Appen Limited reported a modest 2% revenue increase in H1 FY25, driven by a 67% surge in its China business, while reaffirming full-year guidance amid US market uncertainties.
- H1 FY25 revenue up 2% to $102.1 million excluding Google contract impact
- China business revenue grows 67%, achieving positive EBITDA for fifth consecutive quarter
- US AI market volatility leads to winding back US Government division investment
- $10 million annualised cost efficiencies targeted primarily outside China
- FY25 guidance reaffirmed, revenue at low end of $235-$260 million and positive EBITDA
Strong Growth in China Balances Global Challenges
Appen Limited, a global leader in data services for artificial intelligence, has released its half-year results for FY25, revealing a nuanced performance shaped by regional dynamics. The company posted $102.1 million in revenue for the six months ended June 30, 2025, marking a 2% increase compared to the prior corresponding period when excluding the impact of a terminated Google contract.
The standout contributor to this growth was Appen’s China business, which delivered a remarkable 67% revenue increase, reaching an annualised run-rate exceeding $100 million by June. This segment also recorded its fifth consecutive quarter of underlying EBITDA profitability, underscoring its rising importance within the group.
US Market Volatility and Strategic Adjustments
Conversely, Appen’s operations in the United States faced headwinds amid ongoing volatility in the AI market and policy uncertainties, particularly affecting the US Government division. These challenges have prompted the company to scale back investment in this division starting in the second half of FY25, aiming to reduce operational expenses by approximately $4 million annually.
Despite these setbacks, Appen remains confident in the broader market opportunity, highlighting a recent project win with over $10 million in annual revenue potential as a positive indicator for future growth.
Cost Efficiency and Financial Health
Appen is actively pursuing a technology innovation and automation strategy designed to deliver around $10 million in annualised cost savings, predominantly outside its China operations. Approximately 70% of these efficiencies are expected to be realised by the end of Q3 FY25, with the remainder by year-end.
The company’s financial position remains robust, with a cash balance of AUD 92.9 million ($60.9 million USD) as of June 30, 2025, bolstered by timely payments from major customers.
Outlook and Market Positioning
Appen reaffirmed its FY25 guidance, anticipating revenue towards the lower end of the $235 million to $260 million range and a positive full-year underlying EBITDA. CEO Ryan Kolln emphasised Appen’s unique role in delivering trusted, scalable data essential for the next generation of AI development, positioning the company for sustained profitable growth despite short-term market fluctuations.
As the AI landscape continues to evolve rapidly, Appen’s strategic focus on technical expertise, cost discipline, and geographic diversification will be critical in navigating uncertainties and capitalising on emerging opportunities.
Bottom Line?
Appen’s strong foothold in China and disciplined cost strategy set the stage for navigating US market uncertainties and sustaining growth.
Questions in the middle?
- When will large language model projects in the US resume to boost revenue?
- How will the wind-back of US Government division investment impact long-term growth?
- What margin pressures might arise from the growing China business with traditionally lower margins?