BL Q3 Deep Dive: Platform Transition and AI Adoption Shape Future Trajectory

Financial automation software company BlackLine (NASDAQ:BL) met Wall Streets revenue expectations in Q3 CY2025, with sales up 7.5% year on year to $178.3 million. The company expects next quarter’s revenue to be around $183 million, close to analysts’ estimates. Its non-GAAP profit of $0.51 per share was in line with analysts’ consensus estimates.

Is now the time to buy BL? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

BlackLine’s third quarter results met Wall Street expectations, but the market responded negatively following management’s update on customer and revenue trends. Management attributed the quarter’s performance to strong new customer acquisitions and larger deal sizes, with CEO Owen Ryan highlighting that new customer bookings were up 45% and the average new deal size more than doubled. However, the company faced headwinds from a strategic shift away from lower-end customers and a slowdown in user growth as existing clients evaluated platform pricing and new AI offerings.

Looking ahead, BlackLine’s guidance is shaped by ongoing customer transitions to its platform-based pricing model and anticipated adoption of its Verity AI suite. CEO Owen Ryan emphasized that the company aims to deliver accelerating revenue growth and margin expansion, stating, “Our confidence in AI comes from firsthand experience, we are not just selling this transformation, we are living it.” Nevertheless, management expressed caution regarding the near-term impact of user attrition and the time required for customers to fully embrace new pricing and AI-driven solutions.

Key Insights from Management’s Remarks

Management pointed to new large enterprise deals and the adoption of platform pricing as key drivers this quarter, while noting that the transition created temporary headwinds in customer metrics and net revenue retention.

• Large enterprise wins: BlackLine secured its largest-ever contract with a global real estate services company and landed new business with a Fortune 20 customer, demonstrating success in both direct sales and partner channels. These wins often included full-suite deployments of Studio360 and use of the new platform pricing model.
• Shift to platform pricing: Nearly three-quarters of new customer bookings adopted BlackLine’s platform-based pricing, which decouples revenue from user seat counts and aligns revenue with delivered value. Management noted this transition is strategic for long-term growth but contributed to lower user license growth in the short term.
• AI-driven product innovation: The company launched its Verity AI suite and conversational assistant Vera, which are designed to automate high-value finance tasks and support auditability. Early customer interest was strong, but some large clients paused user expansion to evaluate these new offerings, impacting net revenue retention.
• Operational efficiency gains: Investments in AI-powered internal tools and migration to Google Cloud Platform (GCP) led to improved productivity, with sales rep output up nearly 30% year over year and a 23% faster innovation cycle. The company also shifted more headcount to lower-cost locations to support margin expansion.
• Public sector and international progress: BlackLine advanced its public sector strategy, moving closer to FedRAMP approval, and saw growing adoption of its platform pricing model in international markets, with key wins through SAP partnerships and increased pipeline activity in Asia-Pacific.

Drivers of Future Performance

Management’s outlook for the coming quarters is anchored by continued adoption of platform pricing, AI product rollout, and operational efficiency, though the transition presents near-term challenges.

• Customer transition impacts: The move to platform pricing and increased automation means some customers require fewer user licenses, leading to lower net revenue retention and customer count in the near term. Management expects this headwind to diminish as clients adopt the new pricing structure and product suite.
• AI and product expansion: The rollout of Verity AI and other automation tools is seen as central to BlackLine’s value proposition. Management believes these innovations will drive deeper customer relationships and future upsell opportunities, but adoption cycles remain lengthy, especially for large enterprise accounts.
• Operational leverage and cost management: Efforts to modernize infrastructure, shift workforce to lower-cost regions, and use AI-driven productivity tools are expected to support margin expansion. Management is focused on decoupling revenue growth from headcount increases, aiming for improved profitability even as the company invests in product development and sales.

Catalysts in Upcoming Quarters

Looking forward, our team will be monitoring (1) the pace at which existing customers transition to platform-based pricing and adopt Verity AI solutions, (2) signs of stabilization in net revenue retention and customer count as the transition matures, and (3) continued progress in public sector contracts and expansion of SAP-led international partnerships. Progress on operational leverage and tangible improvements in sales productivity will also be important markers of execution.

BlackLine currently trades at $53.56, down from $56.81 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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