This Small-Cap Stock Just Crushed Earnings. Is It a Buy?
Like much of the software-as-a-service (SaaS) sector, Appian (NASDAQ: APPN) has had a rough year. Shares of the business process automation company are down 33% year-to-date, falling in line with the rest of the software sector. The market seems to believe it’s vulnerable to competition from AI platforms like Anthropic as the stock fell sharply in late January on a broader sell-off over AI fears, and again in April after Anthropic announced its Mythos AI model, which it said was too powerful to release to the public. Will AI create the world’s first trillionaire? Our team just released a report on a little-known company, called an “Indispensable Monopoly,” providing the critical technology Nvidia and Intel both need. Continue » Despite those concerns, Appian hasn’t exhibited any weakness in its business. In fact, the company, which is leveraging AI as part of its cloud subscription platform, just reported one of its best quarters in years. Appian’s Q1 Appian’s total revenue rose 21% to $202.2 million, well ahead of the consensus at $191.8 million. Cloud subscription revenue was up 25% to $124.5 million. The company’s earlier cost-cutting and improved go-to-market efficiency also continued to pay off as adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from $16.8 million to $26.6 million. It also reported a generally accepted accounting principles (GAAP) operating profit of $3.2 million. Adjusted earnings per share more than doubled from $0.13 to $0.27, easily beating the consensus at $0.18. Appian AI is taking off and accelerating the business’s growth, as nearly 40% of its customers have purchased AI-inclusive license tiers. Appian is landing and expanding deals with Fortune 500 companies and government agencies that need error-free AI for mission-critical applications. CEO Matt Calkins also noted that, despite the popularity of vibe-coding, using AI alone to create mission-critical applications is not a viable strategy, as those applications need to be updated and supported through tools such as those that Appian provides. Appian’s solid first-quarter results led it to raise its full-year guidance, calling for revenue of $819 million-$831 million, up 13%-14%, and better than its earlier forecast of $801 million-$817 million. Given the first-quarter growth rate, that forecast is likely conservative. On the bottom line, it now expects adjusted earnings per share of $0.94-$1.05, up from an earlier forecast of $0.82-$0.96. At the updated guidance, Appian now expects EPS to increase by roughly 60%, showing how far the business has come. Based on that guidance, the stock now trades at a forward P/E of just 23.