AI Commerce Headwinds And Margin Pressures Will Challenge, Yet Ultimately Support, Long-Term Potential

Catalysts

About Rezolve AI

Rezolve AI provides enterprise-grade, AI-powered commerce and checkout solutions that help retailers and brands increase digital conversion and reduce cart abandonment.

What are the underlying business or industry changes driving this perspective?

• Although Rezolve is positioned at the center of AI driven commerce with a proprietary, low hallucination model and ARR guidance raised to at least $150 million for 2025, the rapid influx of well capitalized competitors in conversational commerce and search could compress pricing power and slow ARR growth relative to expectations, ultimately limiting revenue scalability.
• While the shift of global retail toward digital channels and agent based shopping creates a large runway for Rezolve’s Brain Suite, enterprises may lengthen evaluation cycles or favor broader platform vendors for risk mitigation, which could dampen net new customer additions and delay the conversion of pipeline into recognized revenue.
• Although current gross margins above 95 percent highlight the efficiency of Rezolve’s SaaS model, the deliberate expansion of lower margin professional services and aggressive hiring of high cost AI talent risks structurally reducing blended gross margin and pushing EBITDA breakeven beyond management’s H1 target.
• Despite a strong balance sheet with roughly $230 million in cash and a strategy to roll up legacy search providers, integration challenges, culture mismatches and slower than expected upsell from acquired customers, as seen in the need for tailored high touch engagements, could dilute returns on capital and weigh on earnings.
• While partnerships with hyperscale cloud vendors and plans to embed digital asset payments into Brain Checkout could meaningfully expand Rezolve’s addressable market, any delays in delivering robust, compliant crypto enabled payments or changes in cloud partners’ priorities may limit cross sell opportunities, tempering both ARR expansion and future net margins.

Assumptions

This narrative explores a more pessimistic perspective on Rezolve AI compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Rezolve AI's revenue will grow by 268.2% annually over the next 3 years.
• The bearish analysts are not forecasting that Rezolve AI will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Rezolve AI's profit margin will increase from -4102.3% to the average US Software industry of 12.4% in 3 years.
• If Rezolve AI's profit margin were to converge on the industry average, you could expect earnings to reach $32.9 million (and earnings per share of $0.11) by about December 2028, up from $-217.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $47.9 million in earnings, and the most bearish expecting $-523.5 thousand.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 86.2x on those 2028 earnings, up from -3.7x today. This future PE is greater than the current PE for the US Software industry at 31.9x.
• The bearish analysts expect the number of shares outstanding to grow by 6.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.14%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The ambitious jump from a $90 million ARR base today to a $150 million ARR exit rate in 2025 and $500 million ARR in 2026 assumes sustained hypergrowth in enterprise AI commerce adoption. Any cyclical slowdown in retail spending or elongated enterprise decision cycles as the AI market matures could cause ARR and recognized revenue to fall well short of these targets, pressuring the growth multiple that underpins the share price and ultimately reducing earnings power over the medium term.
• Rezolve is rapidly scaling headcount and building a 250 plus person professional services organization while also pursuing a roll up of legacy search providers. If integration complexity, project overruns or underutilized AI engineering capacity emerge as growth slows, the company could see operating expenses outpace ARR growth, driving higher than expected cash burn, weaker net margins and a delayed path to EBITDA breakeven beyond management’s current H1 timeline.
• Management expects professional services to grow to a meaningful share of ARR at materially lower margins of 18 to 45 percent than the core SaaS business. As these services scale faster than high margin software licenses, blended gross margin could trend down from its current level above 95 percent, which would compress operating leverage and cap future earnings expansion even if top line revenue continues to rise.
• The long term secular trend toward AI driven commerce has drawn large platform players and numerous well funded competitors into conversational search and agentic commerce. If Microsoft, Google or other ecosystem partners prioritize their own native solutions over Rezolve or alternative vendors are perceived as more reliable or easier to implement at scale, Rezolve’s partner sourced pipeline could weaken, slowing ARR growth and limiting future operating margin improvement.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Rezolve AI is $7.0, which represents up to two standard deviations below the consensus price target of $10.0. This valuation is based on what can be assumed as the expectations of Rezolve AI's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $7.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $264.7 million, earnings will come to $32.9 million, and it would be trading on a PE ratio of 86.2x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of $2.66, the analyst price target of $7.0 is 62.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.