Issue #28

Behind Every AI Conversation: These Two Stocks Are Winning

While the market’s attention remains fixed on front-end AI companies, two behind-the-scenes innovators—Agora (NASDAQ: API) and The Glimpse Group (NASDAQ: VRAR)—are quietly building the infrastructure that makes real-time, immersive digital interaction possible.

Agora delivers the invisible backbone for global voice, video, and interactive streaming. After several tough years of restructuring, the company just turned profitable, boosted margins to nearly 67%, and is rolling out AI-powered conversational engines that could redefine real-time communication.

The Glimpse Group, meanwhile, is emerging as a rising player in spatial computing and enterprise VR/AR. With record growth, near cash-flow breakeven, and a potential spin-off of its defense-tech subsidiary, Glimpse is turning cutting-edge immersive software into tangible shareholder value.

Together, API and VRAR represent a new generation of AI infrastructure plays—companies supplying the digital picks and shovels powering everything from metaverse applications to real-time AI interaction.

Agora (NASDAQ: API)

Agora, Inc. is a leading global platform providing Real-Time Engagement (RTE) technologies. It offers a comprehensive suite of APIs and Software Development Kits (SDKs) that enable developers to seamlessly embed high-quality, low-latency voice, video, and interactive live streaming into their own applications. Agora's technology is the hidden engine behind interactive experiences across industries like social networking, gaming, education, and telemedicine.

Business Model and Revenue Streams

Agora operates on a robust business-to-developer (B2D) Platform-as-a-Service (PaaS) model. It essentially sells the infrastructure and tools necessary for developers to build real-time communication features without the complexity of managing a global, low-latency network.

Core Revenue Streams:

1. Usage-Based PaaS: This is the primary income source. Agora employs a "pay-as-you-go" pricing model, charging customers based on the consumed minutes of real-time voice, video, and messaging services. This model ensures revenue scales directly with customer adoption and usage, providing significant operating leverage as the customer base matures.
2. Value-Added Services: Agora also generates revenue from advanced features, including cloud recording, moderation, and AI-enabled functionalities.

Macroeconomic Impact:

Agora's performance is sensitive to global tech spending. The company has explicitly cited tightening financing conditions for some customers and the general macroeconomic slowdown as headwinds that impacted revenue in previous quarters. Furthermore, the company's business in China (through its Shengwang division) has faced challenges from evolving regulations in sectors like online education.

However, management has proactively responded by focusing resources on high-value projects, optimizing its global workforce, and strategically phasing out lower-margin products. This focus on efficiency and core, high-quality offerings (like HD video and conversational AI) has improved its gross margin structure, acting as a defense against broader economic pressures.

Recent Performance and Corporate Developments 📈

Agora has recently demonstrated a significant shift toward financial health, driven by operational discipline and a commitment to AI-integrated product lines.

Q2 2025 Financial Highlights: 💰

• Total Revenue: $34.3 million, marking 11% year-over-year growth for continuing operations (excluding phased-out low-margin products).
• Profitability Turnaround: The company achieved a GAAP net income of $1.5 million for the quarter, a massive improvement from the net loss of $9.2 million reported in Q2 2024. This marks a critical milestone on its path to consistent profitability.
• Gross Margin: Gross margin saw a significant bump to 66.8%, a direct result of streamlining its product portfolio and improving operational efficiencies.
• Cash Position: Agora maintains a strong balance sheet with $377.3 million in cash, cash equivalents, and short-term investments as of the end of the second quarter.

Strategic Initiatives and News: 🤝

The company’s recent news is heavily focused on leveraging Artificial Intelligence to enhance its RTE capabilities, signaling its commitment to the "AI Year Ahead."

• Conversational AI Engine: Agora continues to rapidly iterate on its Conversational AI Engine, recently unveiling major upgrades that include "attention locking" (allowing AI agents to focus on specific users) and natural, interactive avatars that synchronize lifelike body movements with speech. This is key to driving adoption in lucrative sectors like customer support and virtual education.
• Strategic Partnerships: Recent announcements, such as building on Exotel’s AgentStream to deliver real-time AI Voice Bots, demonstrate a successful strategy of partnering to embed its core RTE technology into advanced AI applications.

Path to Profitability and Fair Value 🎯

Agora has now crossed the profitability line (on a GAAP net income basis in Q2 2025). The path to sustained, scalable profitability is centered on three pillars:

1. High-Margin Mix: Continued growth and monetization of its higher-margin AI and value-added services are critical. These services differentiate Agora and command premium pricing.
2. Operational Leverage: Management has significantly reduced operating expenses through workforce optimization and expects sequential net income growth through the rest of 2025. The long-term target is an operating margin of 15% to 20%.
3. The Cash Safety Net: With a robust cash position that represents a significant portion of its current market capitalization, Agora has substantial resources to fund its innovation and growth strategies without needing to raise external capital soon.

Analyst Estimates and Ratings 📊

The consensus among analysts covering Agora has remained positive, reflecting the company's recent turnaround in profitability.

• Consensus Rating: The overall consensus rating is a "Buy", with several firms reiterating or initiating positive coverage following the promising Q2 results and focus on AI.
• Price Target: The average 12-month price target is set in the $5.70 to $6.20 range, with the high-end estimates reaching over $7.00. This suggests a potential upside of over 50% from the current stock price of approximately $3.60.

Investor-Focused Takeaway: Is API Right for Your Portfolio?

Agora (API) is a classic "picks and shovels" play for the rapidly expanding AI and interactive economy. Its proprietary global network (SD-RTN™) positions it as a key enabler for any application requiring high-quality, real-time interaction—a necessity for modern, conversational AI.

While the stock has endured past volatility due to macro and regulatory concerns, the recent pivot to GAAP profitability, strong gross margin expansion, and clear focus on high-growth AI integrations make it a compelling turnaround story. The strong analyst ratings and implied significant upside potential, combined with its substantial cash reserves, suggest that API is a technology penny stock with serious potential as the demand for interactive digital experiences continues to soar.

The Glimpse Group (NASDAQ: VRAR)

The Glimpse Group is a diversified immersive technology platform company specializing in Virtual Reality (VR), Augmented Reality (AR), and Spatial Computing software and services, primarily targeting enterprise and government clients. Rather than focusing on consumer hardware, Glimpse operates an ecosystem of specialized subsidiary companies—a multi-brand strategy—that allows it to address diverse industry challenges using immersive, often AI-driven, technology solutions.

Business Model and Revenue Streams 📦

Glimpse's core value proposition is the rapid development and deployment of customized immersive software solutions for high-value clients across corporate training, healthcare, defense, and education.

Core Revenue Streams:

1. Software Services: This category generates the majority of revenue through custom software development, consulting, and project execution, typically for large enterprise or government contracts.
2. Software License/SaaS: This growing, higher-margin segment generates recurring revenue from licensing its proprietary platforms, such as Spatial Core, which acts as a middleware for creating and managing immersive environments.
3. Royalty Income: Revenue generated from intellectual property or continued usage rights related to past projects or divested entities.

Macroeconomic Impact:

While the overall tech investment landscape has been volatile, Glimpse’s focus on the enterprise and government sectors provides some insulation. High interest rates and inflation can lead to tighter corporate spending, potentially delaying large-scale VR/AR enterprise rollouts.

However, Glimpse mitigates this by focusing on projects that yield clear, quantifiable returns, particularly in:

• Defense & Government: High-budget contracts, particularly with the Department of Defense (DoD), which are typically less sensitive to short-term economic fluctuations.
• High-Margin Product Mix: The company's strategic decision to divest non-core, lower-margin assets (like QReal) and focus on its high-margin Spatial Core platform has significantly improved its gross margin structure, demonstrating resilience against market weakness.

Recent Performance and Corporate Developments 📈

Glimpse recently reported strong fiscal year 2025 results marked by strategic realignment and a major return to financial health, despite some quarterly revenue choppiness due to contract timing.

FY 2025 Financial Highlights: 💰

• Total Revenue: Approximately $10.5 million, marking a robust 20% increase year-over-year, driven primarily by its Spatial Core platform.
• Cash Flow Neutrality: Most significantly, the company achieved essentially cash breakeven for the full fiscal year (net operating cash loss of only $0.27 million), a dramatic turnaround from the significant loss reported in the prior year.
• Q4 Revenue Surge: The fourth quarter of FY25 was exceptionally strong, recording $3.5 million in revenue—a massive 105% increase year-over-year.
• Gross Margin: Gross margin remains consistently high, averaging around 67.5% for the year, indicating the efficiency and value of its software-centric business.

Strategic Initiatives and Mergers: 🤝

The defining corporate development is the strategic shift to prioritize Spatial Computing and AI.

• Divestiture: Glimpse divested its subsidiary QReal to streamline operations, focusing entirely on high-value enterprise applications.
• Defense/AI Focus: Its subsidiary, Brightline Interactive, secured and successfully delivered a multi-million-dollar synthetic training ecosystem contract for the DoD, underscoring its pivotal role in combining immersive tech with AI for mission-critical applications.
• Spin-Off Plan: The company's Board has approved the exploration of a potential spin-off of Brightline Interactive into an independent, publicly traded entity. This move aims to unlock significant shareholder value by creating a "pure-play" Spatial Computing and AI defense-tech provider, appealing to a specialized investor base.

Path to Profitability and Fair Value 🎯

Glimpse has already achieved annual cash flow neutrality, a critical step towards sustained GAAP profitability. Future profitability hinges on successfully executing its strategy of transitioning revenue mix and unlocking shareholder value through the planned spin-off.

Key Profitability Drivers:

1. Scaling Spatial Core: The high-margin nature of its software licensing (SaaS) and the large scale of government contracts using its Spatial Core platform are expected to drive operating leverage.
2. Cost Control: The successful execution of its cost-cutting and reorganization efforts has proven effective in dramatically reducing its quarterly cash burn.
3. Clean Balance Sheet: The company holds approximately $6.85 million in cash and has no debt, providing substantial stability and flexibility.

Analyst Estimates and Ratings 📊

Due to its micro-cap status and recent strategic realignment, analyst coverage can be limited, but the sentiment is positive regarding its strategic direction.

• Consensus Rating: The most recent coverage and strategic analysis suggest a "Buy" or "Strong Buy" rating, based on its strong revenue growth and achievement of near cash-flow breakeven.
• Price Target: Analyst-derived 12-month price targets are generally in the $2.67 to $3.00 range. Given the current stock price around $1.50, this implies a potential upside of over 75%.

Investor-Focused Takeaway: Is VRAR Right for Your Portfolio?

The Glimpse Group (VRAR) offers a high-risk, high-reward investment opportunity in the intersection of Immersive Technology and AI, driven by large, sticky enterprise and government contracts. The company has executed a major turnaround, returning to growth and achieving cash flow neutrality while maintaining excellent gross margins. The potential spin-off of its Brightline Interactive/DoD segment represents a significant catalyst that could fundamentally re-rate the stock, potentially unlocking substantial hidden value for shareholders in the year ahead.

🧠 Final Take: Real AI Infrastructure. Real Results

While headlines are dominated by flashy AI front-runners, Agora (API) and The Glimpse Group (VRAR) are quietly building the infrastructure that makes the future of real-time, immersive, and intelligent interaction possible.

📡 Agora (API) – The Real-Time AI Backbone
✔ Returned to GAAP profitability with gross margins near 67%
✔ Conversational AI engine powering the next generation of voice and video apps
✔ $377M+ cash on hand, zero debt, and high analyst upside
➤ Best for: Tech investors seeking a turnaround story with margin strength, solid cash reserves, and exposure to real-time AI infrastructure at deep value levels.

🧠 Glimpse Group (VRAR) – The Spatial Computing Breakout
✔ 105% YoY Q4 growth and near cash flow breakeven for FY25
✔ DoD-backed immersive AI contracts through Brightline Interactive
✔ Upcoming spin-off could unlock shareholder value
➤ Best for: Speculative investors seeking early-stage exposure to AI + VR/AR enterprise software and defense-tech, backed by strong gross margins and a clean balance sheet.

Investor Insight:

🧱 Want the infrastructure behind AI voice, video, and engagement? → API
​ 🧠 Want exposure to immersive AI software for defense and enterprise? → VRAR

These aren’t the usual names—they’re the picks and shovels behind the AI revolution.

We’ll be back with our next report soon, bringing you fresh insights on the market and new opportunities to watch. In the meantime, we’d love to hear from you—let us know how you found this report, what niche sectors you’d like us to cover next, and don’t forget to share your top stock holdings with us. Your feedback helps us deliver reports that matter most to your investing journey.

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Happy Trading
​— Team Premium Stock Alerts