Low code software development platform provider Appian (Nasdaq: APPN) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 16.5% year on year to $170.6 million. Guidance for next quarter’s revenue was better than expected at $174 million at the midpoint, 1.8% above analysts’ estimates. Its non-GAAP profit of $0 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Appian’s second quarter results were positively received by the market, reflecting a combination of robust sales execution and continued expansion in high-value enterprise deals. Management credited the company’s progress to a deliberate upmarket strategy and effective use of artificial intelligence to enhance its value proposition. CEO Matthew Calkins highlighted that AI not only contributed to higher deal values—with a 25% price upcharge—but also opened doors to new industries and use cases. The company’s sales productivity reached an eighth straight quarterly high, and public sector performance outpaced global trends, benefiting from government efficiency initiatives.

Looking ahead, Appian’s raised guidance for the remainder of 2025 is underpinned by the expectation that demand for AI-driven modernization and process automation will accelerate. Management pointed to a growing pipeline of large modernization projects, with customers seeking to consolidate legacy systems and realize operational savings. CFO Srdjan Tanjga emphasized that expanding sales productivity, further adoption of AI features, and disciplined investment in go-to-market resources are expected to support both growth and margin improvement. Calkins noted, “We see a large opportunity emerging in the modernization of legacy applications as AI lowers the cost of extracting and translating old applications.”

Key Insights from Management’s Remarks

Management attributed Appian’s outperformance to strong enterprise demand for AI-enabled solutions, increased traction in public sector modernization, and disciplined operational execution, resulting in improved margins and a healthy new business mix.

• AI Upcharges Drive Deal Value: Appian’s introduction of AI-inclusive license tiers led to higher average selling prices, with management noting that most seven-figure deals in the quarter included a 25% AI upcharge. This pricing power was supported by customer willingness to pay for tangible automation and efficiency gains.

• Modernization Demand Accelerates: The company saw rising demand for legacy application modernization, with large clients—such as a multinational insurer and a Spanish bank—using Appian’s platform to consolidate and streamline hundreds of disparate systems. Management expects this trend to intensify as AI reduces migration complexity and costs.

• Public Sector Momentum: Appian’s U.S. federal business outpaced global growth in both cloud revenue and bookings. Recent wins included a national healthcare agency adopting Appian to support virtual care, expected to yield significant cost savings.

• Go-to-Market Productivity Gains: Sales and marketing efficiency reached an eighth consecutive quarterly high, attributed to operational improvements and better alignment of sales leadership, particularly in the EMEA region. These changes enabled a higher proportion of new business from strategic customers.

• Leadership Changes to Support Growth: The appointment of a new Chief Marketing Officer with experience in enterprise software and AI, along with new sales leaders in EMEA, is aimed at sustaining Appian’s growth trajectory and reinforcing global go-to-market best practices.

Drivers of Future Performance

Appian’s outlook for the next quarter and full year is driven by sustained demand for AI-powered modernization, ongoing productivity initiatives, and continued expansion in both commercial and public sector markets.

• AI Adoption to Sustain Growth: Management expects that further integration of AI features into core offerings will drive new customer wins and deeper penetration within existing accounts, especially as organizations seek automation to reduce operational costs and improve agility.

• Efficiency and Margin Expansion: The company plans to build on recent improvements in sales productivity and cost discipline, with targeted investments in R&D and operational streamlining, particularly leveraging its growing development presence in India. This focus is expected to support ongoing margin expansion and non-GAAP profitability.

• Pricing Model Evolution: Appian is gradually shifting away from seat-based pricing toward consumption and value-based models, allowing it to capture more value from customers who benefit from AI-driven automation. Management is confident this approach will offset any reduction in user-based pricing as automation increases.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) the pace at which customers transition to AI-enabled modernization projects, (2) progress in Appian’s shift toward value-based and consumption pricing, and (3) continued improvement in sales productivity and operating margins. Additional attention will be paid to new leadership’s impact on EMEA execution and the durability of public sector momentum.

Appian currently trades at $28.50, up from $26.93 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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