quarter of high-teens revenue growth moves Agora closer to an operating profit — Q2's loss was only $1.0 million. The two things that could stall that are gross margin (if conversational AI grows faster than its costs fall, margin keeps sliding) and the receivables build-up. Net retention above 100% for a second straight quarter is the most encouraging number in the release; a drop back below 100% in Q3 would undercut the acceleration story. The full-year 2026 picture will only be confirmed in the 20-F annual report, which for FY2025 was filed in April.