Weave (WEAV) Q4 2025 earnings review
Profitability Scales, But Retention Leaks Persist
Weave delivered a solid Q4 on the surface, with 17% revenue growth and record gross margins (73.3%). The pivot to profitability is working: the company generated $12.9M in Free Cash Flow for FY25 and guided for significant operating income expansion in FY26 ($8-12M). However, the underlying engine shows cracks. Net Revenue Retention (NRR) has steadily eroded from 98% in Q1 to 93% in Q4, indicating that while Weave is landing new customers (Specialty Medical), it is struggling to retain or upsell existing cohorts at historical rates. FY26 revenue guidance implies a deceleration to ~15% growth.
🐂 Bull Case
Gross margins expanded 70 bps YoY to 73.3%, and Non-GAAP Operating Income hit $4.1M for the year (up from $0.8M). FY26 guidance suggests operating leverage will continue to scale significantly ($8-12M Op Income).
Free Cash Flow hit $12.9M in FY25, up from $10.4M in FY24. The business is now self-funding its growth initiatives, including AI investments, without burning cash.
🐻 Bear Case
NRR has dropped consecutively for three quarters: 98% (Q1) -> 96% (Q2) -> 94% (Q3) -> 93% (Q4). This suggests the 'leaky bucket' problem is worsening, possibly due to higher churn in newer verticals like Specialty Medical.
While Q4 growth was 17%, FY26 guidance ($273-276M) implies ~14.8% growth at the midpoint. The company is maturing into a mid-teens grower rather than a high-growth SaaS play.
⚖️ Verdict: ⚪
Neutral. Financial discipline is impressive, but the persistent slide in NRR (98% to 93% in one year) is a structural red flag. Until retention stabilizes, the upside from AI and new verticals is capped by churn.
Key Themes
Net Revenue Retention Slide
The most concerning metric in the report. NRR fell to 93% in Q4, completing a full year of decline from 98% in Q1. Management previously cited 'lapping price increases' and 'Specialty Medical mix' as reasons, but a 500bps drop in one year suggests structural pressure on upsells or retention. Without stabilizing this, customer acquisition costs effectively rise.
Expanding Profitability Profile
Weave has successfully transitioned from 'growth at all costs' to profitable growth. Non-GAAP Gross Margins reached a record 73.3% in Q4. More importantly, the company guided FY26 Non-GAAP Operating Income to $8.0-12.0M, effectively doubling or tripling FY25's $4.1M result. This operating leverage validates the vertical SaaS model.
Financing & Payments Integration
A new strategic partnership with CareCredit (Synchrony) integrates patient financing directly into Weave. This is a high-value unlock for dental and specialty medical practices, potentially driving higher payment volumes. This reinforces the 'Payments' growth vector, though specific payments revenue breakout remains undisclosed.
AI & Automation (TrueLark Integration)
The narrative remains heavily focused on 'Agentic AI' and the TrueLark integration. Weave launched 'Weave Insurance Eligibility' using RPA (Robotic Process Automation) to replace manual portal checks. While buzzword-heavy, this directly addresses the #1 administrative burden in healthcare practices (staffing/admin time), validating the product roadmap.
Hardware Margins Drag
While overall margins are up, Phone Hardware gross margin remains abysmal at roughly 1% (positive) in Q4, recovering from negative territory in prior quarters (-44.6% in 24Q4). While hardware is a loss-leader for software entry, it continues to dilute the overall margin profile.
Other KPIs
Added 4,628 net new locations in FY25. This represents steady unit growth, roughly +13% YoY, slightly lagging revenue growth, implying some pricing uplift or upsell helps bridge the gap.
Stable. Up $2.5M YoY. The business is consistently generating cash now, with $81.7M in liquidity (cash + short-term investments) on the balance sheet to fund further M&A or buybacks.
Operating leverage is visible here. While revenue grew 17%, Cost of Revenue grew only 14%, allowing gross margins to expand.
Guidance
Accelerating. The midpoint ($64.5M) implies ~18.8% YoY growth against Q1 2025 ($54.2M). This is an acceleration from the 17% seen in Q4 2025, suggesting confidence in the start of the year.
Decelerating. The midpoint ($274.5M) implies ~14.9% YoY growth. This is a slowdown from the 17.0% growth achieved in FY25. Management may be conservative, or NRR headwinds are impacting the long-term forecast.
Accelerating significantly. The midpoint ($10M) represents a ~143% increase over FY25's $4.1M. This confirms the 'profitable growth' thesis is the primary management objective.
Key Questions
Stabilizing NRR
NRR has deteriorated for four consecutive quarters to 93%. Is this the floor, or should investors expect further compression as the Specialty Medical mix (which historically has higher churn) grows?
Decelerating FY Guidance
Q1 guidance implies nearly 19% growth, yet the full year guide drops to ~15%. What specific headwinds are baked into the back half of 2026 to cause this deceleration?
AI Monetization Timeline
With the launch of Insurance Eligibility and TrueLark integration, when will these 'AI Agent' products contribute materially to ARPU to help reverse the NRR slide?