How Is Appen’s China Business Driving an 81% Revenue Surge Amid US AI Market Turbulence?
Appen Limited reported a modest 2% revenue increase in Q3 FY25, driven by an 81% surge in its China business, while navigating ongoing volatility in the US AI market. The company reaffirmed its FY25 guidance, highlighting progress on cost efficiencies and a strong cash position.
- Q3 FY25 revenue up 2% to $55.3 million
- China business revenue soars 81%, sixth consecutive profitable quarter
- Successful transition of $10 million+ annual revenue project to full production
- $7 million of $10 million annualized cost savings achieved
- FY25 guidance reaffirmed with positive underlying EBITDA expected
Robust China Growth Offsets US Market Challenges
Appen Limited’s Q3 FY25 results reveal a tale of two markets. The company posted a modest 2% year-on-year revenue increase to $55.3 million, largely propelled by its China operations, which surged 81% compared to the prior corresponding period. This growth pushed the China business to an annualised revenue run-rate exceeding $115 million by September, marking its sixth consecutive quarter of standalone underlying EBITDA profitability.
CEO Ryan Kolln highlighted the operating leverage benefits as the China segment scales, with underlying EBITDA improving by $1.2 million quarter-on-quarter. This strong performance contrasts with the ongoing volatility in the US AI market, where uncertainty around the timing and volume of large language model (LLM) projects continues to weigh on results.
Strategic Execution and Cost Efficiency Drive Progress
Despite the US market’s unpredictability, Appen successfully transitioned a previously announced project with over $10 million in annual revenue potential from pilot to full production during the quarter. This milestone underscores the company’s ability to deepen customer relationships and expand its footprint amid challenging conditions.
Appen is also advancing its technology innovation and automation strategy, delivering significant cost efficiencies. Approximately $7 million of the targeted $10 million annualised cost savings have been realised, with the remainder expected by the end of Q4 FY25. These savings are net of investments in upgrading technical talent, reflecting a balanced approach to operational discipline and capability enhancement.
Financial Position and Outlook
The company’s cash balance remains robust at $50.9 million USD as of 30 September 2025, despite a $10 million decrease from the previous quarter due to supplier payments and cost efficiency initiatives. Appen reaffirmed its FY25 guidance, expecting revenue towards the low end of the $235 million to $260 million range and a positive full-year underlying EBITDA.
While the China business momentum is a clear highlight, the company’s cautious stance on the US market reflects broader industry uncertainties. The decision to wind back investment in the US Government division, yielding an additional $4 million in annualised expense savings, further illustrates Appen’s adaptive strategy in a shifting landscape.
Positioning for the Next Phase of AI Development
Appen’s extensive experience in sourcing and annotating data for AI, supported by a global crowd of over one million skilled contractors, positions it uniquely to support the evolving AI lifecycle. As the AI market matures, the ability to deliver trusted, scalable data quickly will be critical, and Appen’s focus on innovation and operational efficiency aims to secure its leadership in this space.
Investors will be watching closely how Appen balances growth in China with the challenges and opportunities in the US, as well as how effectively it executes its cost-saving initiatives while investing in technical expertise.
Bottom Line?
Appen’s China momentum fuels growth, but US market uncertainties and cost execution remain key to watch.
Questions in the middle?
- How will Appen navigate the timing and volume uncertainties of large US LLM projects?
- What impact will the completion of cost savings have on full-year profitability?
- Can Appen sustain its China growth trajectory amid global AI market shifts?
