Appen has delivered its strongest quarterly result of FY26, with revenue rising 34% to US$73.9 million and underlying EBITDA increasing more than tenfold to US$10.3 million. Appen Global returned to profit while China continued to drive growth, although FY26 revenue is expected to land in the lower half of guidance.
- Q3 revenue up 34% to US$73.9 million
- Underlying EBITDA rises to US$10.3 million from US$1.0 million
- Appen Global returns to profit with US$5.6 million EBITDA
- Appen China revenue climbs 61% to US$46.1 million
- FY26 guidance maintained, with revenue expected in the lower half
Appen Global swings back into profit
Appen Limited (ASX:APX) has put a sharper edge on its AI recovery, returning its Global division to profit just as group revenue accelerated. Q3 FY26 revenue rose 34% year on year to US$73.9 million, while underlying EBITDA before foreign exchange reached US$10.3 million, up from US$1.0 million a year earlier.
The result was broad-based. Appen China generated US$46.1 million of revenue, up 61% on the prior corresponding period and 11% on Q2 FY26. Appen Global contributed US$27.9 million, up 5% year on year and 17% quarter on quarter, with underlying EBITDA improving to US$5.6 million from a US$1.3 million loss in Q2.
China reaches a US$190 million run-rate
China remains the larger engine of the business. September revenue lifted Appen China’s annualised run-rate above US$190 million, compared with more than US$175 million at the end of Q2. The company attributed the growth to generative AI projects, including work supporting Chinese technology companies expanding internationally.
China’s underlying EBITDA margin reached 14.5%, compared with 11.6% a year earlier. Appen said the improvement reflected a higher mix of generative AI work and higher-margin prebuilt datasets. Quarterly EBITDA was slightly below Q2, however, with lower utilisation during the Mid-Autumn Festival holiday, the timing of government rebates and additional investment in growth opportunities weighing on the period.
Seven of eight major US model builders now customers
Appen Global’s recovery is becoming less dependent on its largest customer. Revenue outside that customer grew 70% from Q2, following a 65% increase in the previous quarter. The division also added two leading US-based frontier AI model builders, including a large former customer, although Appen said initial revenue from both relationships is expected to be modest in FY26.
The progress extends the customer base to seven of the eight largest US-based AI model builders, with projects in the pipeline involving the eighth. Work now spans established areas such as speech and search relevance as well as coding, STEM, finance, robotics and other AI applications. The division also reduced operating expenses to US$10.8 million, down 19% on the prior corresponding period.
Guidance holds as cash generation improves
Appen maintained FY26 revenue guidance of US$270 million to US$300 million and an underlying EBITDA margin of approximately 5% to 10%. Current visibility points to revenue in the lower half of that range and margin in the upper half, but the company is retaining the full ranges because new projects can start at short notice and at scale.
The quarter also produced US$4.0 million of net operating cash, compared with US$7.9 million of cash used in Q2. Cash on hand ended September at US$42.6 million, down US$2.1 million from June after US$5.2 million of investing outflows, including US$3.9 million invested in intellectual property. The figures are based on unaudited management accounts and remain subject to change.
Bottom Line?
The turnaround is gaining credibility, but the next test is whether new Global customers become meaningful revenue contributors before China’s growth carries too much of the group burden.
Questions in the middle?
- How quickly will the two newly added US model builders move from initial projects to material revenue?
- Can Appen convert the promised annualised cost efficiencies into sustained Global margins without affecting delivery quality?
- Will fourth-quarter activity lift FY26 revenue from the lower half of guidance despite the current visibility range?