AppFolio’s third-quarter revenue rose 19% to $296 million, and the property management software company raised the bottom of its full-year sales forecast. The Santa Barbara, Calif., company also narrowed its profit-margin outlook from the top and reported a sharp jump in sales and marketing spending.
In its Oct. 22 earnings release, AppFolio said units under management on its platform grew 8% from a year earlier to 9.8 million, up from 9.6 million at the end of June. GAAP operating income rose 64% to $57 million, or 19.4% of revenue, from $35 million, or 14.1% of revenue, in the third quarter of 2025. Net income was $46.0 million, or $1.29 per diluted share, compared with $33.6 million, or $0.93, a year earlier.
“Q3 reflects the strength and durability of our business, as new and existing customers continue to adopt our performance platform,” Chairman and CEO Shane Trigg said in the release. “The promise of Real Estate Performance Management is helping create a future of winning with our customers, turning performance into a competitive advantage that compounds over time.”
Where the growth came from
Most of AppFolio’s revenue now comes from what it reports as value added services, as opposed to software subscription fees. According to the financial tables in the company’s SEC filing, value added services revenue rose about 21% to $231.9 million in the quarter, from $192.1 million a year earlier. Subscription revenue rose about 14.5% to $61.5 million, from $53.8 million. Value added services made up about 78% of total revenue.
The cost side moved in different directions. Sales and marketing expense rose about 35% to $48.6 million, from $35.9 million. Research and product development spending slipped to $53.1 million, from $54.0 million, and fell to 18% of revenue from 22%. General and administrative expense also declined. Non-GAAP operating income, which excludes stock-based compensation and amortization of acquired intangibles, rose 38% to $81 million, or 27.3% of revenue.
Cash from operations was $97 million in the quarter, or 32.7% of revenue, up from $86 million a year earlier. AppFolio ended September with $258.5 million of cash and cash equivalents, compared with $107.0 million at the end of 2025.
A tighter outlook
AppFolio now expects 2026 revenue of $1.122 billion to $1.127 billion. In July it had forecast $1.117 billion to $1.127 billion, so the change raises the low end and leaves the top unchanged. The company narrowed its full-year non-GAAP operating margin forecast to 26.5% to 27.5%, from 26.5% to 28.0% in July, trimming the top of that range. It still expects about 36 million diluted shares for the year.
The company reported $839.0 million of revenue through September. On our arithmetic, the new full-year range implies fourth-quarter revenue of roughly $283 million to $288 million, below the $296 million AppFolio booked in the third quarter. The release does not explain the expected quarter-to-quarter change.
The results come as rental software companies compete to put AI tools in front of property managers. AppFolio sells its platform under the “Real Estate Performance Management” label Trigg used in the release. Other companies are making similar moves. Venn bought Zuma for $50 million to add AI leasing agents, and Boom raised $15 million to build leasing AI on top of rental screening data.
For property managers and the owners who hire them, the quarter shows AppFolio growing faster in services layered on its platform than in software seats, and spending more to sell them. The company held a conference call with analysts on Oct. 22 at 5 p.m. Eastern. More proptech coverage is in our Technology & AI section.
