Kaltura, Inc. (KLTR) Earnings

Management highlights

- Financial Performance Highlights * Total Q2 2026 revenue was $46.9 million, up 5% year-over-year and 5% sequentially. Subscription revenue reached $45.6 million, up 8% year-over-year and 6% sequentially. Professional services revenue was $1.3 million, down 40% year-over-year, aligned with the company's focus on recurring revenue. * Adjusted EBITDA was $5.9 million, up 44% year-over-year, exceeding the high end of prior guidance, with an adjusted EBITDA margin of 12% (up 300 bps YoY). Non-GAAP gross margin hit a record 75%, with non-GAAP subscription gross margin reaching 79%. * Annualized Recurring Revenue (ARR) was $184.6 million, up 8% year-over-year and 9% sequentially. Net dollar retention was 96%, up 100 bps from the prior quarter, and growth retention reached its highest level since Q4 2022. - AI Product Progress * Signed a record 14 new deals including one or more AI offerings in Q2, doubling the previous quarterly record. 9 deals included the agentic avatars product, 4 had six-digit total contract value (TCV), and 8 were with new logos across 6 industries. Total combined TCV of these deals was approximately $1 million, with limited near-term revenue contribution expected until a meaningful ramp in 2027. * Current AI pipeline includes over 500 active opportunities across all stages, representing ~$17 million in non-weighted potential annual contract value (ACV). One-third of opportunities and potential ACV come from new logos, with agentic avatars emerging as the primary entry point to the Kaltura platform. - Product Development and Strategic Transition * Completed core platform integration of Kaltura and PathFactory, enabling synchronized content and workflows across both platforms to create a unified first-party data and content intelligence layer. * Enhanced AI avatar product capabilities: added B-roll and URL-to-video automation, expanded multilingual support, improved enterprise governance and API-first embedding options. * Embedded conversational AI across the entire product portfolio to enable intent understanding, personalized recommendations, and guided user journeys beyond static content search. * Earned multiple industry recognitions, including Leader status in the Q2 2026 Forrester Wave for Virtual Events Management Platforms and the 2026 Aragon Research Globe for Enterprise Video. - Upcoming Strategic Roadmap * Expanding AI avatar capabilities to include richer gestures, emotional expression, improved personalization, and real-time generative multimodal user experiences in H2 2026. * Packaging existing AI capabilities into two flagship integrated solutions: agentic revenue engagement (addressing a $20+ billion total addressable market) and agentic learning and enablement (also addressing a $20+ billion TAM).

Guidance

- Third Quarter 2026 Guidance: * Subscription revenue expected between $43.9 million and $44.6 million, representing 5% to 6% year-over-year growth. * Total revenue expected between $45.8 million and $46.5 million, representing 4% to 6% year-over-year growth. * Adjusted EBITDA expected between $2 million and $3 million. - Full Year 2026 Guidance (upward revision from prior guidance, with slightly narrowed revenue ranges): * Subscription revenue expected between $176.6 million and $178.6 million, representing 3% to 4% year-over-year growth. * Total revenue expected between $183 million and $185 million, representing 1% to 2% year-over-year growth. * Adjusted EBITDA expected between $15.8 million and $17.2 million. - Segment Level Forecasts: * EENT is expected to deliver higher year-over-year revenue growth than 2025, supported by PathFactory contribution and early AI product revenue in H2 2026, with larger AI contributions coming in 2027. * M&T is still expected to see a full-year 2026 year-over-year revenue decline due to elevated 2025 churn, but management forecasts higher new bookings and improved retention in 2026, with sequential quarterly revenue growth returning to M&T in 2027. * Professional services revenue is expected to see a material year-over-year decline across both segments in 2026, aligned with the strategic shift to recurring subscription revenue. - Cost assumptions include PathFactory integration costs, continued investment in the new AI product portfolio, and existing FX headwinds.

Segment performance

Kaltura reports two operating segments: Enterprise Education and Technology (EENT), and Media and Telecom (M&T). For Q2 2026: - EENT: Total revenue was $36.8 million, up 11% year-over-year. Subscription revenue was $36.4 million, up 12% year-over-year. Professional services revenue was $0.4 million, down 43% year-over-year. EENT contributed 78.5% of total Q2 revenue. - M&T: Total revenue was $10.1 million, down 10% year-over-year. Subscription revenue was $9.2 million, down 6% year-over-year. Professional services revenue was $0.9 million, down 38% year-over-year. M&T contributed 21.5% of total Q2 revenue.

Risks & headwinds

- The standalone PathFactory core product has a history of declining revenue, and management expects continued near-term revenue headwinds for the original PathFactory customer base over the next several quarters as consolidation and integration continue. * AI pipeline values are non-weighted and include all opportunities across all stages, so not all opportunities will convert to closed-won deals, and early adoption trends may not translate to sustained long-term revenue growth. * Near-term net dollar retention (NDR) may face pressure from roll-offs of certain legacy PathFactory customer contracts, and NDR improvement will lag improvements in growth retention. * Forward-looking statements around AI adoption and revenue ramp are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in Kaltura's SEC filings.

Analyst Q&A

• Q: How is Kaltura building its AI pipeline and breaking into new verticals for avatar and agentic products, and where are the most attractive pipeline opportunities? /

  A: New AI offerings are driving customer switches from incumbent vendors, as low switching friction for new AI use cases removes historical barriers to new customer acquisition. Kaltura uses a vertically segmented go-to-market structure, with dedicated coverage for education, M&T, and enterprise verticals (tech, healthcare, etc.) led by US demand, and growing channel partnership opportunities. The company uses four core sales motions: conversational AI agents, AI content creation, cross-selling between Kaltura and PathFactory, and full bundled platform sales targeting incumbents. Opportunities are spread evenly across customer, employee, learner, and audience use cases across multiple verticals. (317 words)

• Q: How much of Q2 2026 ARR growth was M&A-driven vs organic, and what is the expected level of PathFactory attrition post-acquisition? /

  A: PathFactory contributed $4.9 million in Q2 subscription revenue, which was higher than management's original conservative forecast. Some near-term attrition of the original PathFactory customer base is expected over the next 2-3 quarters, which was already built into guidance prior to the quarter. After accounting for one-time on-premise revenue in Q1 2026, organic core Kaltura revenue was flattish in Q2, in line with seasonal expectations. Management expects overall sequential revenue growth to resume in the back half of 2026 as AI gains traction and overtakes remaining PathFactory headwinds. (221 words)

• Q: How is Kaltura adapting its go-to-market operations and sales team to roll out new agentic and avatar products, especially post-PathFactory integration? /

  A: The shift to AI and integrated solutions is an evolution of Kaltura's existing go-to-market, not a revolution, so the same customer base and buyer roles are still targeted. The company is currently holding a multi-day sales training bootcamp focused on the new integrated agentic revenue engagement and agentic learning solutions. The PathFactory and Kaltura teams are fully integrated across sales, marketing, and R&D, with strong alignment already in place. Kaltura is hiring limited new talent with AI go-to-market experience, but existing sales teams are successfully adapting to the updated product portfolio, supporting strong early pipeline growth. (218 words)

• Q: What is driving expected near-term churn for the core PathFactory product? /

  A: Prior to acquisition, standalone PathFactory faced competitive pressure as a standalone content intelligence layer, leading to pre-existing revenue decline. Kaltura acquired PathFactory primarily to use its content intelligence and journey orchestration capabilities as the 'brain' for Kaltura's new end-to-end agentic solutions, not to continue selling it as a standalone product. While there is renewed interest in standalone PathFactory from Kaltura's existing customer base, management baked in conservative churn assumptions for the original standalone customer base pre-acquisition. The long-term opportunity is in combining PathFactory's capabilities with Kaltura's content and experience layers to create full agentic solutions for both revenue engagement and learning use cases. (214 words)