Appian Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Q2 results exceeded guidance: Cloud subscription revenue rose 21% year over year to $106.9 million, total revenue increased 17% to $170.6 million, and adjusted EBITDA reached $8.1 million versus guidance for a loss.
  • Positive Sentiment: Appian cited strong momentum from its upmarket strategy and AI offerings, with most seven-figure software deals including AI license tiers and a 25% AI upcharge. Management said AI is improving pipeline, bookings, pricing, and the value proposition across new and existing industries.
  • Positive Sentiment: The company raised its full-year 2025 outlook to $429–$433 million in cloud subscription revenue, $695–$703 million in total revenue, and $49–$55 million in adjusted EBITDA, supported by sales productivity gains and disciplined expense management.
  • Positive Sentiment: Appian reported strong first-half federal-sector performance and sees a significant opportunity in AI-enabled legacy application modernization. Management highlighted several large customer wins and expansions, including a healthcare agency expected to save $38 million annually.
  • Negative Sentiment: Cloud subscription net retention declined to 111% from 118% a year ago, which management attributed partly to prior downsells; subscription gross margin also fell to 87% from 89% in the prior quarter. The company is gradually shifting away from seat-based pricing toward consumption models as AI may reduce application user counts.
AI Generated. May Contain Errors.
Earnings Conference Call
Appian Q2 2026
00:00 / 00:00

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Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, VP of Investor Relations, Jack Andrews. Please go ahead.

Jack Andrews
Jack Andrews
VP of Investor Relations at Appian

Good morning. Thank you for joining us. Today we'll review Appian's second quarter 2025 financial results. With me are Matt Calkins, Chairman and Chief Executive Officer, and Serge Tanjga, Chief Financial Officer. After prepared remarks, we'll open the call for questions. During this call, we may make statements related to our business that are considered forward-looking. These include comments related to our financial results, trends and guidance for the third quarter and full year 2025, the benefits of our platform, industry and market trends, our go-to-market and growth strategy, our market opportunity and ability to expand our leadership position, our ability to maintain and upsell existing customers, and our ability to acquire new customers. These statements reflect our views only as of today and don't represent our views as of any subsequent date. We won't update these statements as a result of new information unless required by law.

Jack Andrews
Jack Andrews
VP of Investor Relations at Appian

Actual results may differ materially from expectations due to the risks and uncertainties described in our SEC filings. Additionally, non-GAAP financial measures will be discussed on this conference call. Reconciliations of GAAP to non-GAAP financial measures are provided in our earnings release. With that, I'd like to turn the call over to our CEO, Matt Calkins. Matt?

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Thanks, Jack. Thank you everyone for joining us today. In the second quarter of 2025, Appian's cloud subscriptions revenue grew 21% to $106.9 million. Subscriptions revenue grew 17% to $132.7 million. Total revenue grew 17% to $170.6 million. Adjusted EBITDA was $8.1 million. Last quarter, I shared two metrics that measure Appian's progress towards efficient growth. The first measures the productivity of our sales and marketing expenditure. In Q2, Appian's go-to-market productivity ratio was 3.3. You can see on slide four, that's our eighth sequential quarterly increase. I believe there's more upside ahead. Our weighted Rule of 40, which expresses our strategic priorities by weighting cloud subscriptions revenue growth twice as much as adjusted EBITDA margin, was also up slightly to 31. We're pleased with our second quarter results. I'll briefly mention two reasons why they are good. First, the internal factor, our upmarket strategy is working.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Powered by strong sales organization and execution, we're reaching the high-value transactions where Appian belongs. Second, the external factor, artificial intelligence. Our platform gives AI the things it needs, like data access, structure, guardrails, and tracking, so AI can solve complex business problems. AI is having a tangible effect on our financial results. We're getting higher prices because of AI. We add a 25% upcharge. We're in new deals because of AI and even new industries. I'll talk about that in a moment, but one more point about it. Whatever AI has done for our revenues, it's done more for our pipeline. Whatever it's done for our pipeline, it's done even more for our value proposition. I see this being a strong growth factor in the future. Speaking of growth, most of our seven-figure software deals signed this quarter were with our AI-inclusive license tiers.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

I'll share two examples of AI impact in big applications for big customers. First, an international grocery retailer and seven-figure ARR customer manages supply chain logistics and insurance claims with Appian. In Q2, it deployed Appian AI into an existing field dispatching application built on our platform. Before AI, drivers filed paperwork when they encountered a shipment issue, and back-office workers manually recorded discrepancies before correcting the information and reissuing a new dispatch order in their Appian application. Managing these expectations was slow, and there were sometimes human errors. Now, drivers upload their paperwork into Appian, and our AI automatically reconciles the information. It's faster and more accurate. Second, a top global asset management firm and longtime Appian customer has deployed our platform across its enterprise. It runs dozens of Appian applications.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

This quarter, it upgraded, purchased a seven-figure software deal to upgrade its licenses to deploy features like Appian AI into areas like its client investment operations. Appian AI agents will accelerate the processing of customer requests. Agents will classify forms and extract data related to opening, closing, and changing accounts. Turning to the U.S. public sector, our performance in the first half of this year has been strong. Our federal business outgrew the global business in cloud revenue, in new bookings, and in software pipeline. We have a reputation for driving efficiency in a sector which now prioritizes efficiency higher than ever before. We're seeing some good opportunities. A U.S. agency supporting national healthcare is unifying its enterprise, and in Q2, it chose Appian as the backbone to all virtual care operations and signed a seven-figure software deal.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Millions of patients will use our platform to engage with clinicians, coordinating virtual appointments, and sharing health data in real time. The agency expects to save $38 million per year using Appian. We've been using the phrase cautiously optimistic, in quotes, all year to describe our expectations for the federal business in the face of DOGE and other volatility, and I'll stick with that wording. Looking back, our cautious optimism has been validated by results. We see a large opportunity emerging in the modernization of legacy applications. We've been modernizing applications for a decade already, but the industry is about to transform as AI lowers the cost of extracting old applications and translating them into a new format. Businesses modernize applications to reduce cost, eliminate technical debt, improve functionality, and unify silos. Let's start with an example.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Aviva is a multinational insurer that consolidated 22 legacy call center systems into a single Appian application. They achieved 40% cost savings and the ability to service customers nine times faster. Now that AI makes it easy to achieve modernization, the industry is set to grow. Modernization was the hottest topic on my latest customer tour. Generally, customers brought it up themselves. This industry is going to be big because each major organization, every major organization around the world, supports hundreds or even thousands of applications at great expense. They would rather have fewer, and they wish they were better integrated, and they regret the data incongruity, and they worry about the long security perimeter, and they want to access them all in modern ways. Nobody likes silos.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Silos are just the way applications are laid down as IT departments solve one problem at a time, but it's not a good way to structure an enterprise. Appian brings three powerful advantages to the revitalized field of app modernization. First, our platform is a great destination for translated applications. It's full of powerful pre-written functionality. It's secure, reliable, enterprise-grade. Second, recreating an application in Appian is a dialogue, not a delegation. We manage a multi-step dialogue between the designer and the AI. The AI presents the designer with proposals like for the interface or the data structure. The designer can modify them. When the designer is satisfied, the AI builds the new app. Even then, the app remains highly modifiable in Appian's process modeling interface. Third, Appian consolidates many applications into one.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

The modernization process is a unique opportunity to consolidate old applications into fewer new ones that offer the same functionality in a more coherent way. Last quarter, a customer asked me if we could translate 3,000 old applications. He didn't want us to give him 3,000 new ones. Appian is built to unify functionality and data into a combined application experience. I love this modernization market for its scale and universality, also because Appian's advantages won't be easy for rivals to duplicate. Another example, a leading Spanish bank is running a large-scale modernization campaign to decommission inflexible technology. In Q2, it purchased thousands of Appian software licenses and became a new customer. It'll migrate all back-office workflows from legacy tools and consolidate them on our platform. We expect the bank will run core processes 30% faster and save millions of dollars annually with Appian.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Last customer example, a prominent U.S. health insurer is undergoing a company-wide initiative to consolidate its tech stack and save $1 billion. It selected Appian two years ago to modernize its core applications and deployed a single application to unify its previously dispersed approval process for prescription fulfillments. In Q2, it signed a seven-figure software expansion deal to deploy Appian across its business, starting with Medicare and Medicaid enrollment. Finally, I have one personnel announcement. Last month, David Crozier joined Appian as our new Chief Marketing Officer. David holds a deep understanding of enterprise software and AI and brings decades of experience leading marketing teams and scaling operations globally. I'm excited for him to join our team. With that, I'll turn the floor over to Serge. Welcome, Serge.

Serge Tanjga
Serge Tanjga
CFO at Appian

Thanks, Matt. Thank you everyone for joining us today. Since this is my first earnings call as Appian CFO, I want to take a moment to share my reasons for joining Appian and the opportunity I see ahead. First, our product is great, which is reflected in our strong retention rates. I have consistently heard from our customers that they are happy with Appian and want to find ways to do more with our platform. That satisfaction is a great foundational asset on which to build the company. Second, Appian's AI value proposition resonates in the market. Enterprises are wary of AI hype and want to deploy this technology in ways that are safe, compliant, and most importantly, generate tangible value. Appian's focus on deploying AI agents within a process achieves just that.

Serge Tanjga
Serge Tanjga
CFO at Appian

Third, Appian is focused on efficiency, as evidenced by an impressive improvement in profitability over the past 18 months. Since joining, I've seen the work done behind the scenes to improve our processes, systems, and execution. We're building a strong foundation that will help us drive efficient growth going forward. Finally, most importantly, Appian's culture deeply resonates with me. Appian's values are intensity and excellence. Those are also my personal values. This team is ambitious and wants to win. I'm excited to be a part of it. Now let's turn to our Q2 results. Appian exceeded the guidance ranges we provided on our key metrics of cloud revenue, total revenue, and adjusted EBITDA. We had a strong quarter of new business signings due to continued momentum at the high end of the market and the AI demand, as Matt mentioned in his remarks.

Serge Tanjga
Serge Tanjga
CFO at Appian

Cloud subscription revenue was $106.9 million, an increase of 21% year-over-year. Total subscription revenue was $132.7 million, an increase of 17% year-over-year. On a constant currency basis, total subscription revenue grew 14% year-over-year. Professional services revenue was $38 million, up 13% compared to the second quarter of 2024. As a reminder, services revenue can be variable quarter-to-quarter. Subscription revenue represented 78% of total revenue, compared to 77% in the year ago period. 81% in the prior quarter. Total revenue was $170.6 million, an increase of 17% year-over-year. On a constant currency basis, total revenue grew 14% year-over-year. Our cloud subscription revenue retention rate was 111% as of June 30, 2025, compared to 118% a year ago. 112% in the prior quarter. Our international operations contributed 38% of total revenue, unchanged from the year ago period.

Serge Tanjga
Serge Tanjga
CFO at Appian

Moving down the income statement, I will discuss our results on a non-GAAP basis unless otherwise noted. Gross margin was 75%, unchanged from the year ago period, and down from 78% in the prior quarter. Our subscription gross margin was 87%, compared to 89% in both the year ago period and prior quarter. Professional services gross margin was 33%, compared to 30% in both the year ago period and prior quarter. Total operating expenses were $122.7 million, flat with $123.2 million in the year ago period. Adjusted EBITDA was positive $8.1 million, versus our guidance of -$5 million to - $2 million. Compared to an adjusted EBITDA loss of $10.5 million in the year ago period.

Serge Tanjga
Serge Tanjga
CFO at Appian

This outperformance relative to our guide was largely driven by greater than expected revenue, as well as timing of certain expenses, which we now expect to incur in the second half of this year. Net income was $0.3 million, or breakeven per diluted share, compared to a net loss of $18.2 million or $0.25 per share for the second quarter of 2024. This is based on 74.6 million diluted shares outstanding for the second quarter of 2025, and 72.3 million diluted shares outstanding for the second quarter of 2024. Turning to our balance sheet, as at the end of Q2, cash equivalents and investments were $184.8 million, compared to $159.9 million at the end of last year. For the second quarter, cash used by operation was $1.9 million, compared to $17.6 million cash used by operations for the same period last year.

Serge Tanjga
Serge Tanjga
CFO at Appian

Turning to guidance, for the third quarter of 2025, cloud subscription revenue is expected to be between $109 million and $111 million, representing year-over-year growth between 16% and 18%. Total revenue is expected to be between $172 million and $176 million, representing year-over-year growth between 12% and 14%. Adjusted EBITDA is expected to be between positive $9 million and positive $12 million. Non-GAAP earnings per share is expected to be between $0.03 and $0.07. This assumes 74.7 million fully diluted weighted average shares outstanding. For the full year 2025, we're increasing our guidance for cloud subscription revenue, total revenue, and Adjusted EBITDA. Cloud subscription revenue is expected to be between $429 million and $433 million, representing year-over-year growth between 17% and 18%. Total revenue is expected to be between $695 million and $703 million, representing year-over-year growth between 13% and 14%.

Serge Tanjga
Serge Tanjga
CFO at Appian

Adjusted EBITDA is now expected to range between $49 million and $55 million. Non-GAAP earnings per share is expected to be between $0.28 and $0.36. This assumes 74.7 million fully diluted weighted average shares outstanding. Our guidance assumes the following. First, we expect professional services to grow modestly on a year-over-year basis for both Q3 and the full year. Second, we anticipate term license revenue to be flat on a year-over-year basis in Q3, and grow modestly for the full year 2025. Third, total other income and interest expense will be approximately $3.5 million in Q3, and $15 million for the full year 2025. Finally, our guidance assumes FX rate as of August 1st, 2025. In closing, we're pleased with our Q2 results, and in particular, with our ability to win new business.

Serge Tanjga
Serge Tanjga
CFO at Appian

We're confident in the opportunity ahead, and we'll continue to invest responsibly to maximize our long-term value. Now I will turn the call over for questions. Operator?

Operator

Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your questions, please press star one one again. Please wait while we compile the Q&A roster. Our first question comes from the line of Raimo Lenschow of Barclays. Your line is now open.

Raimo Lenschow
Raimo Lenschow
Analyst at Barclays

Perfect. Thank you. I've got two quick questions, one for Matt, one for Serge. Matt, if you think that dream or the idea of app modernization, as you said, has been around for quite a while, AI should really help here, where are we on that journey, though, to really get this to happen, and how much will come from just one vendor rather than tools from different ones?

Raimo Lenschow
Raimo Lenschow
Analyst at Barclays

For Serge, can you just talk a little bit about the NRR, the cloud NRR, that 111 step down a little bit again? Are we finding the level here? What are the drivers there? Thank you.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

App modernization is going to be a much more complex market than it appears to be from this distance. Early in its conception, it seems like it may just be unitary, but it won't be. There's an extraction motion, there's an instantiation motion. AI can help with both of them. The first is more services-intensive, the second likely more software-intensive. We're doing this market. We've been in this market for years, and we have a track record, and we're already a legitimate leader in modernization. The game will change so much over the next year or two as AI is brought to bear on both of the two primary motions that comprise this market. We're confident that we have something to say and can lead in both sides of that equation, and we're driving forward.

Serge Tanjga
Serge Tanjga
CFO at Appian

Yeah. Hey, Raimo, thanks for the question. Let me jump in on the NRR rate. Let me say a few things. First, as we've discussed in the past, NRR is a helpful metric, but it has certain limitations. In my mind, most importantly, it's backward-looking. It sort of averages growth across quarters and obviously only reflects a subset of the business. With that said, the downtick to 111%, I would contribute it to some of the same reasons we've talked about in the prior quarter, which is kind of the ongoing effect of a couple of downsells that we've experienced in the past as they work their way through the system in these backward-looking metrics.

Serge Tanjga
Serge Tanjga
CFO at Appian

I will also say that as we look at a composition of our new business in the first half of the year, a higher percentage than in the past has actually come from new customers, which we actually see as evidence of strength, our ability to land in these new logos with large and strategic mission-critical deals at the outset. That's a strong sort of contribution or strong testament to our value proposition. Then you talked about sort of the metric bottoming out. You may have noticed that I did not mention in the script the range of 110%-120% that we used to reference in the past. That's not because actually anything has changed in the business. We remain very confident in our ability to grow with our existing customers.

Serge Tanjga
Serge Tanjga
CFO at Appian

We're not referencing that range because we don't actually run the company to achieve an NRR level. We run the company to achieve total new business, whether it's on-prem or in the cloud, whether it's new or existing customers, it's total new business that we forecast, that we discuss, and that we compensate people for. The NRR metric is an output, we'll obviously continue reporting it, but it doesn't make sense to talk about the expected range because it's not actually how we run the business.

Raimo Lenschow
Raimo Lenschow
Analyst at Barclays

Okay, perfect. That's clear. Thank you. Good luck.

Operator

One moment for our next question. Our next question comes from the line of Keith Weiss of Morgan Stanley. Your line is now open.

Keith Weiss
Keith Weiss
Analyst at Morgan Stanley

Thanks a lot. Thank you guys for taking the question, sitting in for Sanjit Singh this morning. This is similar to Raimo's question, but maybe a little bit more specific. Matt, on the call, you talked about Appian's advantages that won't be easy for others to replicate in this market opportunity. I think that's exactly what a lot of investors are worried about overall for software, but particularly for app development platforms and companies such as yourself, is that this view that generative AI, agentic computing, and these AI labs are going to be able to do more and more on a go-forward basis, automate more processes, and obviate a lot of legacy or existing vendors or even the SaaS layer altogether.

Keith Weiss
Keith Weiss
Analyst at Morgan Stanley

Can you dig in a little bit on sort of what those advantages are that Appian holds that you think are going to prove true moats, right? That aren't going to be able to be replicated by just agentic AI or kind of what the AI labs are doing, to help investors get a little bit more comfortable about durability, if you will?

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Yeah, absolutely, Keith, and thank you for the question. I know a lot of people are worried about this, about how AI will be able to write applications, and they're concerned. They don't know how that's going to affect our market. Let me tell you, there are things that AI will absolutely not be doing. Appian comes with a built-out frame of functionality, and whether that's scalability or security quals or the ability to run on a mobile phone or all the features that come built in when you create an application in the center of our platform on the modeling environment. All of that comes with whatever app you put into our platform, and AI's not going to do that.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

AI's not going to write a hot failover, for example, so that if the app goes down in one location, it automatically starts up in another location, a high availability kind of functionality. That's a perfect example of something you would never get out of AI. AI wouldn't be merging 100 applications into one like we're talking about. Look, the competitive advantage isn't just against AI, it's against our competitors. We find that the direct large company competitors have a platform that's inferior to ours. Porting an old app into JavaScript or Apex code is not as good as porting it into a platform like Appian's that's easy to introspect, modify, and comes built out with all these features.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

The startups aren't going to have the credibility to be used in major circumstances, and from what I've seen, most of the modernization opportunities are major circumstances with hundreds or thousands of applications for worldwide famous organizations. They wouldn't be going with a startup. There's either a platform problem with our directs or a credibility problem with the startups. I think we've got a unique situation where we're large enough to be a credible player in this market, but also we've really invested in having a great process environment so that when you create an application on our platform, that's a fully featured scalable, secure, reliable application in a way that our competitors and AI would be unable to construct.

Serge Tanjga
Serge Tanjga
CFO at Appian

Keith, can I just also chime in because I'm new and had some of the same questions, and sort of an analogy that Matt uses was helpful to me. It's helpful to think of AI, in the context of an application, as an engine. Engine in and of itself doesn't accomplish enough or much. It needs a car to go places, and we are the provider of that in the context of security, safety, durability, accuracy, actually. That gives us confidence that it won't change and that we have a durable advantage here.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Yeah. Like take our Data Fabric as an example, right? AI's not going to write a new Data Fabric that integrates all the data sources across the enterprise and automatically tunes your queries, or tunes it so that the queries that are asked most frequently get better performance. That's the kind of thing that you need a platform like Appian in order to do well. I know there's a lot of imagination about what AI's going to be able to create. AI will create a great engine, but as Serge says, and as we like to say, it's good to have the car with that engine.

Keith Weiss
Keith Weiss
Analyst at Morgan Stanley

Excellent. That's a great analogy, and I think you're right, Matt, we're at a part of the innovation cycle and the hype cycle where there's a lot of broad sort of aspirations what AI will have to do. You guys bringing out sort of analogs like the car versus the engine, I think, is really important to help investors in the marketplace understand what's the right place that AI will go into. Serge, it's great to hear from you again in the new role, so congratulations on the new seat. I had a question more specifically for you. We're seeing 14% constant currency growth overall in Appian and flat OpEx growth, and Matt was talking about some of the efficiencies you guys are already seeing in the business, particularly in sales and marketing productivity from utilizing AI. Where are we in the Appian journey?

Keith Weiss
Keith Weiss
Analyst at Morgan Stanley

How much more is there to go in terms of you guys garnering efficiencies out of your own use of these technologies and getting those margins heading in the right direction?

Serge Tanjga
Serge Tanjga
CFO at Appian

Yeah. I would generally constitute it as we've made progress, but there's plenty more to go. Maybe I'll take a little bit of step back. I commend Matt and the management team on the efforts that were put into place over the last couple of years. Really what the team has done here internally is focus on the areas of lowest productivity, where the ROI wasn't there, and you've seen the improvement in margin. That requires discipline and resolve. Once again, I'm happy to be in an environment that can do that. As we roll forward, I sort of see three key drivers of continued profitability and efficiency. The first one is continued improvements in sales productivity and the payback on our sales and marketing investment. It's very encouraging what we've been able to do here in the first half of the year.

Serge Tanjga
Serge Tanjga
CFO at Appian

Obviously, the game's still afoot. We're optimistic about where we can go from here, and we'll achieve further improvements by improvements in our go-to-market process, as well as targeted incremental investments that will have a disproportionate impact on that sales and marketing payback. That's bucket number one. Bucket number two is we have an ambitious product roadmap, but we can deliver it cost efficiently by growing our R&D base across the world, and in particular in India. We've made those foundational investments, I would say, over the last couple of years, but we're going to continue pushing in that direction.

Serge Tanjga
Serge Tanjga
CFO at Appian

Finally, to your point, we can use our own AI, we can eat our own cooking across the company, and we're seeing some good early results in the context of some go-to-market functions, but we can do more as far as customer facing, we can do more as far as how we write our own code, and of course, in the back office as well. A lot of work done already, but plenty for us to continue doing here and to find that balance between growth as well as improvement in margin.

Keith Weiss
Keith Weiss
Analyst at Morgan Stanley

Excellent. That's super helpful, and congratulations guys on a solid quarter.

Serge Tanjga
Serge Tanjga
CFO at Appian

Thank you.

Operator

One moment for our next question. Our next question comes from the line of Steve Enders of Citi. Your line is now open.

Steve Enders
Steve Enders
Analyst at Citi

Okay, great. Thanks for taking the questions this morning. Matt and Serge, looking forward to working with you more moving forward here. In terms of the contribution that Appian AI is maybe having on the pipeline or maybe how is it changing the customer conversations in terms of how they're viewing Appian as a key partner moving forward? What have you seen from those dynamics, and is it having a impact to or how would you kind of frame the impact it's having to some of the demand out there for Appian right now?

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Yeah. I'd say it's a great driver for pipeline. We are seen differently by customers. We can show them that we can create far more value with AI than we could before. AI is a brilliant digital worker, and we've been selling digital workers for a decade or more within our process model. Now we've got the best digital worker ever, and we can demonstrate how much productivity that can add. Our case studies are accumulating, and we've got a lot of great things to say to each specific vertical industry. We could talk case studies, we could talk our performance record, we can talk expectations for each primary model that we frequently deploy of how much AI efficiency should be gained, how much time should be saved.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

We're showing that we understand better than others what can be done with AI in a practical sense, and it absolutely does change the conversation. That's pipeline, that's bookings, that's revenue, and most importantly of all, and the precursor of all of that is its value proposition, which has changed meaningfully.

Steve Enders
Steve Enders
Analyst at Citi

Okay, that's great to hear. Maybe just on the guide, it looks pretty healthy raise here. I'm trying to understand, how much of that is maybe a bit of a change in the guidance philosophy, or the guide framework here, or is there some impact here from the change in FX rates? Can you just help maybe walk through what's different today with the guide versus 90 days ago from the prior annual outlook?

Serge Tanjga
Serge Tanjga
CFO at Appian

Yeah. I'll jump there. No change in guidance philosophy, or how we think internally, frankly, about our pipeline and our ability to close. Matt has been talking for the last couple of quarters about the changes that we've seen this year in the macro environment, and obviously some of the uncertainty that we have related to DOGE. Although we're happy with our performance, no need to change sort of the tone or the philosophy behind the guide at this point. It still feels a little premature. On FX specifically, what I would tell you, as we've done this time around, as a general practice, we use current FX rates when we provide guidance. We also don't forecast where FX goes from wherever they are at that current moment.

Serge Tanjga
Serge Tanjga
CFO at Appian

If you look 90 days ago in early May, much of the dollar decline, which is beneficial to our revenue, had actually already played out. FX was marginally helpful for Q2, and it's a part of the sort of the increase in the guide. Much of the increase in the guide really is about the fundamental strength that we're seeing in the business and the cautious optimism that Matt talked about.

Steve Enders
Steve Enders
Analyst at Citi

Okay, perfect. That's helpful context. Thanks for taking the questions here.

Operator

One moment for our next question. Our next question comes from the line of Derrick Wood of TD Cowen. Your line is now open.

Analyst at TD Cowen

Great. Thanks, guys. This is Cole on for Derrick. Matt, I just wanted to double-click on DOGE. It seems like some of the initiatives have tapered back a little bit since 90 days ago. Could you just dive in on the federal pipelines and what you guys are seeing? Then maybe as well how AI ties into this and how you're going and selling to them versus commercial? Thanks.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Yeah, that's right. Well, DOGE may have died down a little bit, but there's fundamental undercurrents that have been started by DOGE that look to survive and shape the federal marketplace for years or decades in the future. Perhaps the most important of those is the disinterest that the government now seems to have regarding spending through intermediaries. There's a far greater interest in doing business directly with Appian or with the software provider as the case may be, and that allows us a greater degree of control, customer satisfaction, and revenue involvement. That's a very good trend for us. Another one is the government's increased prioritization of efficiency, something for which we have long had a reputation in Washington. These developments are very positive for us. I think it just structurally changes the market in a way that ought to help, and our pipeline is healthy.

Analyst at TD Cowen

Great, thanks. Just one more on pricing of the AI process. You guys had said that you're going to take a look at shifting pricing, and then last quarter, you said that you might migrate some customers on renewal to a new pricing structure. What's the update there, and do you have anything to add? Thanks.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Yeah, that's right. Well, there's a long-term concern in this industry, just to flesh out your question. That since AI is going to reduce the number of users on any given application, that it might have a negative effect on the pricing scale that a lot of software vendors use. We sometimes price by users, but not always. We have a number of different pricing models. It could be by user or flat app, or all you can eat or a consumption model. We do a lot of different styles of pricing, and it differs by region as well. We see the same problem. We are relying more on our other pricing methods, and we're doing a careful conversion, kind of a migration internally away from seat-based pricing and toward a kind of consumption model. That's a very deliberate, cautious, and gradual migration.

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

We don't need to make any sudden moves because we have a set of pricing models that we can rely on.

Serge Tanjga
Serge Tanjga
CFO at Appian

Maybe just I'll also chime in to say that a pricing model is ultimately just a way to get value, and we're very confident in our value. Frankly, our customers see it as well. Leaving pricing models aside, we've been increasing prices successfully, just apples-to-apples, not new functionality for multiple years now, and that ultimately tells us that our value proposition is strong and that we'll be able to get our fair share of the value we create going forward as well.

Analyst at TD Cowen

Helpful. Thanks, guys.

Operator

One moment for our next question. Our next question comes from the line of Devin Au of KeyBanc Capital Markets. Your line is now open.

Devin Au
Devin Au
Analyst at KeyBanc Capital Markets

Hi. Yeah, thanks for taking my questions here. I wanted to ask about some of the new sales leaders you have hired in EMEA in the quarter, in addition to the new Chief Marketing Officer. Could you maybe elaborate on the appointments there? What are you hoping these new leaders would bring to Appian, and are you expecting any notable changes in the go-to-market motion in that region?

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Yeah. The general trend across all of our go-to-market operations is one in favor of alignment, discipline, best practices, and all the hires we've made in EMEA and from anywhere else for that matter, are in line with that transformation. It's been going for a while. There's not a sudden change. We're just continuing to drive the strategy through aligned leadership across the organization. That's it.

Devin Au
Devin Au
Analyst at KeyBanc Capital Markets

Got it. That's helpful. Maybe just one quick one for Serge. I know you mentioned some of the outperformance in the quarter for EBITDA was kind of driven by some expenses shifting out to the second half. Could you maybe just elaborate more on what these are? Is it mostly headcount related? Any color there would be helpful. Thank you.

Serge Tanjga
Serge Tanjga
CFO at Appian

Yeah. No headcount. It's marketing and some consulting expenses that we just sort of tactically moved from the second quarter into the back half. It's a relatively minor contributor. We just want to be transparent and give you guys the confidence so that you can understand how the guide moves versus the prior one.

Devin Au
Devin Au
Analyst at KeyBanc Capital Markets

Great. Thank you.

Operator

One moment for our next question. Our next question comes from the line of Jake Roberge of William Blair. Your line is now open.

Jake Roberge
Jake Roberge
Analyst at William Blair

Thanks for taking the questions. Serge, looking forward to working with you moving forward.

Serge Tanjga
Serge Tanjga
CFO at Appian

Jake.

Jake Roberge
Jake Roberge
Analyst at William Blair

Good to see the continued productivity on the go-to-market side. Serge, you talked about this being a key area to drive more efficiency in the business. As you've looked at things, can you talk about what's worked for the company thus far and where you think some of the low-hanging fruit is moving forward? Are you starting to see your new AI solutions help drive faster decisions from customers, just given that the ROI for them might be a little bit clearer as you're going to market with those?

Serge Tanjga
Serge Tanjga
CFO at Appian

Yeah. A few things. By the way, thank you, looking forward to working together as well. Again, if you look at the rearview mirror, we've removed some of the least productive areas of investment and channels, that sort of helps productivity sort of in a mathematical way in that it raises the average of the rest. That's helpful because it saves money, but it's not sort of what's going to drive the business going forward. What we've seen, however, over the last couple of quarters, and in particular in Q2, is improvements in productivity driven by better execution and our move up market. We're seeing bigger deals. We are seeing more strategic deals, and that comes from our ability to take our great product, our strong relationships, and marry them with improved execution and just get better outcomes.

Serge Tanjga
Serge Tanjga
CFO at Appian

Honestly, it's my first quarter here, and I was impressed with some of the deals we've been able to get in from the perspective of size, duration, names, structure. I think, again, that speaks to the sort of the latent opportunity that we have here to monetize with our customers over time. You should expect us to see more than that in the context of improving productivity, improving process. Some of the leadership changes are going to keep helping with that front as well. The way that fits into the overall model is just the better the productivity, the more you can grow revenue while expanding margins at the same time. Again, early days, no victory to declare here, but some pretty positive signals.

Jake Roberge
Jake Roberge
Analyst at William Blair

Okay, that's helpful. Can you just double-click on what you're seeing with your public sector business? Things seem to be progressing really well thus far this year. As we head into the third quarter, could you just talk about how conversations with customers are going just given the larger Q3 buying cycle there?

Matt Calkins
Matt Calkins
Chairman and CEO at Appian

Should I take that? Yeah. All right. Well, I'll say that we're in healthy conversations and that we're pleased with the way the behavior of the federal government has changed in its priorities and its buying patterns. Beyond, I think that's all I can add.

Jake Roberge
Jake Roberge
Analyst at William Blair

Very helpful. Thank you.

Operator

I am showing no further questions at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Executives
    • Jack Andrews
      Jack Andrews
      VP of Investor Relations
    • Matt Calkins
      Matt Calkins
      Chairman and CEO
    • Serge Tanjga
      Serge Tanjga
      CFO
Analysts
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