Appen Faces Rising Losses Despite Strong China Growth and Cost Cuts
Appen Limited reported a 9.2% revenue decline to $103.2 million for H1 2025, offset by robust 67% growth in its China business unit. Despite increased net losses, the company maintains a strong cash position and focuses on generative AI expansion and operational efficiency.
- 9.2% decrease in total revenue to $103.2 million
- 33.3% drop in Global Services revenue due to Google contract termination
- 19.7% growth in New Markets revenue, led by 67% surge in China business
- Underlying EBITDA loss slightly worsened to $2.8 million
- No interim dividend declared; cash reserves strong at $60.9 million
Revenue and Market Dynamics
Appen Limited, a global leader in AI data services, released its interim financial results for the half-year ended 30 June 2025, revealing a 9.2% decline in total revenue to $103.2 million. This downturn was primarily driven by a significant 33.3% drop in Global Services revenue, reflecting the termination of a major Google contract and ongoing volatility in the US AI market.
However, the company’s New Markets segment demonstrated resilience, posting a 19.7% increase in revenue to $59.6 million. Notably, the China business unit was a standout performer, achieving a remarkable 67% revenue growth to $42.2 million, with an annualised run rate surpassing $100 million by June. This growth underscores Appen’s strategic focus on expanding its footprint in high-growth AI markets outside the US.
Profitability and Cost Management
Despite the revenue challenges, Appen’s underlying EBITDA loss edged slightly higher to $2.8 million, influenced by foreign exchange losses and a changing customer mix. The Global Services segment’s EBITDA fell sharply by 68.7% to $2.1 million, reflecting the impact of lost Google business and US market fluctuations. Conversely, New Markets improved its EBITDA loss by nearly 50%, driven by China’s strong performance and operational efficiencies.
Cost control remains a priority, with operating expenses (excluding certain non-cash items) decreasing by 8.3% compared to the prior period. Investment in product development was maintained at 9.3% of revenue, supporting Appen’s commitment to technology innovation and automation to enhance data quality and delivery speed.
Balance Sheet and Capital Allocation
Appen’s balance sheet remains robust, with cash reserves increasing to $60.9 million and no debt on the books. The company’s net assets declined to $96.9 million, reflecting ongoing losses and amortisation charges related to acquisitions such as Quadrant. To preserve capital and support strategic initiatives, the board has decided against paying an interim dividend for this period.
Strategic Outlook
Management is focused on navigating the dynamic AI landscape by accelerating growth in generative AI, enhancing operational efficiency, and driving technology innovation. The company aims to diversify revenue streams further, particularly by leveraging its strong position in China and expanding enterprise and government segments despite short-term uncertainties in the US market.
While the termination of the Google contract and US political unpredictability pose challenges, Appen’s strategic investments and geographic diversification position it to capitalize on emerging AI opportunities globally.
Bottom Line?
Appen’s strong China momentum and strategic focus on AI innovation offer a buffer against US market volatility, but near-term profitability pressures persist.
Questions in the middle?
- How will Appen offset the ongoing revenue impact from the Google contract termination?
- What are the prospects for growth in the US government and enterprise segments amid political uncertainty?
- Can Appen sustain and scale its China business to drive overall profitability in the coming periods?
