Executive Summary / Key Takeaways

• CXAI is spearheading the transformation of the hybrid workplace with its AI-native platform, focusing on Agentic AI and spatial intelligence to deliver unparalleled employee experiences and operational efficiency for Fortune 1000 clients.
• The company has successfully pivoted to a high-margin, recurring SaaS model, evidenced by subscription revenue reaching 99% in Q1 2025 and gross margins consistently above 80%, alongside a 100% net retention rate in 2024.
• Technological differentiation, including 19 granted patents and strategic partnerships with Google Cloud (GOOGL) and AWS (AMZN), underpins CXAI's competitive moat, enabling solutions like predictive analytics for space utilization with over 90% accuracy.
• Despite current operating losses, robust financing efforts provide over 18 months of liquidity, supporting continued strategic investments in R&D and market expansion, with management anticipating a "banner year" in 2025.
• CXAI operates in a global employee experience market projected to grow at a CAGR exceeding 20%, capitalizing on increasing Return-to-Office mandates and a critical need for enhanced employee engagement amidst significant lost productivity.

The Dawn of Agentic AI in the Hybrid Workplace

CXApp Inc. (NASDAQ:CXAI) is at the forefront of a profound shift in how enterprises manage their physical and digital workspaces, positioning itself as a leader in the burgeoning employee experience market. Founded on March 14, 2023, through the acquisition of Inpixon's enterprise apps business by KINS Technology Group, CXAI has rapidly evolved from a legacy services provider to an AI-native SaaS platform company. This transformation, particularly evident in 2024, saw the successful deployment of its CXAI 1.0 single code base, a significant streamlining of its cost structure, and a strategic pivot towards high-margin, recurring revenue streams.

The company's core mission is to deliver intelligent enterprise workplace experiences, leveraging the intersection of customer experience (CX) and artificial intelligence (AI) to enhance "people, places, and things" within the workplace. CXAI aims to solve the critical post-pandemic challenges of Return-to-Office (RTO) mandates and declining employee engagement, which collectively contribute to an estimated $1.9 trillion in lost productivity nationally. This strategic focus aligns with a global employee experience and workplace technology market projected to grow at a compound annual growth rate (CAGR) exceeding 20% in the coming years, driven by enterprise investments in hybrid work enablement and data-driven decision-making.

A Technological Moat Built on Agentic AI and Spatial Intelligence

CXAI's competitive advantage is deeply rooted in its proprietary technology, which is designed to deliver a "full stack solution" for the enterprise workplace. The CXAI platform is architected as an AI-first, mobile-first, and cloud-first system, supporting multiple operating systems (Android, iOS, web) and devices, from smartphones to interactive kiosks. This foundational technology is protected by 39 filed patents, with 19 already granted, including a new patent in Q2 2025 for 3D mapping and augmented reality, and two new patents in Q1 2025 related to spatial intelligence.

At the heart of CXAI's innovation is Agentic AI, a paradigm shift from mere AI assistance to autonomous action and outcome completion. This advanced capability, leveraging Google's Gemini 2.5, enables the automation of nuanced, multi-turn booking requests and complex workflows. For instance, an Agentic AI solution can orchestrate a workshop setup by simultaneously booking a venue, inviting participants, ordering catering based on individual preferences, and providing navigation—all with a simple voice or text command, completed within a minute. This streamlines administrative duties, driving efficiency and personalization for employees.

CXAI's Spatial Intelligence further differentiates its offering by optimizing physical spaces and enhancing interactions through multidimensional mapping (2D and 3D), on-device positioning, and IoT technologies. This provides contextual awareness, allowing employees to easily navigate campuses, find colleagues, and locate available resources. The company's Experiential Analytics (CXAI VU) platform, powered by generative AI, revolutionizes workplace insights. It analyzes large datasets to generate actionable intelligence, enabling real-time decisions and predictive modeling. For example, CXAI has developed a prediction model for booking cancellations with over 90% accuracy, which has demonstrated significant quantifiable benefits: approximately $300,000 in cost savings per campus from wasted desks, thousands of hours saved in employee productivity, and a 75% reduction in underutilized spaces.

The CXAI Kiosk, an interactive digital signage solution, exemplifies this integrated approach. It allows employees to view real-time room, desk, and space availability, book a space in a few clicks, and receive notifications, all while being ADA compliant. Following its first paid deployment with a major technology company, the Kiosk is now generally available, representing a significant expansion opportunity. Complementing this, CXAI BTS (Behind the Scenes) acts as the core AI engine, managing content, access control, and security compliance, while CXAI Localization supports global deployments with features for eight languages and local preferences. These technological advancements are bolstered by strategic partnerships with major cloud providers, including Google Cloud, Microsoft Azure (MSFT), and Amazon Web Services (AWS), ensuring scalability, security, and cost efficiency.

Competitive Landscape and CXAI's Strategic Edge

CXAI operates in a competitive landscape dominated by tech giants like Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), Salesforce (NYSE:CRM), and Cisco (NASDAQ:CSCO), which offer broad enterprise software and collaboration ecosystems. While these larger players boast extensive global reach, deep integration capabilities, and robust financial performance, CXAI carves out a distinct niche through its specialized focus and agility.

CXAI's platform offers a more tailored approach to physical workplace experiences, such as occupancy management and wayfinding, compared to the broader productivity suites of Microsoft or Google. Its Agentic AI and spatial intelligence capabilities provide a unique value proposition, delivering specialized tools for precise location-based services and real-time analytics that can be more efficient for targeted workplace tasks. For instance, while Microsoft excels in comprehensive, enterprise-wide solutions, CXAI's focused innovation in workplace engagement allows for greater customization and responsiveness to evolving employee needs.

Financially, CXAI's TTM Gross Profit Margin of 73.21% demonstrates competitive efficiency in its core SaaS delivery, standing favorably against Microsoft's 69%, Cisco's 64%, and Salesforce's 77%. However, its TTM Operating Profit Margin of -239.13% and Net Profit Margin of -228.76% underscore its current investment phase, contrasting sharply with the significant positive margins of its larger, more established competitors. CXAI's strategy to "land and expand" with Fortune 1000 clients, coupled with its ability to adapt rapidly to evolving enterprise needs, positions it to gain market share in specialized segments where larger competitors may be slower to adapt due to their broader scope. The company's strong security and compliance credentials (ISO 27001, SOC 2) also serve as a critical differentiator, particularly for its Fortune 1000 clients in regulated industries.

Financial Performance: A Strategic Pivot Towards Recurring Revenue

CXAI's financial performance reflects its deliberate strategic pivot towards a high-margin, recurring SaaS model. For the three months ended June 30, 2025, total revenue was $1.223 million, a decrease from $1.766 million in the prior year period. This decline was primarily attributable to a strategic de-emphasis on non-recurring Professional Services revenue, which management views as a necessary step in transitioning to a full SaaS delivery model. Despite this, gross profit for Q2 2025 was $1.052 million, with the gross margin improving to 86%, up from 80% in Q2 2024. This margin expansion is a direct result of scaling high-margin SaaS offerings and reducing professional services-related costs.

The shift towards recurring revenue is a core tenet of CXAI's strategy. In Q1 2025, subscription revenue impressively constituted 99% of total revenue, up from 87% in Q1 2024. This commitment to predictable revenue streams is further evidenced by a 10% year-over-year growth in subscription revenue for fiscal year 2024, totaling over $6.2 million, and a net retention rate (NRR) reaching 100% in 2024, significantly up from 73% in 2023. This indicates strong client retention and successful upselling of additional features and services.

Operating expenses for Q2 2025 increased slightly to $5.163 million from $5.063 million in Q2 2024. This increase was driven by strategic investments in research and development, particularly in platform enhancements and deeper integrations with Google's AI infrastructure, partially offset by reductions in sales and marketing and general and administrative expenses due to resource reallocation and cost control measures. For the full year 2024, total operating expenses saw a substantial 66% reduction to $19.6 million from $58 million in 2023, primarily due to the absence of a goodwill impairment charge recognized in the prior year. While the company incurred a net loss of $3.139 million in Q2 2025, this was an improvement from a net loss of $5.256 million in Q2 2024.

Liquidity and Outlook: Fueling Future Growth

CXAI maintains a robust liquidity position to support its strategic growth initiatives. As of June 30, 2025, the company reported cash and cash equivalents of $4.854 million, alongside a working capital deficiency of $1.415 million. Despite incurring net losses and utilizing cash in operations, CXAI has proactively secured significant financing.

On March 26, 2025, the company entered into a Securities Purchase Agreement (SPA) with Avondale Capital, LLC, providing access to up to $20 million in Pre-Paid Purchase Agreements. An initial $4.2 million (net proceeds of $3.99 million) was drawn on April 8, 2025, with $15.8 million remaining available. Additionally, $3.52 million remains accessible under a prior SPA with Streeterville Capital, LLC. Management is confident that these financing efforts provide sufficient liquidity for at least the next 12 to 18 months, mitigating any going concern indicators. The company also filed a shelf registration statement on Form S-3 after Q2 2025, authorizing future offerings of up to $150 million in securities, further enhancing its capital flexibility.

Looking forward, CXAI is not providing official quantitative guidance for 2025 revenue but aims for growth driven by Annual Recurring Revenue (ARR). Management anticipates 2025 to be a "banner year," expecting significant expansion demand from existing customers and new enterprise clients. The company is committed to expanding its customer base, introducing monetizable features, and driving recurring revenue growth in the next 12 months, balancing innovation with financial discipline for long-term profitability. The recent enactment of the One Big Beautiful Bill (OBBB), which reinstates full expensing for R&D expenditures, is expected to result in a reversal of previously recognized deferred tax assets and an increase in net operating loss carryforwards, potentially improving future tax efficiency.

Risks and Challenges

While CXAI's strategic direction is compelling, investors should consider several risks. The company's recurring losses and cash utilization, though mitigated by recent financing, present a going concern indicator. The global macroeconomic environment, including geopolitical conflicts and trade tensions, could introduce market volatility and economic uncertainties, potentially impacting CXAI's operations and financial position. Furthermore, while Agentic AI offers significant opportunities, its enterprise adoption hinges on the technology being "reliable, trustworthy and secure," a high bar that CXAI must consistently meet to sustain customer confidence and growth. The company's smaller scale compared to tech giants also poses a challenge in terms of resource allocation and the ability to compete across all segments of the vast enterprise software market.

Conclusion

CXAI is charting a bold course in the rapidly evolving landscape of enterprise workplace experiences, driven by its unwavering commitment to an AI-native, platform-based approach. By prioritizing Agentic AI and spatial intelligence, the company is not merely offering tools but redefining how employees interact with their workplaces, fostering engagement and driving measurable operational efficiencies for its Fortune 1000 clientele. The strategic pivot to a high-margin SaaS model, evidenced by impressive gross margin expansion and robust recurring revenue growth, underscores a disciplined execution of its vision.

Underpinned by a strong patent portfolio and strategic cloud partnerships, CXAI's technological leadership provides a distinct competitive edge against broader enterprise software providers. While the company is in an investment phase, reflected in its current operating losses, its proactive financing and strong liquidity position provide the necessary runway to capitalize on the increasing demand for intelligent hybrid workplace solutions. As RTO mandates intensify and the need for enhanced employee engagement becomes paramount, CXAI's innovative platform is poised to capture a significant share of this transformative market, making it a compelling consideration for discerning investors focused on the future of work.