Appian (APPN -1.23%) has had a roller coaster ride as a publicly traded company. After surging in the early stages of the pandemic on high hopes for its low-code technology, the stock fell sharply in 2021. Since then, it has remained low as software stocks have generally been under pressure following a “tech recession” in 2022 and slow growth since then.

During this time, Appian evolved into an artificial intelligence (AI)-based process automation company, which is sometimes called low-code or process mining. It streamlined its business through layoffs and cost cuts, retooled its strategy to focus on the high end of the market, and now looks as strong as it has in years as it delivers strong growth in cloud-based software and it becomes profitable.

Shares rose 2.6 percent on Thursday as the market responded to solid results in the third-quarter earnings report. Cloud subscription revenue, the company’s focus on value, rose 22% to $94.1 million. Total revenue rose just 12% to $154.1 million, which was driven by a decline in professional services revenue, in line with Appian’s strategy to push more of that revenue to partners such as consultants who help sell the product. Total revenue topped estimates of $151.9 million.

In conclusion, Appian also showed significant improvement as adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved from a loss of $5.3 million to a profit of $10.8 million, benefiting from cost reductions, focusing on the upper end of the market. The company reported adjusted earnings per share of $0.15, up from an adjusted loss of $0.20 per share and well ahead of a loss per share of $0.08.

Appian also raised its full-year EBITDA guidance from $5 million to $7 million, a significant improvement on its year-ago guidance for a loss of $20 million to $25 million.

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How Appian uses AI

Artificial intelligence it has quickly become the future of technology for software companies like Appian as well, and AI is embedded in the company’s process automation platform.

Companies like Amazon I’m talking about the power of “Agent AI,” a tool that works autonomously, making complex decisions based on real-time data. Appian CEO Matt Calkins argued that automating the company’s processes is a better solution, saying on the earnings call, “Appian uses AI in a process to create a superior version of Agentic AI.”

Appian is a small company, although it competes with much larger software companies, and its focus on a single category and only the enterprise market is a strength. After all, its gross renewal rate is regularly 99%, and it was again in the third quarter, showing that customers are overwhelmingly satisfied with the product.

AI adoption appears to be at a tipping point in the software industry as companies are now aware of new capabilities and looking for ways to harness its power. Appian has an opportunity to capitalize on that opportunity. In an interview with The Motley Fool, Calkins explained how the market is shifting in Appian’s favor.

“Now we’re more mature as an economy about what we want from AI, and it’s becoming an efficiency proposition,” he said, arguing that Appian was well-positioned to deliver value. He added: “So I think (in) this phase of the national AI conversation, the international business conversation will be better for us.”

The AI ​​opportunity

Appian’s cloud growth accelerated from the second quarter to the third quarter, and the company is well positioned for continued gains in Q4 and 2025, particularly with margin improvement. Management requested adjustment EBITDA of $6 million to $8 million for the fourth quarter and revenue growth of 14 percent to 17 percent to a range of $95 million to $97 million, though its top-line guidance is typically conservative.

Appian did not provide guidance for 2025, but Calkins said he is looking forward to the new year. Based on the quarter’s momentum and the broader emergence of artificial intelligence in the software sector, Appian could be poised for a bullish year in 2025.