Virtual events software company (NYSE: ONTF) reported Q2 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 5.4% year on year to $35.33 million. Guidance for next quarter’s revenue was better than expected at $33.9 million at the midpoint, 0.8% above analysts’ estimates. Its non-GAAP profit of $0.02 per share was $0.01 above analysts’ consensus estimates.

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StockStory’s Take

ON24’s second-quarter results were met with a positive market reaction, as revenue and non-GAAP earnings both exceeded Wall Street expectations. Management pointed to record customer retention and growing adoption of ON24’s AI-powered ACE solutions as key drivers. CEO Sharat Sharan highlighted improving performance in enterprise segments and the return of “boomerang” customers—those who previously left but have since re-engaged with the platform. The company’s focus on operational discipline, including cost control and product innovation, was emphasized as contributing to its positive adjusted EBITDA and free cash flow.

Looking ahead, ON24’s updated outlook is shaped by ongoing investments in AI-driven features and a go-to-market strategy targeting large enterprise clients. Management’s guidance relies on continued customer retention improvements and stronger cross-selling of new products, particularly in regulated industries like financial services and life sciences. CFO Steven Vattuone stated, “We expect our strategic initiatives and positive momentum to drive a return to ARR growth in Q4 of this year.” However, leadership acknowledged that certain market segments, such as manufacturing, remain challenged and could impact near-term bookings.

Key Insights from Management’s Remarks

Management attributed Q2 performance to rising enterprise adoption, product expansion, and improved customer retention, while noting that ongoing product innovation and sales execution are central to future growth.

• AI-powered product uptake: ON24’s ACE (Analytics and Content Engine) saw a growing share of customers paying for its features, driving deeper engagement. CEO Sharat Sharan noted that “a mid-teens percentage” of customers now pay for ACE, with consistent growth since launch.
• Enterprise segment focus: Efforts to align sales and customer success around the needs of large organizations led to gains in average annual recurring revenue (ARR) per customer and a record number of $100,000-plus ARR clients. The share of multi-year deals also reached an all-time high.
• Boomerang customer momentum: The return of former clients, often at higher commitment levels, highlighted ON24’s competitive differentiation. Management cited examples where clients switched back after competitor trials failed to deliver desired results.
• AI-driven content automation: New capabilities such as ON24 Translate (AI-powered multilingual translation) and ON24 IQ (an autonomous event automation assistant) enabled customers to scale content globally, streamline event workflows, and personalize experiences across regions.
• Regulated industry expansion: ON24 reported increased ARR growth from financial services and life sciences, with management citing growing traction for AI-enabled solutions in these industries as customers seek scalable, data-rich engagement platforms.

Drivers of Future Performance

Management expects the combination of AI-enabled feature expansion and a sharpened enterprise sales focus to drive results, though risks in certain end-markets persist.

• AI innovation as a growth lever: Leadership views ongoing investment in AI-powered personalization, analytics, and automation as key to deepening customer value and driving cross-sell opportunities. Management expects these features to enhance customer retention and position ON24 as a strategic partner for digital engagement.
• Enterprise pipeline and retention: The company’s outlook depends on maintaining recent gains in enterprise new business, further increasing multi-product adoption, and improving gross retention. CFO Steven Vattuone highlighted that “our focus on enterprise customers resulted in our average core ARR per customer reaching its highest level ever.”
• Market softness in select segments: While financial services and life sciences are expected to support growth, management acknowledged that segments like manufacturing remain pressured. ON24’s Q3 outlook assumes a seasonally soft quarter, with expectations for a return to ARR growth in Q4 hinging on improved bookings and continued customer win-backs.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch (1) the pace of adoption and monetization for ON24’s AI-powered ACE and Translate capabilities, (2) progress in expanding multi-year, high-value enterprise agreements, and (3) improvements in gross and net retention rates. We are also monitoring whether the company can return to ARR growth as forecasted and sustain operational efficiencies.

ON24 currently trades at $4.90, up from $4.76 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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