Klaviyo, Inc. (KVYO) Earnings

Management highlights

- Product and AI Innovation • Klaviyo positions itself as an autonomous B2C CRM, with vertically integrated data infrastructure, experience infrastructure, and AI agents to deliver personalized consumer engagement. The data infrastructure now stores over 9 billion consumer profiles and ingests more than 250 trillion data points per quarter, and can support 100 million personalized marketing messages in under 20 minutes for large enterprise customers. • The Composer AI agent, launched in June 2026 to all customers, gained over 95,000 users in its first month, with nearly 25% becoming recurring weekly users. The share of generated campaigns that customers actually use increased from 35% to 46% in the first few weeks post-launch, and early use cases include campaign creation, audience selection, performance auditing, and optimization, delivering measurable ROI for customers. • Customer Agent, an always-on autonomous agent for customer support and sales conversations, saw adoption grow 40% quarter-over-quarter, with weekly resolution volumes up nearly 80% since early June. The product has demonstrated 3x ROI for early adopters, and an AI-powered agent trainer has improved resolution rates from 52% to 79% for one large enterprise customer in 7 days with no extra engineering work. • Data and analytics products powered by AI/ML for behavior prediction are delivering strong growth, with customers seeing clear ROI from improved marketing personalization. The company has improved deliverability and compliance year-over-year, with lower unsubscribe, spam, and bounce rates and higher engagement rates. - Go-to-Market and Growth Traction • Go-to-market process improvements and strengthened sales leadership have delivered improved sales efficiency globally, particularly in the enterprise segment. The company is seeing widespread enterprise adoption driven by legacy system replacement, with multiple large recent wins including Warner Music Group, Claire's, the San Francisco 49ers, and Country Road Group. • The company signed its largest ever deal in Q2: an eight-figure multi-product, two-year contract with a fast-growing e-commerce brand. • International expansion is accelerating: a new France office and EU data center will launch in H2 2026, and the company is expanding local sales and marketing presence across EMEA and APAC. The B2C CRM total market opportunity is estimated at over $160 billion. • Net new customer additions are up 29% year-over-year, with growing adoption across SMB and mid-market segments, and more customers are committing to multi-year contracts and adopting multiple Klaviyo products. - Leadership Updates • Klaviyo acquired Agency, with Agency founder Elias Torres joining as Chief Product Officer to accelerate AI agent product development. Erica Smith will join as the new CFO on September 1, 2026, with outgoing CFO Amanda Whalen remaining in an advisory role through November 2026.

Guidance

- Full-year 2026 revenue guidance is raised to a range of $1.526 billion to $1.534 billion, representing 24% year-over-year growth, an increase of $12 million at the midpoint compared to prior guidance. - Full-year 2026 non-GAAP operating income guidance is lowered to a range of $212 million to $218 million (approximately 14% non-GAAP operating margin), a $10 million reduction at the midpoint. This revision includes $10 million to $12 million in costs associated with the Agency acquisition and continued investments in AI product innovation. - Q3 2026 revenue guidance is set at $377 million to $381 million, representing 21.5% to 22.5% year-over-year growth. - Q3 2026 non-GAAP operating income is guided to $40 million to $43 million, with a non-GAAP operating margin of 10.5% to 11%. Non-GAAP gross margin is expected to be slightly lower in Q3 compared to Q2, with a larger-than-normal seasonal step-down expected in Q4 due to faster growth in text messaging relative to total company growth. - The company will continue repurchasing shares under its existing $500 million buyback authorization, with $160 million of capacity remaining as of the end of Q2.

Segment performance

Klaviyo reports overall Q2 2026 revenue of $370.6 million, growing 26% year-over-year, with an annualized revenue run rate of nearly $1.5 billion. The enterprise segment (customers with $50K+ ARR) grew 36% year-over-year to 4,477 customers, and this segment represents approximately 40% of total ARR. Customers using three or more products contribute nearly 20% of total ARR, and these multi-product customers have gross retention that is more than 6 percentage points higher than single-product customers. Revenue from outside the Americas grew 35% year-over-year, with EMEA revenue outside the UK up 41% year-over-year. Data and analytics products, including marketing analytics, are growing ARR more than 100% year-over-year. Text messaging and WhatsApp are key growth drivers, with multi-channel campaign usage increasing nearly 50% quarter-over-quarter. Net revenue retention for the total company was 109% in Q2 2026.

Risks & headwinds

- Forward-looking statements around product adoption, revenue growth, and margin expansion are subject to inherent uncertainties, including customer adoption rates for new AI products, changes in carrier fees, macroeconomic conditions affecting customer marketing spend, and competitive pressures in the B2C CRM market. - The trailing 12-month net revenue retention metric will continue to be impacted by lapping of last year's profile enforcement through Q1 2027, which temporarily suppresses the NRR reading despite strong underlying retention and expansion trends. - Enterprise sales motion building is an ongoing journey, and there is no guarantee that the company will meet expected large deal win rates or growth targets for the enterprise segment. - Higher carrier fees for text messaging have pressured near-term gross margins, and the pricing change to pass through higher fees will not impact full-year 2026 results due to renewal timing, meaning margin pressure from this factor will persist in the near term.

Analyst Q&A

• Q: Early Composer adoption has been strong. How does removing marketing headcount bottlenecks affect campaign velocity and incremental platform usage/contract value?

  A: Composer supports three core functions: pre-campaign research, campaign/automation generation, and ongoing verification/optimization, leveraging Klaviyo's stored customer data to inform decisions like audience selection and send timing. Early data shows Composer users are increasing Klaviyo engagement, driving higher profile utilization, more Klaviyo-attributed revenue, and increased text messaging volume. Over time, paid Composer credits are expected to drive incremental revenue as customers see clear ROI from the tool.

• Q: What is driving SMS/WhatsApp traction, and how should we think about gross margin pressure from this channel?

  A: Customers increasingly want all messaging channels unified on a single platform with centralized customer profiles, leading to a 50% quarter-over-quarter increase in multi-channel campaign usage, with many enterprises consolidating from legacy providers to Klaviyo for email, text, WhatsApp, and analytics. Gross margin pressure in Q2 came from higher carrier fees, infrastructure investments, and text's larger share of revenue. The company updated Q3 mobile pricing to pass higher carrier fees to customers going forward, which will be neutral to 2026 results due to renewal timing. Text has strong standalone unit economics with lower CAC from cross-selling and higher expansion, and strategically drives higher retention and cross-sell opportunities for higher-margin products long-term.

• Q: What is the strategic reasoning behind the Agency acquisition, and how does it accelerate AI product development?

  A: Andrew Bialecki has known Agency founder Elias Torres for over a decade, and both share the vision that every business will need AI agents to drive growth and personalize customer experiences. The acquisition's primary goal is to accelerate the pace of AI agent development across Composer and Customer Agent, allowing Klaviyo to bring its autonomous B2C CRM vision to market faster. Torres will join as CPO, with Bialecki focusing more on enterprise customer needs and product requirements for large accounts.

• Q: How does Klaviyo's broader AI agent vision improve enterprise sales conversations, especially for legacy replacement deals?

  A: Enterprise customers are prioritizing tech stack consolidation and AI innovation, and Klaviyo's full platform of agents, unified data, and robust infrastructure aligns perfectly with these priorities. Customers increasingly choose Klaviyo to replace multiple legacy platforms, drawn to the AI vision, interoperability with leading LLMs, and lower total cost of ownership from consolidation. Composer adoption is faster among enterprise customers, as it helps manage the complexity of large marketing programs, audits existing campaigns, and speeds up onboarding for new team members. Recent large enterprise wins explicitly cited Klaviyo's AI vision and infrastructure scalability as key decision factors.

• Q: How will Composer and Customer Agent be monetized, and what ARR uplift can be expected for adopting customers?

  A: Composer uses a credit-based model: all customers get 10,000 free credits for a 90-day trial, and customers already started paying for additional credits even during the trial period. Customer Agent uses an outcome-based, per-resolution pricing model, where customers only pay when the AI resolves a conversation autonomously. Management confirms that adoption of these products delivers a meaningful uplift to average customer ARR, with variation based on usage volume, and the products are expected to become large revenue drivers over time.