Agentic AI And Global Expansion Will Drive Powerful Long Term Upside Potential

Catalysts

About Klaviyo

Klaviyo provides a unified B2C customer platform that combines first party data, AI powered marketing and service applications to help brands grow revenue and loyalty.

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

• Rapid adoption of Agentic AI across Klaviyo Marketing and Klaviyo Service is already lifting campaign open rates and Klaviyo attributed value. This should translate into higher ARPU and sustained revenue growth as AI driven features are increasingly monetized.
• Customer Hub, customer agent and help desk are scaling faster than prior major launches. They are positioned to rival or exceed the marketing suite over time, expanding Klaviyo’s addressable market and supporting multi year acceleration in ARR and total earnings power.
• International expansion, with EMEA and APAC growing faster than the core business and supported by new channels like WhatsApp and broader language support, creates a long runway for high incremental revenue at attractive unit economics and structurally higher free cash flow.
• Rising mid market and enterprise replatforming from legacy MarTech stacks toward Klaviyo’s vertically integrated, AI native CRM architecture should drive larger deal sizes, more $50,000 plus customers and improving net revenue retention. This supports margin expansion as fixed costs are leveraged.
• Deep integration with leading commerce and AI ecosystems, plus protocol level work like the MCP server, positions Klaviyo as the default data and engagement layer for emerging agentic and conversational commerce. This can materially increase profiles, messaging volumes and long term revenue visibility.

Assumptions

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

• The bullish analysts are assuming Klaviyo's revenue will grow by 22.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -5.7% today to 3.5% in 3 years time.
• The bullish analysts expect earnings to reach $75.0 million (and earnings per share of $0.22) by about December 2028, up from $-65.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-240.1 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 347.0x on those 2028 earnings, up from -137.0x today. This future PE is greater than the current PE for the US Software industry at 32.9x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• If generative AI and agentic workflows become rapidly commoditized across competing CRM and MarTech platforms, Klaviyo's current AI differentiation could erode over time. This could pressure pricing power and slow revenue growth as larger suites bundle similar capabilities at lower effective cost, ultimately weighing on long term earnings.
• A prolonged period of constrained marketing and e-commerce budgets, particularly among SMBs that make up the bulk of Klaviyo's 183,000 customers, could reduce campaign volumes and profile growth. This would limit the monetization of per profile, message and resolution pricing and cap expansion in net revenue retention and overall revenue.
• The strategy to replace legacy MarTech and service stacks with a unified Klaviyo platform in the mid market and enterprise could stall if large enterprises remain cautious about replatforming or favor incumbent suites and global system integrators. This would dampen the pace of $50,000 plus ARR customer additions, slow ARR scale and constrain operating margin expansion.
• International growth may decelerate if regulatory changes around data privacy, messaging, and AI usage or region specific channel dynamics in EMEA and APAC increase compliance and infrastructure costs faster than expected. This would pressure gross margins and reduce the contribution of high growth international revenue to overall earnings.
• Heavy ongoing investment in rapid product velocity, AI infrastructure and new product lines like Klaviyo Service could fail to generate proportional uplift in KAV and ARPU at scale. This could create a scenario where operating expenses grow faster than incremental unit economics improve, thereby compressing non GAAP operating margin and free cash flow over the long term.

Valuation

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

• The assumed bullish price target for Klaviyo is $55.16, which represents up to two standard deviations above the consensus price target of $43.68. This valuation is based on what can be assumed as the expectations of Klaviyo's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $30.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $75.0 million, and it would be trading on a PE ratio of 347.0x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $29.84, the analyst price target of $55.16 is 45.9% 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.