I previously wrote about Amplitude (NASDAQ: AMPL) with a hold rating, but now I have upgraded my rating to buy. I see potential for growth acceleration in the upcoming quarters, especially in the fourth quarter of 2024. Amplitude’s 2Q24 earnings showed total revenue of $73.3 million, an 8.2% year-over-year growth. Despite positive growth, the adjusted gross margin decreased by 190bps year-over-year to 75.6%, leading to an adjusted EBIT decline.
However, Amplitude has been performing better than expected. Total revenue grew 8.7% year-over-year in the first half of 2024, exceeding expectations. Billings were also strong in the quarter, reaching $95 million. Despite challenges like Russia headwinds, the growth performance has been positive. Management raised the FY24 revenue guidance, showing confidence in the company’s growth potential.
Three key operating observations support Amplitude’s potential for growth acceleration. Firstly, there has been strong customer growth traction, with an increase in total paying customers, customers with more than $100k ARR, and net new customers. Secondly, the net retention rate decline has softened, indicating an end to the multi-year deal headwinds. Lastly, the new go-to-market strategy focusing on enterprise accounts has been successful, with an increase in average deal size.
Looking ahead, the launch of New Amplitude in September could further accelerate Amplitude’s growth. The new product aims to simplify the onboarding process, targeting customers with less technical experience and broadening the company’s market reach. Based on research and analysis, I am bullish on Amplitude’s growth outlook, expecting revenue to grow back to the mid-teens as macro conditions improve.
While there are risks such as the New Amplitude product not meeting expectations and multi-year deal headwinds persisting, I believe Amplitude’s strong performance and strategic initiatives make it a compelling investment. I give a buy rating for AMPL as the company continues to deliver robust customer growth and pivot its strategy successfully. The upcoming launch of New Amplitude could be a significant catalyst for growth acceleration.
