Summary
AppFolio's fiscal 2026 second quarter produced revenue of $281.1 million, up 19.3% from the prior-year quarter. Revenue for the six months ended June 30, 2026 was $543.3 million, up 19.9%. The company sells software to property managers and layers usage-based services on top of that base, so volume matters as much as price. The CEO framed the quarter around a first-time milestone. Trailing twelve-month revenue crossed $1 billion. He credited customers adopting more of the platform, including AI features delivered through Real Estate Performance Management.
Growth looks broad on the volume side. Property management units under management reached 9.6 million, up 8% from 8.9 million a year earlier. The customer count rose to 22,751 from 21,403. Value added services did most of the work, with that revenue line up 22%. Subscription services revenue grew 14%, and other revenue fell 37%. The mix says a lot. Payments, tenant screening, and risk mitigation usage drive the value added line, and those fees scale with transaction activity rather than seat count.
Profitability improved faster than the top line. GAAP operating income rose 30.8% to $53.0 million. Operating margin was 18.8% of revenue for the quarter versus 17.2% a year earlier, 1.6 percentage points better. For the six months, operating margin was 19.1% against 16.4%, up 2.7 percentage points. Net income rose 15.5% to $41.5 million, and diluted EPS was $1.17, up 18.2%. Tax explains the gap between those growth rates. The provision for income taxes rose sharply and the effective tax rate climbed as pre-tax income grew and excess tax benefits from stock-based compensation shrank. On a non-GAAP basis, operating income rose 24% to $76 million, or 27.1% of revenue, and the six-month non-GAAP operating margin was 27.2% against 25.3%. Stock-based compensation and purchased intangible amortization account for most of the distance between the two sets of numbers.
Cash generation stood out. Net cash provided by operating activities was $87.6 million for the quarter, up 66.4%, and $121.9 million for the six months, up 33.8%. Capital spending stayed minimal. Cash, cash equivalents, and investment securities totaled $221.7 million at June 30, 2026. The company has a $150.0 million revolving credit facility that matures September 30, 2030 and was undrawn. Remaining performance obligations were $114.8 million. AppFolio repurchased 702,502 Class A shares in the first quarter of 2026 at an average price of $177.95 for $125.0 million, bought back nothing in the second quarter, and had $125.0 million remaining under the 2025 program at June 30, 2026.
Management guided on a full-year basis rather than for the next quarter. Fiscal 2026 revenue guidance is $1.117 billion to $1.127 billion, and the full-year non-GAAP operating margin range is 26.5% to 28.0%. Diluted weighted average shares are expected to be about 36 million for the full year. The MD&A expects cost of revenue, sales and marketing, research and product development, and general and administrative expense to stay relatively flat as a percentage of revenue for the year, with depreciation and amortization also flat. Risks worth tracking: third-party service provider costs tied to payments, tenant screening, and risk mitigation pushed cost of revenue higher in the quarter; the effective tax rate moved up; and the company notes that acquisitions or general expansion could require additional equity or debt financing on terms that may not be favorable. Forward-looking statements rest on the risk factors in the fiscal 2025 annual report filed February 5, 2026.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $281.1M | $262.2M | +7.2% | $235.6M | +19.3% |
| Research & development | $51.0M | $49.6M | +2.8% | $46.7M | +9.3% |
| Sales & marketing | $43.9M | $37.5M | +17.2% | $36.8M | +19.5% |
| General & administrative | $25.6M | $24.3M | +5.3% | $21.9M | +16.8% |
| Total operating expenses | $228.1M | $211.5M | +7.9% | $195.1M | +17.0% |
| Operating income (loss) | $53.0M | $50.7M | +4.4% | $40.5M | +30.8% |
| Operating margin | 18.8% | 19.4% | -0.5 pp | 17.2% | +1.6 pp |
| Net income (loss) | $41.5M | $42.4M | -2.1% | $36.0M | +15.5% |
| Net margin | 14.8% | 16.2% | -1.4 pp | 15.3% | -0.5 pp |
| Diluted EPS | $1.17 | $1.18 | -$0.01 | $0.99 | +$0.18 |
Risks
The effective tax rate rose to 23.7% for the quarter ended June 30, 2026 from 14.3% in the prior-year quarter (and to 21.9% year to date from 14.5%), driven by higher pre-tax income and a decrease in excess tax benefits from stock-based compensation. A rising tax rate pressures net income growth despite GAAP operating income growing 30.8% in the quarter.
Cost of revenue (exclusive of depreciation and amortization) increased 22% to $102.6 million for the quarter ended June 30, 2026, with the increase primarily from $15.6 million of higher third-party service provider costs tied to greater adoption of Value Added Services such as payments, tenant screening and risk mitigation. These third-party costs vary in amount and as a percentage of revenue.
Growth is increasingly dependent on usage-based Value Added Services, which rose 22% to $219.5 million for the quarter ended June 30, 2026, versus 14% growth in Subscription Services and a 37% decline in Other revenue to $1.9 million. A pullback in transaction-based payments, screening or risk mitigation usage would disproportionately affect total revenue.
Stock-based compensation expense of $20.5 million for the quarter ended June 30, 2026 is central to attracting and retaining employees, and the company notes a decrease in excess tax benefits from stock-based compensation as a driver of the higher tax rate. Personnel-related cost increases drove higher sales and marketing and research and product development expense.
SaaS KPIs
All quarters →Property management customers
Non-GAAP operating margin
Total units under management
Summary, forecast, risks and KPIs are extracted from APPFOLIO INC's SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.