API

Please be advised that today's conference is being recorded. The company's earnings results, press release, earnings presentation, SEC filings, and a replay of today's call can be found on its IR website at investor.agora.io. Joining me today are Tony Zhao, founder, chairman, and CEO. Jingbo Wang, the company's CFO. During this call, the company will make forward-looking statements about its future financial performance and other future events and trends. These statements are only predictions that are based on what the company believe today. The actual results may differ materially.

These forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could affect the company's financial results and the performance of its business, and in which the company discuss in details in its filings with the SEC, including today's call, earnings press release, and the risk factors and other information contained in a final prospectus relating to its initial public offering. Agora, Inc. remains no obligations to update any forward-looking statements the company may make on today's call. Now, with that, let me turn it over to Tony. Hi, Tony.

Thank you, operator, and welcome everyone to our earnings call. I'll start with a review of our operating results for the quarter. I'm pleased to report our sixth consecutive quarter of GAAP profitability alongside another quarter of strong top-line growth. Total revenue for the first quarter of 2026 reached $37.7 million, up 13.5% year-over-year. Growth further accelerating our prior quarters. GAAP net profit was $1.1 million, more than double the level of Q1 last year. These results reflect the continued expansion of our Real-Time Engagement use cases globally, as well as the increasing contribution from AI-related applications and products built with our solutions. Let me turn to our business product and technology update for the quarter. Over the past several months, we continue to make progress in bringing Conversational AI to real-world production, deepening the capabilities with our Real-Time Engagement infrastructure, and expanding our ecosystem partnerships.

In March, we officially launched Agent Studio, a visual no-code environment that enables developers and enterprises to rapidly build, test, and deploy voice AI agents at scale. We also introduced conversational AI agents for inbound use cases such as customer service, as well as outbound use cases focused on sales and marketing. The market opportunity here is enormous. According to Gartner, conversational agents are expected to automate 70% of customer interactions by 2027, and by 2028, AI agents are projected to outnumber human sellers by 10 to one. At the same time, many enterprises still struggle to deploy voice AI in production environments. The challenge is not simply the AI model itself, but the complexity of orchestrating multiple technology layers while maintaining low latency, reliability, and the natural conversational experience at scale. In addition, effective enterprise deployment require domain-specific expertise.

A successful voice AI agent must do more than respond accurately. It must reflect the tone, personality, and workflow of the industry it serves. For example, a car sales assistant and a debt collection agent need very different conversational styles, compliance guidelines, and customer engagement approaches. Our solution is designed to eliminate this complexity through a fully integrated stack that combines three core components. First, an environment that allows enterprise to design, test, and deploy AI agent in minutes rather than weeks or months. Second, our conversational AI agent orchestrates ASR, large language model, and TTS capabilities with intelligent interaction handling, noise suppression, multilingual support, and domain-aware conversation design, enabling more natural and human-like interactions. Third, our global real-time network infrastructure delivers sub-second latency and carrier-grade reliability worldwide. We are already seeing strong early validation from real-world deployments.

In Q1, one customer implemented a survey and polling agent that matched 10% conversion rate of human agents. This allowed them to scale data collection and reward distribution far more cost effectively without adding operational headcount. Overall, enterprise feedback has been highly encouraging. Customers increasingly recognize that scalable Conversational AI requires not only powerful models, but also real-time infrastructure's capability of delivering and seamless interaction and integration. We believe we are uniquely positioned at the intersection of these capabilities. Last month, we also strengthened our position in the enterprise collaboration market with the launch of our Intelligent Meeting Engine product. Intelligent Meeting Engine offers end-to-end encryption, flexible deployment options including on-premises and private cloud, and a full data solution to help ensure that customer meeting content remains entirely within their controlled infrastructure.

At the same time, it increases AI powered capabilities such as real-time transcription, translation, intelligent meeting summaries, and automated follow-up workflows that can connect with customers' existing business system. This solution addresses growing enterprise demand around content, data sovereignty, and intelligent workflow automation, and has been well received in industries including finance, government, and healthcare. Turning to ecosystem partnerships, we continue to integrate the latest AI models such as Google's Gemini and xAI's Grok models into our Conversational AI solutions. In particular, Google has featured Agora as a recommended partner for building real-time Conversational AI, validating our technology leadership in this space. In addition, we recently entered a strategic partnership with NetEase Enterprise Service Division, NetEase Smart Enterprise. Together, we will provide integrated solutions spanning real-time video, content moderation, and AI agents. This partnership combines NetEase expertise in AI and content moderation with our leadership in real-time engagement infrastructure.

We believe this partnership is meaningful validation of our technology from one of China's leading internet companies, while also expanding our go-to-market opportunities across education, customer service, digital entertainment, and enterprise collaboration. Before I conclude, I want to thank the Agora and Shengwang teams for their continued dedication and execution, and thank our shareholders for their ongoing trust and support. Globally, Conversational AI is rapidly moving from proof of concept to large-scale deployment. Since the official launch of our Conversational AI Engine product last year, usage has demonstrated remarkable momentum with over 150% sequential growth every single quarter. Enterprises today are no longer asking whether they should adopt Conversational AI. Instead, they are asking how to deploy it at scale with reliability, low latency, and seamless integration. We believe our decade of experience in real-time engagement infrastructure uniquely positions us to help customers solve exactly these challenges.

With that, let me turn things over to Jingbo Wang, who will reveal our financial results.

Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for the first quarter of 2026. Then I will discuss outlook for the second quarter. Starting this quarter, we have simplified our disclosure approach for revenues and active customers, and we will no longer separately disclose these metrics for Agora and Shengwang. We've also refined our dollar-based net expansion rate or DBAR methodology. We now compare quarterly revenue from the same cohort of paying customers year-over-year to calculate DBAR. This change aligns DBAR more closely with our quarterly revenue growth rate, making it easier for investors to compare the two. Total revenue for the first quarter reached $37.7 million, representing 13.5% year-over-year growth.

Those results exceeded the high end of our guidance range of $36 million-$37 million, and reflected continued expansion and usage growth of our real-time engagement services in sectors such as U.S. live shopping, social and entertainment, and financial services. DBAR first quarter was 99% compared to 95% in the first quarter of 2025. Gross profit first quarter was $23.9 million, representing a 5.7% year-over-year increase. Gross margin was 63.4% compared to 68% in the same period last year, mainly due to product mix change, especially Conversational AI products remaining at a subscale stage. Turning to expenses, R&D expenses were $14.4 million in Q1, up 2.9% year-over-year. R&D expenses accounted for 38.1% of total revenues, compared to 42.1% in the same period last year. The increase was primarily due to continued investment in Conversational AI products. The marketing expenses were $5.9 million in Q1, down 4.8% year-over-year.

The marketing expenses represented 15.6% of total revenues in the quarter, compared to 18.7% in Q1 last year. The decrease was primarily due to disciplined expense management, including lower personnel and promotion expenses. General and administrative expenses were $6 million in Q1, down 6.4% year-over-year. G&A expenses represented 15.9% of total revenues, compared to 18.8% in Q1 last year. The decrease was primarily due to a lower allowance for current expected credit losses, mainly as a result of improved customer credit conditions and collection outcomes. Moving on to the bottom line. We delivered net income of $1.1 million in Q1, more than double the net income in the first quarter last year, representing a 2.9% net income margin. This marks our sixth consecutive quarter of GAAP profitability and reflects continued improvement in our operating leverage. Turning to cash flow.

Operating cash flow was $5.7 million in Q1, including interest received of $4.3 million, compared to $17.6 million in Q1 last year, which included interest received of $17.8 million. Moving on to balance sheet. We ended Q1 with $366.1 million in cash equivalents, and deposits and financial products issued by banks. Net cash outflow in the quarter was mainly due to share repurchase. During the quarter, we repurchased approximately 12.5 million Class A ordinary shares or 3.1 million ADS, representing approximately 3.6% of our total outstanding shares at the beginning of the quarter, for approximately $13.1 million. As of March 31st, 2026, we had repurchased 174.7 million Class A ordinary shares or 74.7 million ADS for approximately $156.2 million under our share repurchase program, which represented 78.1% of our $200 million share repurchase program. The current program will expire at the end of February 2027. Turning to guidance.

Based on currently available information, we expect total revenues for the second quarter of 2026 to be between $39 million and $40 million, compared to $34.3 million in the second quarter of 2025, representing year-over-year growth of 13.7%-16.6%. Notably, even at the low end of this range, we expect to deliver faster revenue growth than we did in the first quarter. In closing, I want to thank our teams for their focused execution in the first quarter. We beat revenue guidance and net income more than doubled year-over-year. Our second quarter outlook also points to a further acceleration in revenue growth. We will continue to invest in AI with discipline, and we are confident that it will become an increasingly important driver of long-term growth. Thank you all for joining today's call. Let's open it up for questions.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by as we compile the Q&A roster. First question comes from the line of Harry Zhou from Bank of America Securities. Please go ahead.

Hi. Thanks, management, for taking my questions and congratulations on the strong first quarter results and solid two-year guidance. I have three questions here. The first one, since the company did not disclose the revenue breakdowns by region, we would like to know the growth trend in overseas and China market and what are the verticals driving the growth behind. Secondly, in terms of the Conversational AI, we would like to know the primary application scenarios at current stage and what revenue scale could the company achieve by the end of this year. Thirdly is about the profit guidance. What is the operating profit target for 2026 and any timeline for operating level of breakeven? Thank you.

Thank you. On the first question, first of all, in this quarter, both the China business and the U.S. international business are growing very rapidly. The growth rate, the U.S. business is still a little bit faster, but the two are approaching also at very healthy rates. In terms of the demand in both markets, I'll talk about the demand in the RTE market first, and Tony will talk about demand in the AI market. For RTE in China, demand for the traditional verticals, social, entertainment, education, from all these verticals, demand continued to recover. In the U.S. international markets, demand from live shopping, financial services, and gaming scales are among the strongest. We have a very healthy pipeline of new customers in these verticals as well. Overall, RTE demand looks quite healthy.

About the demand on AI side. From the beginning of this gen closely watching the progress on all front. We were the first to introduce AI into the whole RTE technology stack and offer the first generation of products empowered by those capabilities. Since then, we've been closely working with customers on practical demand. The thing is, in the last few years, there has been a lot of hype around how AI can change people's lives, and those claims are not fake. Many of those claims are overstatements that far ahead of what's happening on the ground, mostly oversimplifies the practical challenge and actual adoption process. Since early last year, we've been seeing demand from call center education, digital avatar, et cetera. I think we talked about that last year. This is happening over the past few quarters, in different regions.

In each of those areas, we actually have certain partners and customers to work with them to go into real production. With them, we made progress in the overall experience, practical token economy, and customer use case adoption. At this moment, we see fairly large demand from the call center side. As the technology of voice agent is increasingly able to communicate and resolve many communication tasks. Leveraging large language model intelligence is improving day by day. On IoT side, after successfully helping to launch the companion toy for Zuzu, similar demand is expanding. For Zuzu's growth itself is also very promising. It can get enough monthly subscription revenue from the most sticky user group every month. It's not just a one-time sale of the hardware toy. We're seeing a similar trend in other use cases of Conversational AI.

Yeah. Tony just talked about the demand for Conversational AI. That should also answer partly the second question. Yes, for revenue contribution this year, we believe call center and IoT will be the biggest contributors. I think Tony also talked about that in his opening remarks, that since we released our Conversational AI Engine product in March last year, its usage has been growing at more than 150% sequential growth rate every single quarter. Also the revenue contribution at the moment is still relatively low. We expect to see its revenue to quickly ramp up and towards the summer, around 5% revenue contribution by then. In terms of the 2026 operating target. Given the current growth trajectory and seasonality, we expect operating income and net income to both grow sequentially every quarter from Q1 to Q4.

In term of the full year profit, we expect the GAAP net income will be significantly higher than last year. Our goal is to achieve GAAP operating profit in the second half of this year.

Yeah. Thanks very much, Ryan. Very clear. Thank you.

Thank you. Just a moment for our next question, please. Next, we have Rachel Han from CICC. Please go ahead.

Thanks. Hi, this is Rachel Han from CICC. Thanks for taking my questions. Congrats on another solid quarter, especially with revenue coming above the high end of guidance. My first question is on e-commerce overseas last quarter. I remember you highlighted Whatnot and the Super Bowl live shopping events. Could you give us an update on how this vertical has been developing since then, and how should we think about the potential revenue contribution from overseas e-commerce for the rest of 2026? My second question is on domestic China business. I know we share some color on the growth drivers for the domestic business this year, but I noticed we announced NetEase Smart Enterprise partnership this quarter. How should we think about its potential impact on our Shengwang's growth in 2026? Thank you.

Sure. The first question on commerce use case. I want to say that in the U.S. market and in probably all developed markets in general, video-based live shopping is still very new thing. We mentioned one last quarter. After that event, very successful event, actually, it did perform well in term of new user acquisition and customer user stickiness. We continue to see growing demand from that customer. In addition, we recently won over another fast-growing video-based e-commerce customer, in U.S. market from a competitor. On top of that, in the last quarter was a milestone in the industry. Now everybody in the industry is watching, and several other players are trying to host similar events in the future, and we are discussing with a few of them already.

We do expect this vertical to have a lot of room for growth, and we are making solid progress on that front. In terms of the business in China, as I said earlier, demand from these internet-based use cases, social, entertainment, education, we see demand recovery also still at a moderate rate. From verticals such as IoT, cameras, doorbells, cars, from wearable devices. Demand from IoT is growing very fast. It has been very fast in the past two, three years. Digital transformation customers with additional AI features. We also see renewed demand growth from digital transformation, traditional enterprise customers. In terms of the piece, I think it's certainly very helpful on its own, but also it reflected further consolidation of the market in China, right?

Recently, to just give some more examples, recently, a private competitor in this market repurchased all of its venture capital investee and started to focus more on profitability rather than scale, right? That used to be a competitor, now it is a partner. We also see another large public cloud competitor has further reduced its staff on the RTE business. We do believe this trend of consolidation will gradually help our revenue growth as well.

Okay, thanks, Bingbo Dong. That's very helpful and all the best going forward. Thanks.

Thank you. Just a moment for our next question, please. Last question comes from Yu Xu from China Securities. Please go ahead.

Hi, management. Thanks for taking my question and congrats on the strong results. Just two quick ones. Are we seeing further improvement in the domestic competitive landscape, and how should that translate into pricing power and revenue growth? Excluding the initial gross margin drag from Conversational AI, what is the online gross margin trend for our core business? Second question. As for Conversational AI scale, how are its unit economics trending? If AI progression comes in below expectation, how should we think about our target of turning operating margin positive by Q4 of 2026?

Sure. First question on competition and the margin. I will talk about RTE and Tony will talk about AI. Actually I just talk a little bit about the competition in the China market. We see that the market is moving into further consolidation. There was more players to no longer going after scale, right? We do believe that will help with revenue growth as well as margin improvement in the coming quarters. As you can see, overall, the gross margin this quarter was a few compared to the same quarter last year. That's mostly due to the initial negative gross margin on the Conversational AI business. If excluding Conversational AI, the gross margin of the Core RTE businesses remain actually relatively stable in the first quarter.

On the AI side, there's a lot of competition for Conversational AI in Silicon Valley and the U.S. market. The market is still at an early stage, and there are different players trying to attack it from quite diverse angles. It's still a growth market, so every company has a chance to attack from different angle and still making progress. We are the ones who focus more on the fundamental technology, trying to enable the most promising use cases through the ultimate quality of conversation. The customer demand is strong. As we see, the status is actually adapting to those customer demands and improving the conversational quality so that it can resolve communication tasks at a higher and better level, making it more effective. China market is quite different.

As you can see, most of the AI companies can only make a fractional of revenue in China market compared to their U.S. peers. The market is quite hard to get through at this moment. However, there is similar demand on Conversational AI side, and the technology and product progress are also similar.

Okay. In terms of the unique economics of the conversational product, I think it is still too early to talk about. For example, in first quarter, the reason we have a negative gross margin for this product is because we have a lot of POC customers, a lot of experimentation that basically generate no revenue, but has a lot of cost. We believe as we continue to scale, as customers move from POC to deployment and scale usage, by the end of the year, we expect to see a meaningful revenue contribution. At that point, the gross margin will certainly turn positive, and also will be at a healthy level.

In the long run, we actually expect the conversational revenues to generate similar, if not higher gross margin than the current RT products because of, one, higher pricing, and two, the more technical sophistication and value creation for customers. We talk about if the AI progress is below, like does not meet the expectation. Actually, we have considered all the investments we need to make on that front, and it will not affect our goal of turning operating profitability in the second half of this year.

Thank you.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. Thank you. With that, this concludes today's Q&A session and conference call. Thank you again, everyone, for attending the company's call today. As a reminder, the recording and the earning release will be available on the company's website at investor.agora.io. If there's any further questions, please feel free to email the company. Thank you.

Thank you. Bye-bye.

Good day and thank you for standing by. Welcome to Agora, Inc. Fourth Quarter and Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. The company's earnings results press release, earnings presentation, SEC filings and a replay of today's call can be found on its IR website at investor.agora.io. Joining me today are Tony Zhao, Founder, Chairman and CEO; Jingbo Wang, the company's CFO. During this call, the company will make forward-looking statements about its future financial performance and other future events and trends. These statements are only predictions that are based on what the company believes today and actual results may differ materially. These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could affect the company's financial results and the performance of its business and of which company discussed in detail in its filings with the SEC, including today's earnings press release and the risk factors and other information contained in the final prospectus relating to its initial public offering. Agora, Inc. remains no obligation to update any forward-looking statements the company may take on today's call. With that, let me turn the call over to Tony. Please go ahead.

Thanks, operator, and welcome, everyone, to our earnings call. I'll begin by reviewing our operational performance for the past quarter. We are pleased to report our fifth consecutive quarter of GAAP profitability in Q4, marking our first full year of GAAP profitability since 2018, driven by sustained double-digit revenue growth, improved operating leverage and disciplined cost management. Total revenue for the fourth quarter were $38.2 million, representing 10.7% year-over-year growth. Our GAAP net profit for the quarter was $4.9 million with a GAAP net margin of 12.9%. Next, I would like to share with you our recent business update, which highlights both the strength of our core real-time engagement business and the accelerating momentum of our conversational AI initiatives. Our platform's scalability and reliability were recently validated during a high-profile live streaming event over the Super Bowl weekend. MrBeast, the world's most followed content creator, hosted a broadcast session on Whatnot, the leading video-based shopping platform and a long-standing customer of Agora. We delivered high-quality full HD video to nearly 600,000 peak concurrent viewers worldwide while enabling their interactions at sub-second latency. To quote our customers' own words from their technical blog, "On event day, Agora's real-time media pipeline performed reliably at peak. Time to first frame stayed under 1 second, latency remained consistently low, and video quality held stable throughout the stream, even as we pushed systems to their limits at extreme load." We believe this is the largest live video shopping event in U.S. history. Events of this magnitude are the ultimate stress test for real-time infrastructure. Our ability to deliver stable, high-quality video with ultra-low latency at a global scale demonstrates our leadership in network resilience, distributed architecture and real-time routing. This event was powered exclusively by our platform, as no competitor can match our performance and scale. This is why industry leaders in e-commerce, social, entertainment and education continue to trust our infrastructure for their most critical moments. At the same time, we are witnessing rapid adoption of our conversational AI engine product. Since its launch in March 2025, usage has more than doubled each quarter. We are also encouraged to see early experimentation among our customers quickly evolve into real-world deployment across multiple verticals, including customer services, smart devices, education and AI-powered consumer applications. Companionship toys powered by our solution, such as Fuzozo, are driving accelerated shipments with high user stickiness. Validating this momentum, a leading consumer hardware giant recently launched a companionship toy built on our technology. Furthermore, our conversational AI kit, integrating a voice module and an emotion-display screen, has set an industry trend and is now widely adopted by manufacturers. We started the year with a strong reception of our conversational AI solutions for Physical AI at CES 2026 in January. At the event, we introduced the latest upgrade of our conversational AI device kit, featuring enhanced multimodal capabilities, including vision understanding and motion control. These new capabilities enable the development of embodied AI hardware and robotics across multiple use cases. For example, our customer Luwu Dynamics is developing a desktop embodied AI robot powered by this solution. Many of our customers also showcased products at CES that leveraged our solutions, ranging from AI companion devices and robotics to next-generation Physical AI products. The strong market interest and media coverage coming out of CES further validates the growing demand for real-time, human-like interaction embedded directly into smart devices. Beyond one-on-one interaction between humans and AI agents, we are also expanding into multi-agent collaboration scenarios. During the quarter, we supported Agnes AI in launching its next-generation AI group chat and multi-agent collaboration platform. By leveraging our real-time engagement infrastructure and conversational AI capabilities, Agnes AI enables multiple AI agents and human participants to interact seamlessly. We believe multi-agent orchestration represents the next frontier of AI-driven productivity while agents can coordinate tasks, share information and collaborate with humans in real time. Across these developments, a clear theme is emerging. As AI becomes more interactive and multimodal, the technical complexity behind delivering a seamless interaction experience between a human and an AI agent increases significantly. Real-time conversational AI requires not only powerful foundation models, but also advanced audio processing, ultra-low latency networking, global scalability, interruption handling, turn-taking management and device-level optimization. These are areas where we have made substantial investments and have built a strong competitive edge. Our deep expertise in real-time infrastructure uniquely positions us to bridge the gap between AI model capability and production-grade user experiences. Looking ahead, we remain focused on driving revenue growth and advancing conversational AI innovation throughout 2026. We enter the new year with strong momentum, supported by an expanding customer pipeline, growing production deployments and increasing ecosystem partnerships. We believe we are well positioned to capture this transformation and create long-term value for our shareholders. Before I conclude, I would like to thank our customers, developers, partners and shareholders for their continued trust and support and our global teams for their dedication and innovation. With that, let me turn things over to Jingbo, who will review our financial results.

Thank you, Tony. Hello everyone. Let me start by first reviewing financial results for the fourth quarter of 2025 and then I will discuss outlook for the first quarter of 2026. Total revenues for the fourth quarter reached $38.2 million, representing a 10.7% year-over-year increase and exceeding the high end of our guidance. This marks our fourth consecutive quarter of double-digit organic growth. If we look at the 2 business divisions, Agora revenues reached $19.9 million in Q4, representing 14.4% year-over-year growth and 9.3% quarter-over-quarter growth. The strong growth reflects our successful market penetration and growing adoption in verticals such as live shopping. Shengwang revenues reached RMB 129.2 million in Q4, up 5.7% year-over-year and 5.6% sequentially, driven by continued business expansion and adoption in key verticals such as social and entertainment and IoT. Dollar-Based Net Retention Rate is 109% for Agora and 89% for Shengwang. Gross margin for the quarter was 65.1%, down 1.5 percentage points year-over-year and 0.9 percentage points sequentially. The slight decline was primarily driven by the lower margin profile of our conversational AI-related products, as usage is still ramping and remains at a subscale level. Turning to expenses. R&D expenses were $13.6 million in Q4, down 7.7% year-over-year, reflecting our continued cost discipline. R&D expenses accounted for 35.8% of total revenues compared to 42.9% in the same period last year. Sales and marketing expenses were $7.1 million in Q4, down 2.1% year-over-year. Sales and marketing expenses represented 18.7% of total revenues in the quarter compared to 21.1% in Q4 last year. G&A expenses were $5.4 million in Q4, a decrease of 16.5% year over-year, primarily due to lower provisions for credit losses following improved customer collections. G&A expenses represented 14.1% of total revenues compared to 18.7% in Q4 last year. Moving on to the bottom line. We delivered net income of $4.9 million in Q4, representing a 12.9% net income margin. As Tony just mentioned, this marks our fifth consecutive quarter of GAAP profitability and first full year of GAAP profitability since 2018. Based on our current business momentum and visibility into 2026, we expect net income to grow compared to 2025. Now turning to cash flow. Operating cash flow was $9.3 million in Q4 compared to $4.5 million in Q4 last year. Moving onto balance sheet. We ended Q4 with $374.9 million in cash, cash equivalents, bank deposits and financial products issued by banks. Net cash outflow in the quarter was mainly due to share repurchase of $10.9 million. In the fourth quarter, we repurchased 12 million ordinary shares, or 3 million ADSs, representing 3.3% of our outstanding shares at the beginning of the quarter. Since our Board approved the share repurchase program in February 2022, we have repurchased $143.1 million worth of shares through December 31, 2025, which represented 71.6% of our $200 million share repurchase program. We are pleased to announce that our Board has authorized a 12 month extension of our share repurchase program through February 28, 2027, with all other terms unchanged. This reflects the Board's confidence in our long-term growth prospects and our continued commitment to delivering shareholder value. Now turning to guidance. For the first quarter of 2026, we currently expect total revenues to be between $36 million and $37 million, compared to $33.3 million in the first quarter of 2025, representing year-over year growth rate of 8.1% to 11.1%. This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change. In closing, I want to extend my sincere gratitude to our exceptional teams in Agora and Shengwang. Our sustained double-digit revenue growth and double-digit net income margin are a direct result of your dedication and execution. Let's remain focused on driving revenue growth and advancing conversational AI innovation throughout 2026. To our shareholders, thank you for your continued trust and partnership. Thank you all for joining today's call. Let's open it up for questions.

[Operator Instructions] First question comes from Daley Li from Bank of America Securities.

Firstly, congrats on the strong Q4 results. And I have two questions here. Firstly, could you update us the overall RTE demand trend in China and overseas? And what industries are the key demand drivers? Secondly, you have released the ConvoAI Device Kit. And could you please share more color on the conversational AI applications and what industries and applications are the key drivers? And besides I'm not sure, could you share some color about your targeted revenue for the conversational AI this year?

Okay. For the real-time engagement market trend, in China, demand from social entertainment and education customers continue to grow at a modest rate while we remain optimistic on the vast growth potential of IoT and digital transformation customers to drive our China revenue. In recent months, competitive pressure further abate, and we believe the industry will continue to consolidate. In U.S. and international markets, as I mentioned earlier, our success in one of the massive single-channel live streaming event solidifies our position and brand awareness among live shopping customers, which will bring more business opportunities for us. We are confident that we will gain more market share in this vertical. And for ConvoAI Device Kit, so we do expect our conversational AI revenue to continue to grow. The use cases, not just companionship toys, as I mentioned, also physical AI equipment are all happening. For the...

For the revenue, so as you know, we released our conversational AI engine in March last year. And since its release, as Tony just talked about, its usage has more than doubled every single quarter. Its revenue contribution is still relatively low at the moment because a lot of customers are in POC stage. So the revenue growth lagged behind usage growth. But we do see a healthy pipeline of customers. So based on that, we expect to see revenue contribution from conversational AI to ramp up throughout this year. And our goal is for conversational AI to approach 5% of ARR contribution towards the end of this year. Tony, do you want to talk more about the use cases?

Sure. We've been talking about the conversational AI use cases before. It's still focused on customer service, companionship devices, education and interactive. We're now also focusing closely with global customers from U.S., Europe, South America, Asia Pacific region and inside China to implement our solution in a couple of customer service scenarios such as outbound marketing, marketing, cooling market cooling, appointment scheduling, order confirmation and so on. For companionship devices, a number of device shipments and activations are promising. And more importantly, our solution is becoming the de facto industry standard or best practice, we expect to see more customers launch their products throughout the year, including some based on well-known IP with the potential to become a global hit.

Next, we have [ Ri Han ] from CICC.

This is [ Ri Han ] from CICC. Can you hear me?

Yes.

Congrats on another solid quarter, especially with revenue coming above the high end of guidance. My first question is on gross margin. We noticed that gross margin declined slightly year-over-year to 65%, just as Jingbo said. Can you walk us through the key factors behind that decline? Should we view this as mix driven and temporary or more structural given AI ramp-up costs? How should we think about margin trend into 2026? My second question is on profitability for 2026. After achieving full year GAAP profitability in 2025, how do you think about operating income and operating margin next year? What are the main drivers that could support further margin expansion? Yes, that's it.

Sure. So I will talk about gross margin first. As I said, the slight decrease in gross margin was mainly due to the impact of conversational AI-related products because some of the customers are still in early pilot stage, and we don't charge customers for pilot POC experimentations. So revenue ramp-up lags behind usage growth. And also the, ConvoAI infrastructure is currently running at a very small scale, subscale levels. So that's why the -- if we only look at the margin of that particular product, it's very, very low at the moment, and that drags down the overall margin slightly. We do expect this to improve as usage and revenue ramp up, but it might take a couple of quarters to fully recover. So when we kind of do our internal forecast and give guidance on 2026 profitability, we are essentially forecasting flat gross margins compared to Q4 2025. So in terms of operating income -- so we expect operating income to improve significantly -- further improve significantly compared to 2025. It's driven by revenue growth, improved operating leverage. And our goal is to achieve GAAP operating profit in Q4 2026. Please note, this is after taking into consideration about $6 million of share-based compensation in 2026 and also nearly $4 million of amortization related to the headquarters project. So after these 2 items, we expect to significantly improve the operating income.

Next question comes from Zongxuan Yang from CITIC Securities.

Also congrats on the last quarter's performance. So I just have one question follow the first question from Bank of America regarding to AI. So we can see that the stock price for -- especially for those U.S. software companies have fluctuated recently. So like the market has a lot of concern about AI software. So I just want to know that how do you think of the -- maybe like the infrastructure and the cybersecurity company position on this AI era? And also maybe like other company's leader on this issue and the other company's position in the AI.

Yes. So SaaS service strengthened because of the drastic cost reduction in building UI/UX and application layer logic of software by web coding or AI coding. However, the system level or infrastructure level core services, including the PaaS and API services we provided are actually facing increasing demand from web coding. And the need for an even higher quality and scalable API services are actually much needed than before. And it's hard to imagine those hardcore low-level or system-level infrastructure technology would be easily disrupted by web coding or just AI coding. So as the demand for real-time multimodal interactions with AI engine growth, especially in this sector, we will largely benefit from the global trend of AI development. Plus who is not an AI company these days? If you're not, you're outdated. We, as a company, is the first one to introduce AI technology into RTE sector even before the generative AI era. And we are the first one to launch AIGC RTE SDK, first one to demo full duplex conversational AI. We provide the best AI turnkey and AI models in the world, and we are one of the few to launch the real-time API with OpenAI. So we are heavily invested in the AI development and AI infra front. We have also positioned the company as a leading innovator in generative AI era, and we are committed to be one in the coming decades.

Yes. Actually, I want to add like layman's perspective from a non-technical person. So now if you ask a coding agent, a cloud code or open cloud to write an app with real-time engagement features like write a meeting app for your own company or your team, it's most likely actually if you try, you'll see that the agent will call API to build this instead of trying to rebuild the entire real-time communication infra and the fundamental code again. So actually, will be used by the coding agents rather than be replaced by coding agents.

Our last question comes from Xu Yue from China Securities Co.

Congrats on the solid results. So I have two questions. The first question is regarding the gross profit margin. We see that this quarter, the gross profit margin is kind of dragged down by AI investment. So how do we forecast for future AI product margin trend? And the second question is, how do you view the growth trajectory for the coming quarters for AI toys and customer service? And have we seen the inflection point of adoption in these verticals?

Sure. So again, in terms of gross margin, we actually think the conversational AI product has great margin potential based on our own internal estimate. If we operate at normal levels at a good utilization rate and a decent scale, the gross margin of the AI product should be at least similar, if not higher, than the current core RTE products. So the current relatively low margin is really due to the suboptimal scale and also a lot of POC ongoing. So we don't have like a fundamental concern on the margin. It will just take some time to ramp up to the target levels. So that's on gross margin. In terms of the AI product adoption, as Tony talked about, right, we do expect the adoption to grow throughout this year. And you talked about the performance and cost, right? I think it's not just us in terms of performance, but for all the players globally in conversational AI, there are a lot of new start-ups focused on this area. And I think we face the problem, same problem. The technology itself is fundamentally ready. But from an engineering perspective, there remains a lot of corner cases and use case adoption to be done. This will take time. But it's really just a question of time, not a question of whether it will work or not. So we think we made a lot of progress already in 2025. That's why in several use cases like companion card, like outbound calling. In several use cases, it's already working, and we'll solve more problems this year. And we do think it's not like one single turning point, but we will solve use case by use case and gradually penetrate into more verticals. And on the cost side, as we all know, cost is coming down steadily on all the models, so we do not think the cost will be a blocking factor.

Thank you. There are no further questions. That concludes today's Q&A session. Thank you, everybody, for attending the company's call today. As a reminder, the recording in the earnings release will be available on the company's website at investor.agora.io. And if there's any other questions, please feel free to e-mail the company. Thank you.

Thank you. Bye-bye.