(This is a business recap, which is shorter than an update. Check out last quarter’s 2Q25 AppFolio update here where we included expert call insights on competition).
3Q25 Update.
AppFolio reported strong 3Q25 results and the stock was up +8% the next day.
Revenues accelerated 200bps to +21% y/y. This is the 2nd quarter revenue accelerated, driven by new customer wins, successful upselling to their Plus and Max premium tiers, and greater adoption of their value-added services.
Core Services grew +17% y/y, down -200bps sequentially, with units under management growing ~200k q/q to 9.1mn, while total customers were rose +7% y/y to 21,759.
Meanwhile, Value Added services revenues accelerated 300bps to +22% y/y to $192mn. Management noted stronger usage of risk mitigation tools, new screening offerings, and increased online payment activity, particularly through credit and debit card rent payments. Partnerships with Live Easy and Second Nature also began contributing to sales during the quarter.
On these strong results, they increased guidance for the year to $945-950mn, from $935-945mn, which represents +19% y/y growth at the midpoint.
However, profitability continued to decrease as they lean into growth investments. GAAP operating margin were 14%, down -700bps y/y, as margins compressed due to higher S&M spend. As a % of revenue, S&M was 14% vs 12% in 3Q24. R&D and G&A also grew, up +170bps, due to increase spending on data centers and their annual corporate bonus plan.
On the product side, AppFolio continues to advance its AI-driven platform, Realm-X. CEO Shane Trigg highlighted meaningful productivity improvements, noting that “vacancies are being filled more than five days faster, renewal rates are increasing by 20%, and customers are saving an average of 10 hours per week on routine tasks.”
In addition, they also mentioned new additions to their stack offering. Procure, developed through a new partnership, enables vertically integrated real estate and construction firms to automate workflows on AppFolio’s platform. They introduced Resident Onboarding Life and reimagined their FolioSpace solution, to help streamline the onboarding experience to improve faster move-ins and decrease follow ups.
All in all, AppFolio continues to execute well by expanding their offerings and increasing their revenue per use. Their streamlined platform with little tech debt has positioned them well to quickly roll out AI-enabled tools while competitors have lagged here. This doesn’t just provide new revenue opportunity, but helps in customer acquisition as well.
At a $255 stock price their market cap is $9.2bn for a 10x revenue multiple. If we assume 30% mature margins, then they are currently trading at 42x stead-state earnings. As a reminder, our mature margin assumption is lower than typical SaaS because of their payments revenue which carries a lower margin (their gross margins are in the low 60s versus 80% at the high end for SaaS). An investor would likely want to be comfortable assuming at least high teens to 20% growth for several years out in order for AppFolio to meet their hurdle rate.
Call Notes.
Core Solutions
- Grew +17% y/y to $54mn driven by new customers, growth in total units under management, and more customers choosing Plus and Max premium tiers
- Ended 3Q with 9.1mn units from 21,759 customers up +7% y/y
Value-Added Services
- Grew +22% y/y to $192mn due to greater use and adoption of their risk mitigation services, new screening offerings, online payments, use of credit and debit cards for rent payments and growth in units under management
- Live Easy and Second Nature partnership are beginning to contribute to sales
Realm-X
- Performers is the latest innovation in our Realm-X embedded AI suite
- “With Performers, we’re moving beyond traditional automation to agentic, goal-driven AI, transforming the performance of our customers’ business. Performers are designed to handle both routine and exception tasks, adapt to changing situations and optimize for business goals set by property managers.”
- “Initial offerings include the Realm-X Leasing Performer, Maintenance Performer and Resident Messenger Performer, which automate lead to lease, maintenance triage and resident communications, respectively. Customers fully adopting Realm-X are seeing tangible outcomes.”
- “Vacancies are being filled more than 5 days faster. Renewal rates are increasing by 20% and net operating income is almost 3% higher and an average of 10 hours per week are saved on completing tasks.”
Procure
- “One of our newest Stack partners is Procore. A growing number of our customers run vertically integrated businesses that include real estate development and construction. And this partnership means they can manage their entire operation on AppFolio by automatically syncing project financials with Procore.”
FolioSpace
- “We fully reimagine the resident onboarding experience, transforming one of the most stressful parts of the resident journey into a simplified guided workflow for crucial tasks like lease signing, payment, insurance and utility setup. This provides both residents and property managers a clear streamlined path, resulting in faster move-ins and a reduction in follow-up calls.”
Resident Onboarding Lift
- ‘We’ve launched Resident Onboarding Lift, co-created by AppFolio and Second Nature. Onboarding Lift focuses on meeting residents’ needs at the time they need it most by delivering highly desired value-added services such as credit building, pest control and discounted group rate Internet. This creates a win-win that elevates the resident experience while being a differentiator for property managers.”
Margin
- Non-GAAP Operating margin was 23.5% 520bps lower than last year due to accrued $13mn expense as a result of their annual corporate bonus plan. Excluding this impact, operating margins was ~29%
Cost of Revenue
- Grew 2 points y/y to 36% as a result of increased adoption of credit cards, additional data center spend, and additional expense from bonus plan over attainment
Guidance
- Raised their full year 2025 revenues to $945-950mn ~19% y/y
- Cost of revenues will continue to be higher
- Operating margin as a percent of revenue is projected to be lower than last year with revenue mix impacting cost of revenues, growth in sales capacity, increased spending to support usage of our new resident and AI capabilities and additional expense from expected bonus plan over attainment.
For further reading, check out our 66-page AppFolio Research Report.
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*At the time of this writing, one or more contributors to this report has a position in APPF. Furthermore, accounts one or more contributors advise on may also have a position in APPF. This may change without notice.
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