Integrated Research Limited reported a modest revenue dip and significant profit declines in FY25 as it pivots to a product-led growth strategy focused on AI-powered observability solutions and hybrid pricing models.
- FY25 pro forma revenue slightly down at $74.3 million
- EBITDA and NPAT fell sharply due to increased investment in new products
- Launch of AI-powered Prognosis Elevate and Iris products
- Shift towards subscription and consumption-based hybrid pricing
- FY26 guidance signals softer renewals but continued innovation investment
FY25 Financial Performance Highlights
Integrated Research Limited (ASX – IRI), a global player in observability solutions for critical IT environments, disclosed its FY25 results showing a slight 1% decline in pro forma revenue to $74.3 million. However, the company faced a more pronounced drop in profitability, with EBITDA down 35% to $15.9 million and net profit after tax halving to $13.4 million. These declines reflect the company’s deliberate strategy to invest heavily in product innovation, which has increased costs in the short term.
Strategic Shift to Product-Led Growth
CEO Ian Lowe outlined a clear pivot from reliance on contract renewals towards a product-led growth model. This approach focuses on developing new AI-enabled observability products designed to generate sustainable revenue streams from new clients and expanded contracts with existing customers. The company is targeting growth in three key revenue metrics – new client revenue, expansion revenue, and subscription fees, with the latter showing a strong 77% increase in FY25.
Innovation and New Product Launches
Integrated Research introduced two flagship products in the first half of FY26 – Prognosis Elevate, an on-premises product now offered as a cloud-hosted service with hybrid pricing, and Iris, an AI-powered assistant integrated into their Prognosis platform. Iris offers natural language, chat-style interaction tailored specifically for observability, distinguishing it from generic AI assistants. These innovations are part of a broader framework to modernize technology and align offerings more closely with business outcomes.
Capital Allocation and Market Position
The company maintains a robust balance sheet with net cash increasing 27% to $40.6 million, supporting its medium-term capital allocation framework. This includes dedicating 30-35% of available capital to product innovation, reserves for opportunistic deals, and contingency funds. Integrated Research’s blue-chip client base across technology, financial services, and telecommunications sectors underpins its market credibility as it navigates this transition.
Outlook and Market Implications
Looking ahead, FY26 guidance indicates softer renewals and a 4% revenue decline midpoint in the first half, tempered by ongoing cost management and further investment in product development. The company’s shift to hybrid pricing models combining fixed license fees with consumption-based charges aims to create more predictable and scalable revenue streams. While the short-term profit impact is evident, the strategic emphasis on AI and subscription services positions Integrated Research to capitalize on the growing and maturing observability market.
Bottom Line?
Integrated Research’s bold product-led pivot signals a challenging near term but sets the stage for sustainable growth driven by AI innovation and flexible revenue models.
Questions in the middle?
- How quickly will new AI-powered products like Iris drive meaningful revenue growth?
- What impact will the hybrid pricing model have on customer adoption and retention?
- Can the company offset softer renewals with new client wins and expansion revenue in FY26?