10-Q: ON24 Q3 2025: Revenue Declines Amid AI Innovation & Cost Cuts

ON24 reports a 5% revenue decrease in Q3 2025, alongside an improved net loss driven by aggressive cost management and new AI-powered product launches.

Summary

• Total revenue for the three months ended September 30, 2025, decreased by 5% to $34.6 million, down from $36.3 million in the same period of 2024.
• Net loss significantly improved to $6.4 million for Q3 2025, compared to a net loss of $11.4 million in Q3 2024.
• For the nine months ended September 30, 2025, total revenue decreased by 6% to $104.7 million, from $111.4 million in the prior year.
• Net loss for the nine months ended September 30, 2025, improved to $22.4 million, compared to $33.3 million in the same period of 2024.
• The number of customers declined to 1,521 as of September 30, 2025, from 1,645 at December 31, 2024, and 1,666 at September 30, 2024.
• Annual Recurring Revenue (ARR) decreased to $124.5 million as of September 30, 2025, from $129.7 million at December 31, 2024, and $132.2 million at September 30, 2024.
• The company launched several new AI-powered products in 2025, including ON24 Lumina (March), ON24 IQ Intelligent agents (May), ON24 Translate (August), and ON24 AI Propel+ (September).
• Workforce reductions were implemented in the first nine months of 2025 as part of ongoing cost management efforts, with additional restructuring costs of $0.5 million to $0.8 million expected in Q4 2025.
• Cash, cash equivalents, and marketable securities totaled $175.2 million as of September 30, 2025.
• A $50 million share repurchase program was approved in May 2025, with $11.4 million repurchased as of September 30, 2025, and $38.6 million remaining available.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative. While the company successfully reduced its net loss through aggressive cost management and is actively innovating with new AI products, the core business metrics (revenue, customer count, ARR) are consistently declining. This indicates underlying challenges in growth and market penetration, despite improved efficiency. The ongoing legal proceedings and activist investor engagement add further uncertainty.

Positives

• Net loss significantly improved by $5.0 million in Q3 2025 and $10.9 million for the nine months ended September 30, 2025, compared to the respective prior periods.
• Gross margin increased to 75% for both the three and nine months ended September 30, 2025, up from 74% in the same periods of 2024, reflecting cost reductions and efficiency gains.
• Operating expenses decreased across all categories (Sales & Marketing, R&D, G&A) for both the three and nine months ended September 30, 2025, due to active cost management and headcount reductions.
• Net cash provided by operating activities increased to $8.5 million for the nine months ended September 30, 2025, up from $3.8 million in the same period of 2024.
• The company launched several new AI-powered products in 2025, including ON24 Lumina, ON24 IQ Intelligent agents, ON24 Translate, and ON24 AI Propel+, demonstrating continued innovation.
• A $50 million share repurchase program was approved in May 2025, with $38.6 million remaining available as of September 30, 2025, indicating a commitment to returning capital to shareholders.

Negatives

• Total revenue decreased by 5% in Q3 2025 and 6% for the nine months ended September 30, 2025, indicating a contraction in the core business.
• Subscription and other platform revenue, the primary revenue source, decreased by 6% in both Q3 and the nine months ended September 30, 2025.
• The total number of customers declined to 1,521 as of September 30, 2025, from 1,645 at December 31, 2024, primarily due to lower new customer acquisitions.
• Annual Recurring Revenue (ARR) decreased to $124.5 million as of September 30, 2025, from $129.7 million at December 31, 2024, driven by customer churn and fewer contract expansions.
• The number of customers contributing $100,000 or more to ARR decreased to 294 as of September 30, 2025, from 305 at December 31, 2024, indicating reduced spend from larger organizations.
• The company continues to de-emphasize its Virtual Conference product due to less demand, contributing to overall revenue decline.
• An ongoing consolidated putative class action lawsuit related to the IPO registration statement and prospectus remains, with an appeal currently ongoing after a motion to dismiss was granted with prejudice.

Risks

• Inability to grow revenue in future periods, following recent declines due to reduced customer budgets, increased emphasis on in-person marketing, and competitive dynamics.
• Significant fluctuations in quarterly results due to factors like customer retention, new customer acquisition, sales cycle length, seasonality, and general economic conditions.
• Failure to attract new customers or retain, expand usage, and upsell products to existing customers, leading to potential subscription non-renewals.
• Intense competition from various companies offering meeting tools, webinar software, virtual event software, and marketing automation, many with greater resources and potentially lower prices.
• Adverse or weakened general economic, political, and market conditions, including inflation and geopolitical disputes (e.g., Ukraine-Russia war, Middle East conflict), which may reduce spending on sales and marketing technology.
• Decline in demand for solutions or live engagement technologies in general, potentially due to shifts back to in-person events or new competing technologies.
• Continued history of net losses and potential for increased expenses, which could prevent achieving or maintaining profitability.
• Failure to effectively develop and expand marketing and sales capabilities, including recruiting and retaining qualified sales professionals.
• Issues with the use of AI in the platform, including legal uncertainties, flawed algorithms, insufficient datasets, or generated content containing copyrighted material, leading to reputational harm or liability.
• Heavy reliance on third-party providers for computing, storage, processing, and application integration, with risks of service disruptions, outages, or unfavorable changes in terms of service.
• Cybersecurity-related attacks, significant data breaches, or disruptions of information technology systems, potentially leading to unauthorized access, data loss, regulatory actions, litigation, and reputational damage.
• Interruptions, delays, or outages in service from hosting facilities, which could impair the delivery and functionality of solutions.
• Inability to respond to rapid technological changes, extend the platform, or develop new features in a timely and cost-effective manner, especially with reduced R&D investment.
• Long and unpredictable sales cycles with Enterprise customers, making revenue recognition difficult to predict.
• Adverse impact from market behavior as COVID-19 has subsided, leading to reduced demand for the platform due to a shift to in-person marketing.
• Increased business and economic risks from significant international operations, including compliance with local laws, geopolitical disputes, and foreign exchange rate fluctuations.
• Revenue recognition over subscription terms means increases or decreases in new sales are not immediately reflected in results of operations.
• Real or perceived material defects or errors in the platform, or issues with third-party hardware/software, could harm the business and lead to substantial costs or legal liability.
• Dependence on the interoperability of the platform across devices, operating systems, and third-party applications that are not controlled by the company.
• Failure to maintain, enhance, and effectively promote a strong brand, especially with the increasing use of AI-powered search engines and chatbots.
• Inaccurate estimates of market opportunity and forecasts of market growth, or failure to grow at a similar rate even if the market expands.
• Loss of Chief Executive Officer or other members of the senior management team.
• Failure to attract and retain additional qualified personnel, particularly in competitive areas like software development and sales.
• Inability to successfully plan for future growth, leading to strain on management, operational, and financial resources.
• Failure to maintain an effective system of disclosure controls and internal control over financial reporting, potentially impairing the ability to produce timely and accurate financial statements.
• Failure to offer high-quality support, which could harm customer relationships and business reputation.
• Disruption by catastrophic events, such as natural disasters, power loss, or cyberattacks, particularly given the concentration of operations in the San Francisco Bay Area.
• Actual or perceived failure to comply with evolving privacy laws (e.g., GDPR, CCPA), leading to regulatory enforcement, litigation, fines, and reputational harm.
• Subject to export and import controls, customs, sanctions, embargo, and anti-boycott laws and regulations, which could impair international competitiveness and lead to liability.
• Subject to various U.S. and non-U.S. laws and regulations prohibiting corruption, bribery, and other illegal activities (e.g., FCPA), with potential for substantial fines and reputational harm.
• Use of open source software in the platform, which may subject the company to litigation or other actions related to ownership or license terms.
• Allegations or determinations that technology infringes the intellectual property rights of others, leading to costly litigation, redesigns, or injunctions.
• Failure to protect intellectual property rights and proprietary information, diminishing brand and other intangible assets.
• Adverse effects on reported results of operations due to changes in accounting principles generally accepted in the United States.
• Acquisitions of other companies, products, and technologies could require significant management attention, disrupt the business, or dilute stockholder value.
• Need for additional capital, which may not be available on favorable terms or at all, potentially leading to dilution or increased debt.
• Covenants in the revolving credit facility may restrict operations, and failure to comply could adversely affect the business.
• Incurring indebtedness could adversely affect the business and limit flexibility.
• Adverse effects on results of operations from substantial fluctuations in currency exchange rates.
• Limitations on the ability to use net operating loss carryforwards and certain other tax attributes due to ownership changes or expiration.
• Potential liabilities on past sales for taxes, surcharges, and fees due to uncertainty in nexus rules for online transactions.
• Exposure to greater than anticipated tax liabilities due to changes in tax laws, interpretations, or examinations.
• Share repurchases may not enhance long-term stockholder value, may increase stock price volatility, and will diminish cash reserves.
• The trading price of common stock may be volatile or decline steeply and suddenly regardless of operating performance.
• Concentration of stock ownership presents risks, including lack of liquidity and limitations on individual stockholder's ability to influence corporate matters.
• Substantial future sales of shares by existing stockholders, or the perception of such sales, could cause the market price to decline.
• Provisions in organizational documents and regulatory rules may delay or prevent acquisition by a third party.
• Exclusive forum provisions in the Certificate of Incorporation may discourage lawsuits against directors and officers.
• Decline in common stock market price and trading volume if securities or industry analysts publish inaccurate or unfavorable research or if operating results do not meet expectations.
• Actions of activist stockholders could impact business strategies and adversely affect results of operations, financial condition, or share price.
• Ongoing costs and management demands associated with being a public company and complying with related laws and regulations.
• Reduced disclosure requirements as an emerging growth company may make common stock less attractive to investors.

Future Outlook

The company expects gross margin for the full year of 2025 to be relatively consistent with 2024. Sales and marketing expense for the full year 2025 is anticipated to decrease in absolute dollars compared to 2024, reflecting tightened spending in the current macroeconomic environment. Research and development expense is expected to fluctuate in absolute dollars for the full year 2025 as investments focus on platform development and AI capabilities. General and administrative expense is projected to decrease moderately in absolute dollars for the full year 2025 due to continued cost management. Additional restructuring costs of $0.5 million to $0.8 million are expected in the fourth quarter of 2025. The company believes existing cash, cash equivalents, and marketable securities will be sufficient to meet needs for at least the next 12 months, but may require additional financing for strategic transactions or if capital requirements increase.

Management Comments

• We continue to see less demand for our Virtual Conference product and we have deemphasized this product.
• We have seen a decrease in our customer count in recent years, and our net customers decreased by 45 in the third quarter of 2025 compared to the second quarter of 2025, primarily due to lower new customer acquisitions during the period.
• We believe the change in our net customer numbers reflects the current budget pressures in marketing departments in some organizations, our platform is designed with a long-term view toward our customer relationships and to grow with customers as their needs expand.
• The decrease in ARR from the second quarter of 2025 was primarily driven by customer churn, fewer contract expansions among existing customers, and lower new customer acquisitions during the period.
• The decrease in ARR from December 31, 2024, was primarily due to lower new customer acquisitions, partially offset by decreased downsell activity, reflecting improved customer retention.
• The decrease in $100k Customers from June 30, 2025, and December 31, 2024, was primarily driven by customers reducing their spend with us below the $100K threshold and a lower number of net new customers.
• The quarter to date increases in professional services revenue were primarily driven by stronger demand for our production services supporting live events on our platform.
• The year to date decreases in professional services revenue primarily reflects more customers shifting toward self-service instead of utilizing our core professional services offerings, along with a decline in total customer count that further reduced demand.
• Cost of revenue decreased primarily reflecting the result of our active cost management and headcount reduction associated with our restructuring activities.
• While we continued to invest in our cloud infrastructure capabilities to support our ongoing business needs, we also made cost reductions across our business to enhance efficiency.
• We have been applying a disciplined approach to focus our investments on research and development areas that we believe offer the greatest opportunities, including investments in our generative AI capabilities such as ACE, ON24 IQ and ON24 AI Propel+, as we expand our platform and bring new products to the market.
• We expect our capital investment to continue in the future.

Industry Context

The company operates in the cloud-based intelligent engagement platform market, which is characterized by rapid technological change and intense competition. The shift towards digital engagement, particularly in B2B marketing, continues to be a key trend, but the company notes a return to in-person marketing activities impacting demand for its virtual conference product. The industry is also seeing significant investment in AI-powered capabilities, which ON24 is actively pursuing with new product launches like ACE, Lumina, IQ, Translate, and AI Propel+. Macroeconomic conditions, including budget pressures in marketing departments, are affecting customer acquisition and retention across the industry. The company's declining customer count and ARR suggest it is facing headwinds in this competitive and evolving landscape, despite its focus on innovation and cost efficiency.

Corporate Governance

Legal Proceedings

• An ongoing consolidated putative class action lawsuit, 'In re ON24, Inc. Securities Litigation,' filed in November 2021, names the company, its CEO, CFO, certain current and former board members, and IPO underwriters as defendants.
• The complaint alleges claims under Sections 11 and 15 of the Securities Act of 1933, asserting that the IPO registration statement and prospectus contained untrue statements or omitted material facts about ON24's growth and customer base.
• The district court granted the defendants' motion to dismiss with prejudice in March 2024, but the plaintiff has filed a notice of appeal, and the appeal is currently ongoing.
• The company believes the allegations in the amended complaint are without merit and is unable to reasonably estimate a possible loss or range of possible loss at this early stage, thus no accrual has been recorded.

Related Party Transactions

• The company incurred $0.7 million in Q3 2025 and $2.1 million for the nine months ended September 30, 2025, in engineering and quality assurance costs from a third-party vendor.
• The chief executive officer of this third-party vendor is an immediate family member of the company's chief technology officer.
• As of September 30, 2025, $0.4 million was recorded in accounts payable and accrued liability for the amount owed to this vendor.

Stakeholder Impact

• Shareholders: Face declining revenue and customer metrics, but also benefit from improved net loss due to cost management and an ongoing share repurchase program. The ongoing legal appeal and activist shareholder engagement introduce uncertainty.
• Employees: Affected by workforce reductions as part of cost-cutting measures, which could impact morale and retention. New hires are critical for growth but competition for talent is intense.
• Customers: Experience new AI-powered product enhancements, but also face potential impacts from declining customer count and reduced demand for certain products like Virtual Conference. The company's focus on retention and expansion aims to improve customer value.
• Creditors: The company maintains a revolving credit facility with Comerica Bank, with no outstanding draws as of September 30, 2025, and sufficient cash and marketable securities, indicating a stable short-term credit position. However, covenants could be triggered if deposits fall below $100 million and borrowing exceeds $5 million.
• Suppliers/Vendors: The company's cost management efforts and potential shifts in technology infrastructure could impact vendor relationships and contract volumes.

Next Steps

• Incur additional restructuring costs of $0.5 million to $0.8 million in the fourth quarter of 2025 related to ongoing cost reduction efforts.
• Continue to invest in research and development, particularly in generative AI capabilities like ACE, ON24 IQ, and ON24 AI Propel+, to expand the platform and bring new products to market.
• Focus on acquiring new customers through specialized sales teams (Enterprise and Commercial segments).
• Strive to retain and expand usage among existing customers through new users, new products, and upsell/cross-sell opportunities.
• Continue to manage costs actively across sales and marketing, research and development, and general and administrative expenses.
• Monitor the ongoing appeal in the consolidated putative class action lawsuit.
• Potentially pursue additional share repurchases under the $50 million 2025 Repurchase Program, with $38.6 million remaining available.
• Evaluate financing opportunities for potential strategic transactions or future capital requirements.

Key Dates

Recommendation

The company presents a mixed financial picture. While net losses have significantly improved due to effective cost management and workforce reductions, core business metrics like total revenue, customer count, and Annual Recurring Revenue (ARR) are in decline. The strategic focus on AI-powered product innovation is a positive long-term signal, but its impact on reversing current revenue trends is yet to be seen. The ongoing legal proceedings and activist shareholder involvement add a layer of uncertainty. For a seasoned investor, the current situation suggests a 'hold' position. The company is taking steps to improve profitability and innovate, which could lead to a turnaround, but the shrinking customer base and revenue indicate fundamental challenges that need to be overcome before a 'buy' recommendation is warranted. Conversely, the improved net loss and strong cash position mitigate immediate 'sell' pressure, allowing time for the AI strategy to potentially bear fruit.

Keywords

Cloud-based platform, Intelligent engagement, AI-powered analytics, Digital experience products, Webinar software, Virtual event software, Marketing technology, SaaS, Customer engagement, B2B marketing, Revenue decline, Net loss improvement, Cost management, Share repurchase, SEC filing, 10-Q, ON24