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Highlights:

  • Appen's Q2 FY25 revenue falls 6% YoY to AUD 51.9 million
  • Appen reports EBITDA loss of AUD 2.2 million in H1 FY25 despite China growth
  • Appen's FY25 revenue now expected at lower end of AUD 235–AUD 260 million guidance

Shares in Appen Ltd (ASX:APX) dropped sharply on Wednesday after the artificial intelligence (AI) data company released its half-year update. The stock fell 15% in morning trade to 93 cents, reflecting investor concerns over revenue declines and continued challenges in key markets. Appen reported group revenue of AUD 51.9 million for the second quarter of FY25, representing a 6% decline compared to the prior corresponding period. While the company experienced significant revenue expansion in China, that growth was insufficient to offset ongoing difficulties in its US operations.

The company's China division recorded a 77% increase in revenue year-on-year for the quarter. This business unit closed Q2 with an annualised revenue run-rate exceeding AUD 100 million and delivered underlying EBITDA profitability of AUD 2.1 million for the quarter and AUD 2.9 million for the first half. The China operation has become a key contributor amid broader group underperformance. In contrast, the remainder of Appen’s business continues to be affected by volatility in the US AI market. Management cited the uncertain timing around the resumption of large language model (LLM) projects as a key headwind. These dynamics contributed to a group-wide underlying EBITDA loss of AUD 0.6 million in Q2 and a AUD 2.2 million loss for H1FY25.

Appen is aiming to reduce costs through operational streamlining. Its near-term strategy which focuses on automation and technology-driven efficiency  has identified approximately AUD 10 million in incremental annualised cost savings. However, those efforts have yet to restore overall profitability.

CEO Ryan Kolln said that the company remains focused on improving technical execution and delivery capabilities, but acknowledged that short-term volatility is continuing to affect parts of the business outside China. He added that while near-term market uncertainty remains, the company sees opportunity in longer-term AI development trends, where data quality will be a key differentiator. Nonetheless, the statement stopped short of providing any updated EBITDA outlook and confirmed that full-year FY25 revenue is now tracking towards the lower end of the previously guided AUD 235 million to AUD 260 million range.

Appen's share price has now declined by 63% over the past six months.