Klaviyo Inc (KVYO) 2025 Q3 法說會逐字稿

Please stand by. Good afternoon everyone and welcome to the Klaviyo third-quarter fiscal 2025 earnings conference call. (Operator Instructions) Also, today's call is being recorded.

With that, I would like to turn the call over to Andrew Zilli, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and thanks for joining Klaviyo's third-quarter 2025 earnings call. Our earnings press release, investor presentation, SEC filings, and a replay of today's call can be found on our IR website at investors.klaviyo.com. With me on the call today are Andrew Bialecki, Co-Founder and CEO; and Amanda Whalen, CFO.

As a reminder, our commentary today will include non-GAAP measures. Reconciliations to the most directly comparable GAAP measure can be found in today's earnings press release or earnings release supplemental materials, which can be found on our Investor Relations website. Additionally, some of our comments today contain forward-looking statements that are subject to risks, uncertainties, and assumptions which could change.

Should any of these risks materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results are included in our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Except as required by law, we do not undertake any responsibility to update these forward-looking statements.

With that, I will now turn it over to Andrew.

Thanks, Zilli, and thank you all for joining us today. We had an outstanding third quarter, delivering revenue of $311 million, up 32% year over year. These results demonstrate our ability to build products that create more engaging relationships between consumers and businesses, get those products in the hands of businesses around the world, and build a high growth software business at scale.

We're now serving more than 183,000 customers in over 100 countries, including more than 6,000 enterprise and mid-market global brands like TaylorMade, Mattel, Unilever, and Reebok.

A few highlights from the last quarter. We delivered another quarter of record net adds in our $50,000 plus ARR customer cohort. We grew revenue in EMEA and APAC by 43% in our Klaviyo Service product line, which reached general availability six weeks ago, has the fastest adoption rate of any of our products, including text messaging.

We're firing on all cylinders and see a lot of opportunity ahead, especially with the addition of Agentic AI to our products. On this note, I'd like to take a few minutes to explain how AI fits in with the products we're building and how it's helping our customers grow faster.

The B2C CRM we offer is made up of three vertically integrated components: a highly scalable, fast database restoring everything a business knows about its consumers and making that data available in real time; a set of applications and infrastructure to market, message, and serve consumers across every channel and modality; and an intelligence layer that finds opportunities to market or serve customers better and can automatically create, deliver, and optimize those marketing and service experiences, leveraging the consumer data we have for real-time personalization.

AI and LLMs have fundamentally changed and leveled up what is possible in real-time personalization, intelligence layer, and made the entire stack more effective at driving results for our customers. And we then share in that accelerating value creation with our customers. The more valuable we make each relationship between a business and an end consumer, the better for that business and the better for us.

AI is improving this intelligence layer in three ways. First, it's making it faster and easier for our customers to leverage our integrated database and applications because AI can do the work businesses don't have the time or the bandwidth to do. We'll share a few examples of this in a minute.

Second, AI is making the quality of the marketing and service experiences our customers are creating much better. This is a win-win for both businesses who seek greater engagement in revenue and end consumers who get more relevant marketing and service experiences, thanks to AI integrated into our stack.

Third, as a result of AI, we're able to make Klaviyo more available to more businesses on more platforms because they can interact with Klaviyo through natural language and new applications like ChatGPT.

Let me give some examples of products we've delivered and real customer use cases for each of these elements. And many of these are a direct result of products and features we've built in the last few months and released at our largest customer and partner event of the year, Klaviyo Boston, back in September.

Let's start with making it faster and easier to do marketing and service. We've reimagined how marketing will happen in the Agentic AI era and launched an entirely new workflow for our customers to do marketing, and we're calling it marketing agents. This agent, which is a team of task specific agents, can augment or do the work our customers don't have the time to do.

Klaviyo customers have access to an always-on research, strategy, creative, execution, and brand safety team powered by AI agents running in the background that will suggest and build complete marketing campaigns for businesses to then review, edit, and run. We're progressively rolling out this new technology and experience to our customers, but we're already seeing customers adopting our recommended campaigns and executing them with minimal or no editing on behalf of our users.

Now let's talk about making the quality of experiences better. We're already seeing the quality of campaigns our agent creates is surpassing what some businesses have time to create on their own. For example, a customer in the health industry using marketing agents cites 41% better open rate and generated 24% higher average revenue for Klaviyo attributed value per campaign compared to campaigns they created on their own. Another customer saw a 50% better open rate compared to campaigns they create on their own and 40% less on KAV per campaign.

These results show the real revenue impact agents can have, and we're quite early in what agents are capable of. Today, (technical difficulty) agent is like adding a solid marketing intern to your team. We're developing its skills to be at the level of a marketer with over a decade of experience and instant memory of all previous marketing campaigns and results.

This is a paradigm shift in how marketing will happen where businesses and teams can lean on agents to augment their work, and we are leading and excited to accelerate. We hear from our customers and partners, well, they love our products, they want to do more with them. And with Agentic AI, we're delivering this.

Agentic AI is also improving where businesses can connect with consumers. Our investment in building messaging and deliverability infrastructure and applications that support rich experiences across channels and modalities are paying off. Our customer hub and customer agent products, which are both part of our Klaviyo Service product line, which we made generally available last month, now allow businesses to use AI to chat and message with their consumers across the web, email, text messaging, and WhatsApp, and we plan to add more channels next year.

This expansion of services is resulting in more consumer engagement and incremental sales for the businesses we serve. For example, by surfacing [favorite] products and tailored recommendations with Customer Hub, Thirdlove has driven more than $200,000 in incremental revenue so far this year and enabled over 40,000 self-serve interactions that offloaded work from their support teams. Incredible results for Thirdlove.

And finally, as a result of AI, we're able to make Klaviyo more available to more businesses on more platforms. The launch of our model context protocol or MTP server allows companies to seamlessly integrate Klaviyo into AI clients and applications. We launched this a few months ago, built on top of our comprehensive and integrated data marketing and service API infrastructure. And we are seeing a lot of engagement from customers who are using it on major AI platforms like ChatGPT and Claude.

This is transforming how our customers and partners use Klaviyo. For example, one of our agency partners built a reporting workflow using the Klaviyo MCP server to dramatically reduce the time their account managers needed to prepare for client updates. Instead of spending hours pulling data manually, they now have an AI application using our MCP server that reviews last month's performance, summarizes results and finds campaigns that over or underperform historical trends, diagnoses the probable causes, and suggests next best actions. This saves them hours of manual work for each client relationship and allows them to spend more time leveling up their conversations with clients.

Another partner's creative team is using our MCP server to review past campaigns and identify creative assets that are high performing and can be reused. They're then creating new campaigns with those assets and mapping specific creative to different consumer segments. This is not only saving an enormous amount of time; it's allowing them to do better marketing with their clients and produce better results.

We're uniquely able to capitalize on these opportunities for a few reasons. First, vertical integration matters, and our bet on an architecture that allows for low latency coupling is paying off. The tight integration of our database and marketing, service, and analytics applications allows for rich personalization by using profile data as context in real time. And engagement in behavioral data from each application is automatically available to other applications.

For example, product recommendations derived from marketing campaign engagement, service conversations, and browsing behaviors are richer by using all available inputs and instantly available across all of our products. On top of that, our ability to measure and calculate attribution natively creates a closed loop system AI can train on the outcomes of marketing campaigns and service experiences to improve its performance. And lastly, we have an incredible ecosystem of thousands of agencies, developers, and system integrators who are building agents around our products and agents that extend functionality and improve customer results like the example we mentioned a minute ago.

Klaviyo Boston, the anchor event of our worldwide tour for customers and partners, put this on full display with over 1,400 attendees sharing how they're using our products and what they're building on top of them. As a result of all of the above, AI is providing tremendous tailwinds to our mission of bringing businesses and consumers closer together and huge opportunities for our growth.

We're rapidly moving towards a world where every business will have access to the technology that can present their products and services in the best possible way, personalized to the individual consumer and available wherever consumers are, and doing this autonomously through AI with human oversight and intervention where the business wants it, not because it's required. This is our vision for the B2C CRM and why we believe defining and delivering the customer experience will be autonomous, and we couldn't be more excited.

I'd like to conclude by commenting on a few recent AI developments and why we see them as clear tailwinds for Klaviyo. Businesses win when the friction between a consumer finding them and buying from them is reduced. That's why we're very excited about agentic commerce and various protocols that are being developed, such as the Agentic Commerce Protocol or ACP from OpenAI and the Agent Payments Protocol, AP2 from Google. It drives additional sales in the short run and another consumer relationship businesses can build upon in the long run.

One of our core metrics is the number of digital relationships that exist between businesses and consumers. And so any new channels that accelerate discovery bodes very positively for Klaviyo. Also, as brands prepare for the rise of GPT commerce, they need solutions for maintaining direct connection with their customers. Klaviyo protects that connection by unifying first-party data in the Klaviyo Data Platform, which allows brands to maintain visibility and turn engagement on agentic services into meaningful, measurable customer experiences across all channels.

We also believe agentic commerce and commerce through natural language interfaces will become more common, and we're excited to integrate those protocols into our messaging infrastructure and marketing and customer agent products. We're offering consumers an alternative to browsing a website or a store, and instead chatting or talking to an AI agent from a brand that can handle queries and transactions on its own across multiple channels.

We're also excited to see more infrastructure built to create agents and agentic workflows where customers can use Klaviyo outside of our own user experience. While we'll provide customers with agents and algorithms within Klaviyo that are excellent at various aspects of marketing, service, and analysis, we're also building Klaviyo is an open platform so other developers and companies can build agents that integrate into ours. We're successful when our customers are successful, and we're excited to expand our already large partner ecosystem to include more AI-first developers and builders.

To our customers and partners, thank you for the trust and support. We're very excited about what we'll build together. And to Klaviyos around the world, thank you for your hard work and dedication to supporting our customers. We're still only 1% done on our mission to empower creators to own their destiny. We're excited to build, invest, and lead in bringing this AI-powered future to businesses of all sizes around the world.

And with that, I'll turn it over to Amanda.

Thanks, Andrew. Q3 was another outstanding quarter for Klaviyo. Demand is strong across every growth engine. AI is amplifying our impact, and we are driving innovation for our customers as the definitive CRM for B2C businesses.

Revenue grew 32% year over year to $311 million, reflecting robust demand for new customers and continued multi-credit expansion from our existing ones. International revenue growth accelerated for the sixth straight quarter.

We had record net adds into our $50,000-plus customer cohort. NRR accelerated to 109%, and adoption of our new service product is already outpacing what we saw from SMS at this same stage just six weeks after launch. The results are clear. Our growth engines are delivering and AI is a force multiplier.

We're investing for high growth while maintaining strong unit economics. Non-GAAP operating margin this quarter was 14.5%, meaning our Rule of 40 performance was nearly 47%, our highest in four quarters. There are fewer than 10 public software companies who are growing more than 30%, over $1 billion in revenue run rate, and achieving the Rule of 40. We're proud to be among the top performing group.

At our Investor Day, we outlined three engines driving Klaviyo's long-term growth: multi-product expansion, international acceleration, and mid-market and enterprise momentum, all fueled by AI, which creates tailwinds for our business and positions Klaviyo to be the platform of choice for brands everywhere. In Q3, each of these engines delivered meaningful progress, which underscores the power of our model.

Starting with our multi-product platform, the foundation of our growth is our large and growing customer base. In the third quarter, we added 7,000 new customers, bringing us more than 183,000 customers, up 17% year over year. Companies are choosing Klaviyo as their B2C CRM because we help them grow their businesses by unifying their customer data, marketing, service, and analytics applications, and now by bringing Agentic AI into that same connected platform. And as we drive success for our customers, they, in turn, are growing their business with us. NRR rose to 109% in the third quarter, driven by email expansion, strong text messaging cross sell, and momentum from newer products, including marketing analytics.

At Klaviyo Boston in September, we accelerated innovation across the platform. In addition to the marketing and customer agents Andrew talked about, we enhanced Klaviyo Marketing with new omnichannel capabilities and new channels including WhatsApp. We also released to general availability our new product line, Klaviyo Service, with Customer Hub, Customer Agent, and Helpdesk.

Our product velocity is accelerating, thanks in part to internal AI efforts, and we're now deploying product updates 270 times a day and have over 50 AI models in production that are predicting customer behavior, surfacing insights, and marketing analytics, and helping personalize experiences across Klaviyo Marketing and Klaviyo Service.

Our new Klaviyo Service products are off to a fast start, increasing penetration faster than SMS did at the same point in its launch. Adoption is strong across all sizes of customers, from entrepreneurs all the way up to the mid-market and enterprise. In fact, last week, one of our customers, a large fashion business, signed a seven-figure renewal with us that included adding Customer Agent and Customer Hub across six of their portfolio brands.

We view Klaviyo's service as a long-term revenue engine with the potential to rival and exceed our marketing products as it scales. These launches further expand our multi-product platform, making Klaviyo even more powerful for our customers. We consistently hear from customers about the importance of having one unified platform for engagement, And that's driving continued growth across the entire platform, including text messaging, WhatsApp, and marketing analytics as well.

Because our pricing model scales with the value we deliver, not with seats, our success grows directly alongside our customers. We price on a per profile, message, and resolution basis, which lines up perfectly with the outcome-oriented business models AI is enabling.

Today, more than half of our ARR comes from multi-product customers, which is clear proof that customers want to have everything running off of one platform. This deepens our relationships with customers, improves retention, and drives long-term growth.

Turning now to international, growth continues to accelerate. Revenue outside the Americas grew 43% year over year, our sixth consecutive quarter of faster international growth, with a EMEA up 48% and gaining momentum from Q2. In Q3, we added four new languages to the platform, expanded text messaging coverage to 22 countries, and introduced WhatsApp, which was a highly anticipated channel for our global customers.

EMEA and APAC now represent more than 35% of total revenue, reflecting the strength of our international strategy. Our focused investments abroad are doing exactly what we intended. They're driving strong growth and expanding Klaviyo's global opportunity.

Momentum in the midmarket and enterprise continues to build. We now serve 3,563 customers with over $50,000 in ARR. That's up 36% year over year, including a record 272 net adds this quarter. This was driven by a record number of new lands directly into the cohort.

We're proud to welcome and expand with iconic mid-market and enterprise brands such as Bissell, Rhone, Boux, and Proper Hotels, brands that trust Klaviyo to deepen customer relationships and drive growth.

Another global brand that exemplifies the power of what we're building is MESHKI, an Australian-founded women's fashion brand now selling in over 190 countries. MESHKI has embraced Klaviyo as its system of action, recently adding marketing analytics to power their omnichannel marketing. With Klaviyo, they're personalizing every touch point, from product recommendations and campaigns to customer journeys and interactions, all powered by their own first-party data.

MESHKI also relies on Klaviyo as a central source of truth. As they scale their US presence, the team used Klaviyo to guide where to invest in infrastructure, shipping, and local distribution, transforming customer data into operational decisions. It's a great example of what Klaviyo's B2C CRM is built to do: help brands grow faster and turn every interaction into long-term loyalty at global scale.

Turning to the P&L, non-GAAP gross margin was steady at 76% in line with Q2, as benefits from scaling infrastructure balanced out the continued growth of text messaging. Importantly, non-GAAP gross profit growth accelerated, underscoring how we drive operating leverage as we scale.

Non-GAAP operating expenses also saw broad-based leverage this quarter, improving 170 basis points year over year as a percentage of revenue, reflecting the power in our operating model and our ability to deliver strong growth while investing to capture an even larger AI-driven opportunity.

Non-GAAP operating income for the quarter was $45 million with a 14.5% margin, up slightly year over year. This performance exceeded our guidance, driven by strong top-line outperformance and disciplined execution. We generated $47 million in free cash flow for a 15% free cash flow margin, which was also up year over year.

Turning now to guidance, we are entering the peak holiday season from a position of strength, supported by robust customer demand. For the fourth quarter, we are increasing our revenue expectations to $331 million to $335 million, representing 23% to 24% year-over-year growth. We expect fourth quarter non-GAAP operating income of $43.5 million to $46.5 million, representing a non-GAAP operating margin of 135 to 14%.

As a reminder, we implemented profile enforcement earlier this year, which reduces seasonality in our Q4 and Q1 revenue, making quarter-on-quarter growth steadier over the course of the year. We do expect our fourth quarter non-GAAP gross margin to experience typical seasonal impact from increased text messaging volumes.

Based on our strong third quarter and our momentum heading into Q4, we are raising revenue guidance for the full year by $18 million at the midpoint to $1.215 billion to $1.219 billion for year-over-year growth of 30%. We expect non-GAAP operating income of $161.8 million to $164.8 million, representing a non-GAAP operating margin of 13% to 14%.

This will be another year of delivering results above the Rule of 40. Rule of 40 is an important metric for us because it represents our commitment to strong growth with good unit economics. We will continue to invest, be the definitive CRM for B2C businesses. And we strive to deliver Rule of 40 as we do so.

Looking ahead to 2026, we're confident in our growth trajectory and in the results we are seeing from our AI-powered growth engines. Based on that progress, we expect to deliver at least 21% to 22% revenue growth next year.

Our core marketing products continue to deliver a strong foundation for growth. We expect to drive further adoption and expansion, particularly in mid-market enterprise and international, and we're seeing meaningful early traction from our new AI-powered products.

Our 2026 outlook currently assumes limited near-term revenue from these launches. That said, given the pace of adoption, the upside ahead of us is significant and creates clear long-term runway as these products scale. From a profitability standpoint, we expect to increase our 2026 non-GAAP operating margin by at least 1 percentage point from our updated 2025 guidance.

To close, Q3 demonstrated Klaviyo's strengths, high growth, strong unit economics, and continued progress across our three growth engines: multi-product expansion, international growth, and mid-market and enterprise momentum. AI is accelerating our business. It is unlocking new possibilities for customers to use Klaviyo to connect with their consumers in smarter, more personalized ways. It amplifies our growth and it strengthens our foundation for sustained leadership.

We believe this is just the beginning. With our unique combination of first party data, relentless product velocity, and Agentic AI as a force multiplier, Klaviyo is positioned to be the definitive winner in the next era of consumer engagement.

With that, we'll open up the call for questions. Operator?

(Operator Instructions) Derrick Wood, TD Cowen.

Great, thanks. Thanks for taking my questions. AB, this is for you. I guess at your conference, Accenture talked about fatigue in the legacy martech market and there's a lot of desire to change out legacy tech and leverage new AI tech. You talked about seeing a robust re-platforming cycle over the next two to three years.

I know your new products in AI and CRM are still early. But now that you do have these agents in market, are your conversations or pipelines evolving more around re-platforming and AI adoption? And I mean, do you see 2026 as a step function in these type of engagements, or how do you view this cycle playing out?

Yeah, sure, thanks for the question. So in the mid-market enterprise segments, we're obviously seeing some really good numbers. We added the most $50,000-plus customers in this past quarter. And I think there's really there's two things going on that are forcing these conversations. So yes, I do see there's a real acceleration there and for two reasons.

The first is a traditional reason, which is what we're doing by combining the underlying data infrastructure with then the marketing service analysis, application stack and infrastructure, and handling things like deliverability on the messaging side, creative design; then on the service side, providing that real-time (inaudible) conversations with consumers wherever they are.

I think what's happening on top of that is then when you layer in agents -- and really, here we mean, agents and agentic work flows -- we're finding a lot of larger enterprise saying, look, there's opportunities I can't get to. I can't do this data analysis. There's creative and design that I wish could get checked by agents so we can do more of it. Can you help me find more opportunities to execute against those?

Then obviously, on the customer service side, I think a lot of people look at customer services not just a, hey, when customers have issues, how do I help them, but also how can I proactively give them guidance and look at that as a growth engine. So there was this traditional reason of like, look, my software doesn't really talk to each other very well. And now you layer on what LLMs give us in terms of a better logic engine, a better -- a smarter way to use the tech that we built.

I think this is the future of how CRM is going to work for consumer companies. It's going to be agentic at its core, which means that instead of the operators of that software having to decide, make every decision, drive the software all on its own, it's going to be done in part by agents, and I think increasingly some of the work they can't get to or don't want to do is going to get handed off. And the fact that Klaviyo provides this like closed loop where, hey, it's not just that we store the data; hey, it's not just that we help you find the ideas and execute them; it's then we can then tell you what's working so you can use machine learning and AI to improve, to optimize over time.

That's where this is all going. But I have those conversations, with our enterprise customers today, and then folks that we're talking to that on our pipeline, and they're very excited about this future. And I think we're in the driver's seat to go deliver for them.

Samad Samana, Jefferies.

Hi, good evening, and thanks for taking my questions. So I wanted to stick on the AI theme, and I know that you guys have talked about the Shopify relationship. But I was wondering if you could dig deeper into how the large platforms like OpenAI, working more closely with Shopify and giving them access to maybe millions of consumers and how that ultimately benefits Klaviyo as you think about how those could potentially become -- empower the merchants that you're helping and become more profiles, especially given how embedded you are in the Shopify ecosystem. How are you thinking about that in particular?

Yeah, for sure. So let's talk -- let me touch on a little bit on the AI ecosystem. In Klaviyo, since we started, has been very partner oriented. We've looked at the ecosystem and how do we plug in, how do we work together to build a better experience for the businesses that we serve, ultimately drive better outcomes for them. Let me touch on a couple of things.

First, let's talk about as it relates to commerce and acquiring and building more consumer relationships. Obviously, that's a big part of our business model is we want more businesses connected to more consumers. We think that's an asset that's very important to the businesses we serve, and obviously, that's one of our core monetization axis.

So we look at things like the ability to do commerce through products like ChatGPT is great. It's a way for more consumers to find more businesses. It's a more streamlined experience. And ultimately, like we said in the prepared remarks, it results in this like medium- and long-term growth over for them because they now have another connection to another consumer.

In fact, we're so excited about the idea of like commerce through conversations through chat. It's something we're also working to embed inside of our customer agent. We look at the future. We think that every business is going to have its own customer agent, its own digital, like the best -- most knowledgeable person about all your products who has all the answers in real time 24 by 7.

We want to build that technology. And obviously, once we answer a question like, for instance, (inaudible) to be built in, we want to let consumers then buy directly from that experience. I think in the future, you'll see these agents, rather than browse a website, you could just chat with an agent provided by a business, and then it could help you consummate that transaction.

And the last thing I'll say is when we think about the platforms that are out there, both in terms of end users like each of us using chat interfaces, we look at that as another way to interact with Klaviyo. We're very excited about that. In fact, we've already seen and we talked a little about in some of the remarks upfront, our customers, partners using some of these AI clients to interact with Klaviyo. It might be -- to date, it's been largely to do data analysis. But in the very near future, we think that's going to be actually designing marketing campaigns and getting going on that.

And one of the things I talked to a lot of our customers about, they feel rate limited mostly by their time and how quickly they can scaffold and build and do marketing and service and analysis inside of Klaviyo. We think these new chat [interfaces] are a great way to speed up that loop, allow them to use more of Klaviyo. We benefit when businesses have more connections and also when they're doing more marketing, delivering more experiences to customers. That's why we're going to build into those.

And finally, I think it's early, but a lot of the platforms are now building out these agent builder-type experiences. And we look at that, that's great. That's another way we imagine, there's going to be workflows in the very near term where folks are building Klaviyo campaigns, optimizing them through some of these workflows and agents that they're building both inside of Klaviyo but also outside of Klaviyo. And again, that's great. We think if businesses are able to do more marketing, build more customer experiences, understand who their customers are better, wherever they do that, that's valuable to them and that's valuable to us.

Matt VanVliet, Cantor Fitzgerald.

Hey, good afternoon. Thanks for taking the question. Wonder if you could help us think about the attachment of service already and the fact that it's tracking so far ahead of even some of your best products in history.

Are these customers that are replacing something on kind of the legacy marketing stack, were they doing things sort of haphazardly and this brings it all together? And then maybe more importantly, how is a new product like Service helping the conversation of multi-product expansion, knowing that you can bring it all on a single platform and have that single source of truth?

Yeah, I've been really impressed by what our project engineering teams have done for all three of our K Service, Klaviyo Service, products in that product line. So let's talk through a little bit about each of them. And just so everybody knows, we put the general availability -- we released the general availability just over a month ago. So we're watching the tracking literally week over week. And like I said, the trajectory is awesome.

In terms of what they're replacing or augmenting, let me take it product by product. So for our Customer Hub and Customer Agent products, those we're finding a lot more greenfields. Our Customer Hub products now takes a lot of the personalization that you could do with Klaviyo and messaging on various messing channels. It now brings it directly into a business's website or even in the future, maybe even their mobile application. It gives consumers a way when they go visit a website that the entire web experience is now personalized to them.

It's generating incremental revenue as we talked about. And so it's actually a fairly easy conversation with customers who say, look, we can take the same goodness that you've seen from us in messaging. You can now bring it to your website. It's accretive to your growth. Why wouldn't you do that? A lot of these businesses, they just there were -- there was no product there before.

Integrated into Customer Hub is our Customer Agent. So if a if a consumer has a question and they want to chat both to get help but also critically to get advice, we're seeing some really amazing conversations inside of our data set where consumers are coming and having long conversations about what products would be best fit for them and offering them recommendations.

So really, service is no longer this sort of like, hey, if you have an issue, talk to me. It's now more even pre-sales. And that's again, that's a bit different. People weren't thinking that way before, so we're finding a lot of businesses wanting to add that in because again, it becomes a revenue engine. And it helps offload some of the support volume, but it's also a revenue engine for the business.

And then the third product is we've also built a customer service, a help desk product, which also has AI natively integrated. So we have some great features in there, things where if a conversation happens with our AI agent, maybe does some tool calls to pull in product recommendations and associate information, that all gets passed back to whoever that support rep is that then decides that handles the conversation if it makes its way to a human.

That's a really great integration speeding up response times and resolution rates. That is a more traditional -- like for some small businesses, it might be the first time, but that's more we're replacing some of the customer service software that's out there that might just only have traditionally solved that, like, hey, we help your support team manage the support workload.

And I think -- we're very excited about the trajectory in the first 40 days. We're also talking a lot about the impact of artificial intelligence. I think one thing we want people to take away is we're expanding where we can use and leverage AI to not just marketing but also include what happens on your website and what happens in customer service. And that's part of our building out the entire consumer CRM that's part of our strategy there.

Siti Panigrahi, Mizuho.

That's great. Congrats on a great quarter. And AB, thanks for all that commentary on AI. That's helpful.

Amanda, I want to ask you about your '26 guidance of that 21% to 22% growth. So you have a lot of products announcement there and also there are pricing model changes as well. But what gives you that confidence for next year growth? What is embedded into that guidance?

Yeah, thanks to a great question. And the way that I think about it is we are incredibly confident in our growth trajectory. And that preliminary '26 outlook that we gave is a strong baseline for growth next year with clear upside ahead.

So we have just launched some very exciting new products in AI and expansion into new products and new service categories. We're very excited about the traction that we're seeing. And as AB mentioned, service off to an even faster start than SMS was at this stage. But we're really early in the journey. And so at this point, we're not factoring significant revenue in there for next year. So there's even more upsides to that number as those products continue to grow.

And I think the other thing that gives us incredible confidence heading into next year is that our existing growth engines are really delivering. They have strong momentum as we head into the international or into next year. In international, we saw our sixth straight quarter of increasing revenue growth rates outside of the Americas, which shows that we are really growing and increasing that global opportunity that we have to build the business.

In mid-market this quarter, we had a record high number of adds into the $50,000 customer cohort. Which really shows what we talked about at Investor Day, which is that customers are pulling us up into that mid-market and enterprise space because as we just talked about earlier with AB, they want to replace those legacy tech stacks and having more modern AI-driven way for interacting with their consumers.

And then in multi-products, over half of our ARR is coming today from customers who are multi-products which shows us that those customers really want to consolidate their platforms and they really want to consolidate their platforms with Klaviyo. So we have a huge opportunity ahead of us there with Service. We think Service could be as big, if not, bigger than our marketing products are today.

And then, of course, AI accelerates all of that. AI makes it faster and easier for our customers to use the product. It opens up new surfaces and new places where we can generate demand and interactions with the product. And importantly, it drives even better results. You heard some of the examples that Andrew shared around marketing agent and the uplift that it's driving in open rates and in KAV or the revenue that our customers drive.

So again, those products are early in market. We're already monetizing Customer Agent today. We're going to start pricing pilots for Marketing Agent in the next few months. And as they continue to grow and expand and adoption and usage, again, we see upside there.

So bottom line is that what gives us confidence is that our growth engines are firing on all cylinders. And we're in the early innings of massive AI and multi-product opportunities that are ahead of us.

Tyler Radke, Citi.

Yeah, thank you very much for taking the question. A lot of great discussions around AI and Service hub. I wanted to double click on international, pretty impressive six consecutive quarters of accelerating growth.

Do you think that acceleration could continue going forward? And could you just help us understand like what we're going to -- what we should expect in terms of future unlocks in that? I know you talked about adding new languages to the platform, expanding text message capability, but sort of what inning of sort of those product unlocks are we and any view on sort of the durability of that acceleration? Thank you.

That's great. I'll give you some commentary on some of the things we're doing and let me speak to the numbers. But 43% year-on-year growth, we're very proud of that, and we believe that we can continue to have that grow at very high rates over the next several years. And let me give you a little color on why.

What we found is we're still relatively early in working in both Europe. And I'd say Europe is even a little bit further ahead than where we are in Asia. There's a lot that we've done in the last 12, 24 months to get us ready for that. We've expanded our presence in Europe and in Asia and continued to do so, especially in like, key markets.

From a product side, we've done a lot of work. You mentioned internationalization. Very proud of the work that we've done there, both for our products, but also then to just make the various channels that we're in more available. So having SMS now in so many languages obviously helps a lot.

We just rolled out WhatsApp globally, and that's obviously very, very important in the European and Asian markets. And we have some more channels now that will be coming online following that that are more region specific. So it addresses more of the places that where consumers and businesses meet.

And then finally, we're expanding our presence not just for our customer teams and go-to-market teams but also just our infrastructure. We already have infrastructure all the way around the world. We're standing up new data centers and planning those out in both Europe and in Asia. And I think that will also help, especially for some of our larger customers. So it'll overlap with some of our enterprise strategy.

So I just I'm very excited. We've got a great set of customers. We're also expanding the way of the partners that we have there in key markets. So I think we've got a long way to go. We're nowhere near saturated.

Yeah. And in terms of what helps to drive that consistency and growth going forward and our outlook in international, it's the product expansion that AB talked about. And it's also the progress that we have on the go-to-market side around building out all of the surround sound around those product innovations. It's getting the local partner network set up, both the agency partners and the platform partners as well, great platform partners, not only Shopify, who we have an incredibly strong relationship with, but partners like PrestaShop in France and Shopware in Germany.

And then also continuing to build out the customer experience including the website, the local customer case studies, and so all of that contribute to making this a really strong, consistent growth platform for us going forward.

Rob Oliver, Baird.

Great, thank you for taking my question. Good afternoon. I think at the Analyst Day, you guys called out, I think it was over 600 legacy replacements in the last couple of years. And there's been a few questions of Derrick and one other that have tried to touch on, I think, this opportunity, which is I think so exciting for many of us, which is that this combination of service -- marketing and commerce has actually been tried before and there's buying there.

And so maybe you can talk about as we look into the next year and the next couple of years, the pipeline you have building right now, some of the customer examples you called out, the fashion brands, seven-figure renewal, how should we think about that opportunity increasing over that kind of 600 number over the last couple of years? Thank you.

Yeah, great. We don't have any numbers to share today, but the momentum is awesome. And similar to international, I think there's things we're doing now that have -- that we'll finish doing that will now bear even more fruit.

So as an example, we've only recently spun up our analyst relations program. We're now starting to work with more SIs and global system integrators, which is introducing us to more large enterprises. I think obviously, enterprise and international go hand in hand. We've already worked with a number of large multinationals, but that will get only better as we do some of the work that we talked about on the international side.

And that -- like look, at the bedrock of this for us is I think really the two things I said. The first is since the beginning, this idea of your data infrastructure should have a tight linkage to how you do marketing, messaging, the infrastructure there, and then now what we're doing with service, customers love the idea. The enterprise I talked to love this idea of, one, database now with -- that's getting more intelligent via LLMs and AI that is then distributing that experience to all possible channels.

This really, really matters to them that they want this one unified experience. So this idea that you can use the data you have at scale to generate things like recommendations and then make those available on all services -- websites, mobile apps, messaging, inside of a chat or in a voice conversation with a customer all delivered via AI -- that's a really enticing value prop. And so I think that there's just there's a lot we're doing now that -- the results we're seeing are a little bit of the actions that we've taken in the last 12, 24 months. But I think there's even more that we can do.

And frankly, like there's even an element of social proof to all of this. I talked to businesses that said, hey, 12, 24 months ago, they didn't think of Klaviyo as an as an enterprise brand -- that we are quickly changing that perception. And I expect to see that snowball.

Ryan MacWilliams, Wells Fargo.

Hey, thank you for taking the question and great to see you continue strong new customer additions. The question is more in regards to your customers. So we're hearing SEO struggles come up more for SMB. And I was wondering, are you seeing customers look to Klaviyo as a way to support new market activities to combat SEO efficiency getting more challenging? Or are you seeing existing customers look to add new use cases as a result? Thanks.

Yeah, it's a great question. So I'll say two things. We look at Klaviyo as really as the bedrock of how a business operates and works with maintains and grows with engagement with its most important assets with customers, those end consumers.

So we're noticing actually like two trends. The first is for some businesses, they're seeing a lot of growth through AEO and effectively like getting discovered through some of the AI applications that are out there. And so that's driving more consumer relationships.

For other businesses we find them -- they're actually -- when it's uncertain, what their strategy is they're coming back to Klaviyo to say, hey, how can I do more with my existing consumer relationships? How can I nurture those harder?

And this is where AI really -- I mean, one of the things we want to (inaudible) is like, look, we always automatically, agentically give every single business, every single one of their consumers a path on like what is the absolute best experience they can deliver to that consumer. So when they do acquire them, those consumer relationships are more valuable, more durable, higher LTV.

So it's a bit bifurcated, but I think when there's uncertainty and revenue is really on the blind, we find people come back to us. Just as an example of that, we're about to enter the holiday season. We find that for most of our -- the businesses we work with, especially in retail, this is when they see the highest percentage of return consumers coming to their business. They know that consumers, when they're shopping for the holidays, come back to businesses they already know.

And that's why you see so much more incremental usage of Klaviyo. And we're excited actually to have all these -- some of the AI functionality we've delivered now, help them do a better job connecting those customers to the exact right product, to the exact right service in the most critical time of the year for them.

Scott Berg, Needham & Company.

Hi, everyone. Really nice quarter here. I guess, one question for me is we've been to a lot of sales marketing conferences in the last month or two and we've seen a ton of customer interest in the space. But budgets tend to be just a little bit light right now. And the commentary suggests that there should be a lot of expansion of budgets on some of this newer AI functionality as we get into the new calendar year.

Does that track with what you all are seeing today? Or are you seeing customers more emphatically kind of spend on some of this functionality here even in the third or fourth quarters? Thank you.

Yeah, let me make two comments on that because I think it's probably a bit of a clarification, too, of like how we think about our role in the awareness buying process, what we're -- not even think of like as the marketing and sales sales cycle.

So the first is every product that Klaviyo builds at its core, we make sure that it's like it needs to show its ROI. There needs to be revenue directly attributable back to that product.

I think that's the case that not a lot of sales and marketing products can make. Oftentimes, there are tools that you might have a sales team use or a marketing team use. And it's not only it's productivity to that person, but you can't -- you might be able to measure the hour saved, but you can't see the dollars that that product is generating.

And I get to the second point which is like, so what's the difference between how we build products for marketing, for sales, for revenue generation versus a lot of what's out there in the market. And this is why we started to attach to this word agentic. I think there's a big difference between AI products that sort of assist a person doing a job. That's great. And we should want those products, but they're -- ultimately, they're just kind of -- they're not doing the work for you, they're just helping you do the work.

What we found with a lot of the AI applications inside of Klaviyo, and if you look at what for instance our marketing agent is doing, the goal is to help assist -- to assist a little bit, but it's really doing the job that we find the business we work with -- either they don't have the time or maybe the skills to get done, or maybe they just flat out don't want to do it. And so we've now changed this paradigm where instead of using software as a tool to help somebody do their job, but still ultimately it's the person who you're really measuring the ROI on, we're now literally building algorithms agents that can do a big chunk of the process and a human can review the results.

So the example we talked about with marketing agent, we're now generating not just creative or content but entire campaigns -- who you should send to, what's the purpose. We're giving that to our customers to then review and then they're telling us, hey, whether that's good enough, maybe making some false small squeaks, and then they're deploying it. That's a totally different way of doing marketing than having a tool that helps somebody ultimately have to do all the different steps.

And then we're learning from that and seeing what the results are and automatically optimizing the content that we show them next, right, or the next campaigns that we generate. This is just a different way about thinking about leveraging AI. I think it's even more ROI driving.

And so the conversations I've talked about, you can hear the normal things of, hey, how do we make sure that the quality meets a certain bar, that you can trust that AI is actually doing the right thing. So we've built so many checks into our marketing agent. We have a whole quality agent that run -- that vets everything. People actually are so excited about that. They want to apply it to their human created content as well. They want to put on everything they're doing inside of Klaviyo.

So I think that's the big difference there is there's a difference between driving actual revenue and actually doing the work versus just being a tool that's part of the process.

Arjun Bhatia, William Blair.

Perfect, thank you. I just got a couple of quick ones. First, Amanda, I think you mentioned you're going to start running sort of pricing pilots for marketing agent coming up here. Can you just maybe touch a little bit on what that might look like and what you're starting to experiment with?

And then second, we're heading into Q4, important holiday season, as you pointed out. Just would love to get your sense on how you think that's shaping up relative to last year. Thank you.

Sure. So on Marketing Agent, we're seeing great results. We talked about on the call some of the outstanding results that our customers are seeing in terms of improvements and open rates, improvements in the KAV that they're generating per campaign. It's really helping amplify the work that they were doing and enable them to do more work at higher quality in less time. So there's a lot of excitement about it and generating a lot of value. And so we're going to start experimenting over the next couple of months with what does that look like in terms of a pricing pilot of how do we monetize it.

Some of it, we're going to continue to build into the product natively, the things that we think are really important for all brands to have access to. And a great example of that is some of the image work that we talked about on our last quarterly call. But again, in those places where customers are really seeing that incremental value, we're working on how do we charge it. And we've got great confidence in that because of the results that we're seeing from some of our other areas where we're already using AI in the product, right?

So we're live right now with customer agents and customers are seeing great results from that and it's driving page revenue. And then we're also seeing great results from marketing analytics, which incorporates a lot of AI-driven insights and analytics into helping our customers better target. So examples, we've had recently our customers -- one customer who's using marketing analytics and its predictive gender feature, which is an AI-enabled feature to predict the gender of a given consumer and better target the campaigns that get sent to them, which is helping them generate higher KAV. So again, seeing great traction there which gives us real optimism about our ability to monetize it.

And then as it turns to outlook and how we're thinking about holiday, the way that we think about holidays, this is the most important time for our customers. This is where many of them generate a huge portion of their revenue over the course of the year. And so they're hyperfocused on what will it take to make those -- make that holiday successful.

Tough to predict exactly how the holiday is going to unfold. We've seen a lot of news out there recently. But what we can say with confidence is what we've seen over the last couple of years, which is during this holiday season, consumers go back to the brands that they know and love. And so as our brands and the customers we work with are thinking about getting ready for the holiday, they're thinking about, how do I strengthen those relationships with the loyal consumers who I've already got so that I can make my holiday as successful as possible.

And the great news is that is exactly what Klaviyo helps these brands do. It's historically been and how do we help them with marketing to them, but importantly, we're becoming even more critical to their businesses as they also add in service as well and really create this end-to-end consumer experience. So we look forward to the holiday. What we believe is we've got confidence in how customers are going to turn to us across, whatever, however the holiday unfolds.

Terry Tillman, Truist Securities.

Great, good evening. This is Connor Passarella on for Terry. Thank you for taking the question. I just wanted to follow up on the previous commentary on the holiday season and specifically how that relates to service product adoption. Just for the three service products, there's introductory promotional pricing through December 31. Is there typically interest from the customer base to committing to these new -- or to new products during the holiday period of Q4, or do you kind of often have customers that just want to focus on executing into the end of the year? Thank you.

Yeah, thanks. It's a good question. So among the three, Klaviyo service products in that product line, it's a little -- it's -- we're seeing some differential behavior. So let me just walk through them.

So the first is for our Customer Hub products. We've made the integration onto our customers' websites, into their stacks so seamless, like literally just a few clicks. And it's already leveraging and trained on all of the data inside of a Klaviyo account. We're finding a lot of customers want to adopt that even up leading into the holiday season because they know it'll drive incremental revenue. So we're seeing really good uptake there.

I think similarly, where you find a lot where customers have -- that have not used a customer agent, an AI that can automatically resolve conversations or help guide consumers, there's some folks that want to test that out and have larger deployments/ We're also seeing really good uptake there.

And I'd say like maybe for larger -- and then finally, for our Helpdesk, that sometimes depending on the size of the team can be more of a bigger build of a, hey, I have to set up to learn a new system. We've already -- we had a lot of conversations with folks say, like, hey, this is great. Just talk to me later in December, early January once I get through the holiday rush. So that product might be a little bit -- that may be delayed a few months.

But in general, actually, one thing I'm really excited about is you think about we launched all these products at the end of September, there's a lot of companies that would say, hey, our technology stack is set for the end of the year. And already, we're seeing really good growth in a time when you might not expect it.

And then just to wrap up the call, look, we've been a public company now for two years, and I just want to reflect a little bit on some of the accomplishments we've had. Amanda touched on these. We've been growing logos. We've now expanded our product portfolio from beyond email and text messaging and has now incorporated a lot of marketing channels, customer service, analytics, or Klaviyo Data Platform products.

We truly are building out the CRM stack. We've done a lot of growing in international and with larger accounts in the enterprise. These are all things we said we'd set out to do when we went public. I think we're executing really well against those. And we also believe that we want to be one of the highest growth software companies at scale and prove you can do it profitably. And I think we're doing a great job of that.

And finally, when we think about AI, we look at that as a total unlock for our business and for our customers. When you give our software a logic engine, a brain that it can work on top of customers, our businesses, they're going to do better marketing, build better experiences, that it's going to drive LTD with consumers, and that's ultimately what we index for our customers -- when their customers win, that's how we win.

So anyways, thank you, everybody, for taking the time and we're going to get back to building.

Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.