By Stuart Condie
SYDNEY–Appen said Alphabet’s Google will terminate its inbound services contract, pulling the plug on a deal that contributed about 30% of the Australian AI-trainer’s 2023 revenue.
The decision came without warning, Appen said on Monday. It called the cancellation unexpected and disappointing, adding that it was part of a strategic review by the U.S. tech giant.
The move leaves Appen needing to make strategic changes for the second time in less than a year. In May, newly appointed Chief Executive Armughan Ahmad said that he aimed to grow and diversify revenue away from major tech companies, which provided about 80% of Appen’s annual revenue.
“Appen will immediately adjust its strategic priorities following the notification of the Google contract termination,” Appen said in a market filing.
Appen will cease all work on all projects covered by the contract by March 19. Google accounted for $82.8 million of Appen’s $273.0 million in 2023 revenue, Appen said on Monday.
Appen shares were down 39% to 28 Australian cents (18.5 U.S. cents) in early trade. The stock has lost more than 99% of its value since peaking in August 2020.
Appen has already lost its spot in Australia’s S&P/ASX 200 benchmark index due to its tumbling valuation and has repeatedly been forced to raise capital, most recently tapping investors for A$30 million in November.
Analysts have long worried over Appen’s reliance on Meta Platforms, Google, Microsoft, Apple and Amazon.com for revenue. The ASX-listed company was hit hard when some of those customers cut back on new projects–which utilized Appen’s AI-training capabilities–during the Covid-19 pandemic.
Its revenue fell 13% in 2022 and by about 30% in 2023, according to unaudited results released Monday. Appen, which will release its audited annual results in February, also said it generated an unaudited underlying Ebitda–earnings before interest, tax, depreciation and amortization–loss of $20.4 million for 2023.
The share-price slump could reignite interest in Appen from potential suitors. In November, Appen said that it had received interest in parts of its business and that its board would be prepared to speak with third parties in the event of a suitable proposal.
Write to Stuart Condie at [email protected]
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