AvePoint (AVPT) Q3 2026 earnings review
AvePoint subscription sales grow 27%, but heavier spending cuts profit
AvePoint, which makes software to secure and govern cloud data, signed a record amount of new subscription contracts while heavier sales spending cut into its profit margin. Annual recurring revenue (ARR), the yearly value of active subscriptions, grew 27% to $495 million, and chief executive Tianyi Jiang raised the full-year outlook after two currency-driven cuts earlier this year. Total revenue grew slower at 19% because upfront license sales shrank, while operating profit excluding one-offs fell 9%.
| Annual recurring revenue (ARR) | $495.1M +27% from a year ago (+25% ex-FX) |
|---|---|
| Total revenue | $131.1M +19% from a year ago |
| Operating margin, excluding one-offs | 16.8% 22.0% a year ago |
| Full-year ARR and revenue outlook | Raised ~$2M middle of the range: 26% ARR growth |
⚖️ Verdict: 🟢 Bullish
The story got better because subscription growth sped up for a second quarter and customer retention improved by one percentage point on both of the company's loyalty measures. Gross retention reached the company's 90% goal, easing concern about customer cancellations, and the fourth-quarter outlook calls for revenue growth to rebound to 22%. One caution: operating margin excluding one-offs dropped 5 percentage points as sales spending rose and services lost money, leaving a wider climb to its 2029 profit target.
The question now is whether the new AvePoint Trust Platform will make existing customers spend much more or mostly help win new accounts while Microsoft bundles rival tools. If existing customers pay up for AI governance, net retention will climb toward the 115% target; if not, growth stays reliant on heavy sales spending to win new customers. Fourth-quarter retention rates and initial 2027 margin plans will tell.
🐂 Bull Case
New Customer Wins Keep Subscription Growth Near 27%
AvePoint sells software that helps companies secure and manage their cloud data. Its main forward measure is annual recurring revenue (ARR), the yearly value of active subscription contracts. Chief executive Tianyi Jiang said "broad-based customer demand drove record net new ARR and an acceleration in total ARR growth for the second straight quarter".
- Total ARR: $495.1 million, up 27% from a year ago (25% excluding currency swings)
- New ARR added in Q3: $30.0 million by our math, up 34% from $22.4 million a year ago
- Cloud subscription (SaaS) revenue: $105.5 million, up 26% from a year ago
- Term license and support revenue: $8.9 million, down 26% from a year ago
Total revenue grew slower at 19% because term license sales shrank against a high year-ago comparison. Term licenses record part of their revenue upfront, so when customers choose cloud subscriptions instead, reported revenue lags contract growth. That is why the fourth-quarter outlook calls for total revenue growth to speed back up to 22%.
What to watch: fourth-quarter new ARR against the $31.7 million implied by the full-year outlook. Beating that figure would keep AvePoint ahead of the ~24% yearly pace needed for its $1 billion 2029 goal.
Customer Retention Improved by One Point Across Both Measures
AvePoint tracks two customer loyalty measures over a rolling twelve months. Gross retention measures how much contract value the company keeps before upgrades, and net retention adds extra spending by existing customers. For two years, gross retention sat at 88% to 89% and net retention stayed between 110% and 112%, below the company's long-term goals of 90% and 115%.
In the third quarter, gross retention rose one percentage point to 90%, both as reported and after removing currency effects. Net retention also rose one point to 112% as reported and 111% excluding currency swings. Hitting the 90% gross retention mark eases concern about customer cancellations, but one point of expansion does not yet prove that new AI tools are lifting existing account spend toward 115%.
What to watch: net retention in the fourth quarter, when the largest enterprise renewals take place. A reading of 112% or higher excluding currency swings would show existing customers are paying more for AI governance bundles.
Buybacks Cut the Share Count by Nearly 5%
The New Jersey software group has stepped up share buybacks this year, using cash raised from warrant exercises in 2025 and ongoing operating cash flow. During the first nine months of 2026, AvePoint spent $141.3 million to repurchase its own stock, up from $27.3 million in the same period last year. By our math, that includes $30.9 million spent during the third quarter alone.
Those purchases more than offset employee stock grants, so the diluted share count fell 4.7% from a year ago to 222.0 million shares. Even after the buybacks, the company ended September with $418.3 million in cash and short-term investments and no debt.
What to watch: fourth-quarter share repurchases in the annual cash flow statement. Continued buying at this pace will show whether management still favors shrinking the share count over larger acquisitions.
Positives this quarter didn't test
Two standing growth drivers got no new numbers in the earnings release because the company usually reports them on the conference call or in its quarterly filing.
- Large enterprise customers: accounts paying over $100,000 a year reached 911 in the second quarter; the third-quarter count on the call will show if large-deal momentum held.
- Channel partner share of recurring revenue: partners generated 59% of recurring revenue in the first half; the next update will show if managed service providers kept driving new customer wins.
🐻 Bear Case
Sales and Service Costs Cut Five Points From Operating Margin
Jiang highlighted "further GAAP operating margin expansion", as standard operating margin rose 1.3 percentage points from a year ago to 8.7%. That gain came from lower stock-based compensation and because last year's third quarter included $4.9 million of one-off Singapore listing and fund-closure costs. Excluding one-offs and stock grants, operating profit fell 8.9% to $22.0 million and the operating margin dropped 5.2 percentage points to 16.8%.
- Sales and marketing, excluding one-offs: 33.7% of revenue, up 3.8 percentage points from 29.9% a year ago
- Gross margin, excluding one-offs: 72.8%, down 2.3 percentage points from 75.1% a year ago
- Services gross profit: a loss of $0.3 million, as service delivery costs ($17.0 million) beat service revenue ($16.7 million)
- General and administrative, excluding one-offs: 11.4% of revenue, down 1.0 percentage point from a year ago
This matters because AvePoint's 2029 plan calls for an 80% gross margin and a 27.5% operating margin, with sales and marketing down at 30% of revenue. Right now both gross margin and sales costs are moving the wrong way as the company spends heavily to chase AI deals.
What to watch: the initial 2027 operating margin outlook in next quarter's release. A forecast below 18% would mean elevated sales spending is lasting beyond the 2026 investment push.
AI Governance Expands While Product Revenue Stays Hidden
Bulls view AI agent management as AvePoint's biggest growth driver, while bears worry Microsoft will bundle rival tools directly into its own enterprise software. This quarter AvePoint unveiled the AvePoint Trust Platform to govern AI agents and models "independent of any single cloud, model, or AI provider". Jiang said the update will "extend governance beyond data and agents to the models, MCP servers, and AI skills that enterprises are deploying faster than they can govern", including Anthropic Claude.
Looking beyond Microsoft helps AvePoint defend its role across multiple clouds, and research firm Gartner named the company in its first Magic Quadrant for AI Agent Management Platforms. However, AvePoint still gave no revenue, contract value, or customer counts for its AI governance tools, and net retention moved up only one point. Without sales figures, investors cannot tell if customers pay extra for these features.
What to watch: annual recurring revenue share by product suite in the fourth-quarter report. If the Control suite's share does not rise from last year's 26%, the new AI features are not yet driving outsized spending.
Risks this quarter didn't answer
Two standing financial risks received no new numbers in the third-quarter earnings release.
- Foreign currency exposure: overseas markets bring in about 60% of revenue and exchange rates forced two outlook cuts earlier in 2026; fourth-quarter results will show if currency swings stayed calm.
- Cloud hosting purchase commitment: a five-year $340 million agreement requires $290 million of spending in 2030; the quarterly filing's commitment footnote will show how much of the minimum has been used.
👓 Other Themes
New Strategy Chief and SmallCap 600 Index Addition
AvePoint hired Ali Rohani as Chief Strategy and Customer Officer to "deepen customer value and accelerate growth as enterprises scale AI with trust". During the quarter, the company also joined the S&P SmallCap 600 Index, a benchmark for profitable US small-cap companies. Neither announcement changes this year's financial forecast, though Rohani's appointment aligns with management's push to lift customer expansion rates.
💲 Other KPIs
Total deferred revenue — cash customers have paid upfront for software and services not yet delivered — reached $213.6 million by our math, up 22.6% from $174.2 million a year ago. That follows 25% growth in the second quarter and tracks ahead of 19.5% reported revenue growth, supporting the fourth-quarter revenue pickup.
AvePoint generated $71.6 million of operating cash flow over the first nine months, up 28.8% from a year ago. By our math, subtracting six-month figures and capital spending leaves third-quarter free cash flow of $29.3 million (a 22.4% margin), down 13.6% from last year's record third-quarter collection.
Standard net income rose 37.8% from a year ago to $17.9 million, or $0.08 per diluted share. The result included a $1.1 million one-time tax benefit from releasing a tax reserve, after a $19.9 million tax benefit in the second quarter. Excluding that tax item, net profit was $16.8 million by our math.
🔮 Guidance
Raised. The middle of the range moved up $1.7 million to $526.8 million, or 26% growth from last year. After two cuts earlier in the year due to currency swings (-$1.7M in Q1, -$1.3M in Q2), this raise puts the target back near the original $528.1 million midpoint. By our math, it leaves $31.7 million of new ARR for Q4, up 18% from a year ago.
Raised. Management lifted the middle of the full-year range by $1.8 million to $512.3 million (22% growth), passing through "the respective third quarter outperformance relative to guidance" of $1.9 million. Earlier currency-driven moves shifted the midpoint by -$1.0M in Q1 and -$1.9M in Q2. Excluding currency effects, the full-year growth plan holds steady at 21%.
Raised. The middle of the range rose $0.6 million to $88.0 million, passing through the third-quarter beat. Across the year, the midpoint moved -$1.6M in Q1, -$5.6M in Q2 on higher second-half spending plans, and +$0.6M now. At the midpoint, full-year operating margin excluding one-offs is 17.2%, down from 18.9% in 2025.
New. The plan calls for 22% growth at the $139.4 million middle of the range, both as reported and in constant currency, speeding up from 19.5% in the third quarter as the tough term-license comparison passes. AvePoint has beaten its quarterly revenue midpoint for seven straight quarters; if the 1.7% average beat holds, Q4 revenue would reach $141.8 million by our math.
New. At the $25.2 million middle of the range, operating profit excluding one-offs rises 10.2% from $22.9 million a year ago. By our math, that implies an 18.1% operating margin in the fourth quarter, up from 16.8% in the third quarter as revenue scales, but still 1.9 percentage points below last year's fourth quarter.
❓ Key Questions
How much recurring revenue comes from AI agent governance?
AvePoint launched the Trust Platform and expanded observability to Anthropic Claude and MCP servers, yet still provides no customer counts or revenue for Agent Pulse. Investors need to know how much of the 27% recurring revenue growth comes from paid AI add-ons.
Why did services gross margin turn negative this quarter?
Service delivery costs ($17.0 million) exceeded service revenue ($16.7 million) in the third quarter, helping pull gross margin down 2.3 percentage points to 72.8%. Management has a long-term gross margin goal of 80% and has not explained when service margins will recover.
Will sales spending stay near 34% of revenue in 2027?
Sales and marketing expenses excluding one-offs jumped 3.8 percentage points of revenue from a year ago to 33.7%, cutting the operating margin by 5.2 points. Investors need to know if this higher spending continues into 2027 or drops back toward the 30% target.
Did large customer counts and channel mix keep rising?
The earnings release did not include the quarterly count of customers paying over $100,000 (which stood at 911 in Q2) or the share of recurring revenue from channel partners. Both numbers are needed to check enterprise and partner momentum.