ON24 (ONTF)

Digital engagement platform ON24 (NYSE:ONTF) reported Q4 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 5.6% year on year to $34.64 million. Its non-GAAP profit of $0.05 per share was significantly above analysts’ consensus estimates.

Company Overview

Powering over 1,700 companies' virtual marketing efforts since 1998, ON24 (NYSE:ONTF) provides a cloud-based platform that enables businesses to create interactive digital experiences and capture actionable data from customer engagement.

Online marketing and sales are expanding at a rapid pace. Compared to the offline advertising market, which has been affected by the Covid pandemic and is challenging to measure and improve, more organizations are expected to adopt data-driven digital engagement platforms to better engage their customers online.

ON24 competes with web conferencing platforms like Zoom (NASDAQ:ZM) and Microsoft Teams (NASDAQ:MSFT), virtual event solutions from Cvent (NYSE:CVT) and Notified, and marketing engagement tools from Adobe (NASDAQ:ADBE) and Cisco (NASDAQ:CSCO).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. ON24’s demand was weak over the last five years as its sales fell at a 2.4% annual rate. This wasn’t a great result and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. ON24’s recent performance shows its demand remained suppressed as its revenue has declined by 7.8% annually over the last two years.

This quarter, ON24’s revenue fell by 5.6% year on year to $34.64 million but beat Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to decline by 3.3% over the next 12 months. While this projection is better than its two-year trend, it’s tough to feel optimistic about a company facing demand difficulties.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

ON24’s billings came in at $37.16 million in Q4, and it averaged 5.8% year-on-year declines over the last four quarters. This performance mirrored its total sales and shows the company faced challenges in acquiring and retaining customers. It also suggests there may be increasing competition or market saturation.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

It’s relatively expensive for ON24 to acquire new customers as its CAC payback period checked in at 386.6 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.

For software companies like ON24, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

ON24’s gross margin is good for a software business and points to its solid unit economics, competitive products and services, and lack of meaningful pricing pressure. As you can see below, it averaged an impressive 75.1% gross margin over the last year. Said differently, ON24 paid its providers $24.90 for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. ON24 has seen gross margins improve by 1.8 percentage points over the last 2 year, which is solid in the software space.

ON24’s gross profit margin came in at 75% this quarter, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

ON24’s expensive cost structure has contributed to an average operating margin of negative 25.7% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if ON24 reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

On the plus side, ON24’s operating margin rose by 8.5 percentage points over the last two years. Still, it will take much more for the company to reach long-term profitability.

In Q4, ON24 generated a negative 23.5% operating margin. The company's consistent lack of profits raise a flag.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

ON24 has shown poor cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.8%, lousy for a software business.

ON24 burned through $2.21 million of cash in Q4, equivalent to a negative 6.4% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts predict ON24’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 2.8% for the last 12 months will increase to 4.9%, giving it more flexibility for investments, share buybacks, and dividends.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

ON24 is a well-capitalized company with $167.5 million of cash and $5.57 million of debt on its balance sheet. This $162 million net cash position is 47.4% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see ON24 beat analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its billings fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $8.01 immediately after reporting.

Updated: February 26, 2026 at 9:27 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in ON24.

We cheer for all companies solving complex business issues, but in the case of ON24, we’ll be cheering from the sidelines. First off, its revenue has declined over the last five years, and analysts don’t see anything changing over the next 12 months. While its gross margin suggests it can generate sustainable profits, the downside is its ARR has disappointed and shows the company is having difficulty retaining customers and their spending. On top of that, its operating margins reveal poor profitability compared to other software companies.

ON24’s price-to-sales ratio based on the next 12 months is 2.5x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $8.10 on the company (compared to the current share price of $8.01).