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4Q25 Update.
AppFolio reported decent 4Q25 results and the stock was down -9% in next day trading.
Revenues accelerated 100 bps to 22% y/y. This marked the 3rd consecutive quarter of acceleration after a soft 1Q. However, full-year 2025 revenue growth is still lower than last year at 20% vs 28% in 2024.
Core Services revenues grew 17% y/y to $56mn in the quarter, driven by 1) winning new customers, 2) growth in total units under management, and 3) more customers choosing their plus and max premium tiers. They mentioned that adoption for plus and max premium tiers exceeded 25%, which suggested some more success with penetrating the largest property managers. As a reminder, they have traditionally focused on SMB property managers and only recently gone up market. The initial foray into the end of the market was met with significant investor skepticism as incumbents like Yardi have long dominated that area. It is encouraging to see them already get some wins despite a product that is generally lacking in the complete feature set (particularly accounting) that complex property managers want. (See our 2Q25 update here for a more full competitive analysis).
For full-year 2025, Core Services revenues accelerated 180bps to +17% y/y from 15% in 2024. (On the call, they noted that they are renaming this segment to “Subscription Service Revenues” going forward.) At the end of the year, AppFolio ended with 9.4mn units from 22,096 customers, which is up 8% y/y and 6%y/y, which is a reacceleration of 200bps from last year.
Meanwhile, Value Added Service revenues grew 20% y/y in 4Q to $185mn, down -200bps from 22% last Q. For the full-year 2025, total revenues grew 19% to $722mn, which was a deceleration of 14 points from 33% last year.
Keep in mind that as they roll out more premium packages, they may include some value added services and so that revenue get’s booked in the Core Services line, but it is not indicative of the features being less demanded. On the call they mentioned that they continued to see great use and adoption in FolioGuard risk mitigation services, Folio Screen offerings, and online payments, with newer offerings such as Resident Onboarding Lift and LiveEasy beginning to contribute incrementally.
While the company exited the year with strong low 20% growth, their 2026 guidance calls for a slight moderation of growth. Management is guiding for a deceleration of revenue growth at 17% to $1.1-1.12bn, with cost of revenues being flat y/y/ for 2026.
Turning to profitability, gross margins improved slightly to 64% q/q, and GAAP operating margins expanded 400bps to 18%. Driving this increase in operating margin for the quarter was a 320bps decrease in R&D expenses as a % of revenue, and -180bps decrease in G&A as a % of revenue, showing some operating leverage. S&M spend however, did increase 180bps to 16% of revenues.
For 2025, GAAP operating margins fell -100bps to 16% due to higher S&M spend. In addition, operating margins declined due to performance levels attained under their 2025 corporate incentive plan, which resulted in an additional expense of $15mn.
On the call, AppFolio CEO Shane Trigg noted a benchmark report that stated 77% of property managers expect to increase unit counts in 2026. This number was 65% a year ago, which signals that property manager expectations are increasingly positive for 2026. In addition, Shane Trigg mentioned that 98% of AppFolio’s customers are using one or more AI capabilities on their platform. And 45% of say they plan to consolidate their software solutions, which is key to AppFolio’s value prop as their unified platform simplifies a property managers operations. It is also worth mentioned that their platform is built to quickly iterate off of, which has allowed them to be first to market with many AI-enabled featured.
CEO Shane Trigg reiterated three strategic pillars guiding the company: differentiating through AI-driven product innovation, delivering value efficiently through premium tier adoption and workflow automation, and sustaining a strong internal culture. Initiatives such as Realm-X agentic AI capabilities, new integration partners like Genesis for rent recovery, and bundled services such as Group Rate Internet are intended to deepen platform engagement and increase wallet share among existing customers.
Overall, AppFolio continues to execute well by expanding their offerings and increasing their revenue per user. While competitors have lagged in rolling out AI-enabled tools, AppFolio’s streamlined and comprehensive platform positioned them well to not only grow revenues, but to acquire customers as well. Their success here is showing up in the numbers with revenue growth reaccelerating after the launch of these features. There is still much more for them to build though.
Valuation.
At a $185 stock price, their market cap is $6.7bn for a 7x TTM revenue multiple. If we assume 30% mature margins, then they are currently trading at 29x steady-state earnings or 25x if we take next year’s guidance figures. As a reminder, our mature margin assumption is lower than typical SaaS because of AppFolio’s payments revenue which carries a lower margin. An investor would likely want to be comfortable assuming high teens to 20% revenue growth for several years in order for AppFolio to meet their hurdle rate. In order to better understand what is priced into the stock, we updated our reverse DCF below.
We used the same margin assumptions that range from 25% at the low end to 40% at the high end.
We vary revenue growth in 4 scenarios from 8% to 20%. The 20% scenario is particularly aggressive and the 8% scenario is very conservative.
Below we see the Reverse DCF outputs. If an investor was comfortable assuming the mid-teens revenue growth scenario and 30% margins, the returns are close to ~10%.
We share some more call notes below.
Call Notes.
Core Services
- Grew 17% y/y to $56mn driven by winning new customers, growth in total units under management and more customers choosing our Plus and Max premium tiers.
- Ended 4Q and 2025 with 9.4mn units from 22,096 customers, up 8% y/y and 6% y/y, which is a reacceleration
- Renaming Core Revenue to Subscription Services Revenue going forward
Value-Added Services
- Grew 20% y/y to $185mn in 4Q, reflects greater use and adoption of FolioGuard risk mitigation services, Folio Screen offerings, and online payments, as well as growth in units under management
- Resident Onboarding Lift and LiveEasy are also beginning to contribute to value-added services
Benchmark Report
- 81% of managers feel positive and 77% expect to increase unit counts (this was up from 65% a year ago) [optimism has continued]
- Operators are turning to technology but half of AI users in the industry report they cannot rely on the AI features embedded in their core property management systems. By contrast, 98% of AppFolio’s customers are already actively using 1 or more AI capabilities included in our performance platform.
- 45% of survey respondents say they plan to consolidate their software solutions, underscoring the value of a unified platform that reduces fragmentation and delivers a cohesive experience.
3 Strategic Durable Pillars
- Differentiate to Win
- At the Future industry event, they introduced their first of 3 Realm-X Performers. Moved from automation to agentic AI. “Demand for our agentic AI capabilities has translated into rapid adoption across the platform with the transition from smart maintenance to Realm-X maintenance performer largely complete and leasing performers seeing accelerated adoption that outpaces our previous generation of leasing tools.”
- New rent recovery partner Genesis: partners are brought into the user experience, allowing Realm-X Flows to trigger actions within integrations
- Danielle Holloway McCarthy, Customer Advanced Management Company President, “Before we were relying on 9 separate systems to manage our properties, which made it impossible to deliver a truly seamless resident experience. AppFolio’s AI-native platform changed all of that by consolidating our data and automating our core workflows, we freed up our teams to focus instead on creating meaningful connections with our residents. With a unified system, we’re not just improving productivity, we’re building an environment where everyone can thrive.”
- Deliver Performance Efficiently
- Adoption of premium tiers, Plus and Max, exceeded 25%
- New service within Resident Onboarding Lift is Group Rate Internet, which allows property managers to offer their residents fully managed, high-speed internet at an attractive rate
- Great People and Culture
- I joined in 2020, we set a goal to reach $1 billion in revenue. This year, we’re poised to hit that milestone. It’s a testament to what’s possible when we stay focused on our customers, deliver industry-leading innovation, and maintain operational discipline.
Profitability
- Operating margins declined due to performance levels attained under their 2025 corportate incentive plan, which resulted in an additional expense of $15mn
- Cost of revenue was 36%, down 100bps from 37% in 4Q. For 2025 however, cost of revenue increased from 35% rose 100bps to 35%, driven primarily by payments mix, additional data center spend, and the additional expense from the 2025 bonus plan over-attainment
Guidance
- $1.1-1.12bn in revenues (17% growth). Revenue seasonality consistent with 2025
- Cost of revenues to be flat compared to 2025
*At the time of this writing, one or more contributors to this report have a position in APPF. Furthermore, accounts one or more contributors advise on may also have a position in APPF. This may change without notice.