Amplitude (AMPL -1.95%) caught a lot of attention from investors when it debuted in 2021.
At the time, the cloud software company, which is focused on product analytics, was growing rapidly and tech stocks were still booming from the pandemic-driven tailwinds. However, Amplitude tumbled in the tech crash in 2022. The stock plunged and growth has slowed as many of its customers realized that they overestimated their need for its services, much like they did with most other software products, as the tech industry lost some of its primacy in the economic reopening following the pandemic lockdowns.
The company was forced to lay off employees and retrench, and after some acquisitions and with the headwinds from the customer spend rationalization finally rolling off, Amplitude looks as strong as it's been in a long time.
In fact, the stock has surged of late, up 56% over the last year as investors have responded to the company's momentum in its product lineup. However, there's one thing investors should be watching now.
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What can Amplitude do with AI?
Amplitude, which still trades in a small-cap range at a market cap of less than $2 billion, is arguably as well-positioned as any company of its size to capitalize on AI technology.
The company helps businesses discover and understand how customers use their digital products, like websites, apps, and other devices so they can learn what's working and make improvements.
In the digital era, that's a valuable tool, and it could be greatly enhanced with artificial intelligence, which has the power to automate insights that now require a human to glean through data analysis.
The company introduced its new Amplitude AI agents in June, which will do things like pull dashboards, run queries, test hypotheses, and determine which leads are the most promising.
Among the specific AI agent templates are website conversion agents, onboarding agents, feature adoption agents, and monetization agents, which help improve the nuts-and-bolts points of engagement that most businesses are trying to accomplish online.
Amplitude followed that up in July with its acquisition of Kraftful, an AI-native Voice of the Customer (VoC) start-up. Amplitude will capitalize on Kraftful's proprietary large language model (LLM), which can process massive amounts of user feedback data. The acquisition will help Amplitude further lock the capabilities in the data its software is uncovering, making its product suite even more valuable for customers.
What's next for Amplitude
In its first quarter, Amplitude reported 12% annual recurring revenue growth and 10% overall revenue growth, an improvement from recent years.
The company has seen a jump in remaining performance obligations as well, which rose 30% to $325.9 million, showing that its customers are committing to longer contracts. That's a good sign that growth momentum is returning after years of elevated churn coming off the pandemic.
Amplitude has a large base of more than 4,000 customers, ranging across industries from tech to consumer to industrials, and that includes 27% of the Fortune 100, showing it's landing large companies as well.
Seeing a bump from the new AI agents could take time, but the new products will almost certainly help accelerate Amplitude's growth over the long term.
The company was recently rated No. 1 in product analytics by G2, a research firm, and it has gained market share from larger competitors like Google Analytics and Adobe Analytics, which are more focused on marketing analytics rather than product analytics.
As a leader in an emerging niche in software at a market cap of just $1.5 billion, Amplitude has a lot of upside potential. If its new AI agents gain traction, the stock could soar.
