This Under-the-Radar AI Stock Just Dropped a Game-Changer for Investors

Silicon Valley's sleeping giant wakes up swinging.

While FAANG stocks hog the limelight, an unassuming AI player just deployed secret sauce that could rewrite the rulebook. No hype—just cold, hard infrastructure breakthroughs that leave competitors scrambling.

The 'aha' moment? Their proprietary neural architecture achieves what others brute-force with 10x the computing power. Translation: fat margins while rivals bleed cash on Nvidia GPUs.

Wall Street analysts missed it—too busy chasing ChatGPT clones. Meanwhile, this dark horse quietly locked down patents that could dominate next-gen enterprise automation.

Cynical take: If history repeats, institutional money will flood in...right after retail investors take all the early risk. Again.

Image source: Getty Images.

A push toward modernization

One of the big tailwinds driving the acceleration in Appian's revenue growth is the push toward IT modernization across businesses, according to CEO Matt Calkins.

Modernization, by which he means eliminating silos and bringing IT systems up to date, has taken on more importance in the AI era, and Appian's platform fits the job well. In an interview with The Motley Fool, Calkins shared one example of a company, that after a series of acquisitions, had 22 applications that all had to be updated individually when a customer called to make a small change. With Appian's AI platform, it was able to eliminate that redundancy.

Appian's AI platform is delivering clear results. The company charges a 25% fee for its suite of AI features, and the adoption trends are encouraging. Of its new customer cohort, about half are purchasing the AI, and existing customers continue to upgrade. Calkins said, "It's a major contributor to the upside in this quarter."

What's more, Appian competes with tech behemoths likeand, yet Calkins was confident enough to say that his company was "leading the market" with AI for process, adding, "I'm not aware of any technology that can do what ours can do with regards to making an AI application today."

If Appian is truly the leader in the emerging industry, it should be able to unlock a lot more business ahead.

Margins are improving

In addition to the tailwinds from AI, Appian is also delivering significant improvements on the bottom line. Its go-to-market productivity, which the company tracks through a ratio of revenue to sales-and-marketing expense, has improved over eight quarters in a row, rising from 2.39 to 3.3, and is expected to go higher.

The company also reduced generally accepted accounting principles (GAAP) operating expenses from $146.2 million in the quarter a year ago to $137.7 million, thanks in part to the go-to-market efficiency, and its AI rollout has also added leverage.

What's next for Appian?

Appian is only valued at $2.2 billion, meaning the stock is much cheaper than the typical software-as-a-service stock, trading at a price-to-sales ratio of around 3.

Appian's guidance tends to be conservative, and it called for growth to slow slightly in the third quarter to 16%-18% cloud subscription growth and 12%-14% overall revenue growth.

However, the AI era is only just starting, and it's already benefiting Appian both in top-line growth and in margin improvement. If Appian can demonstrate that it's the technological leader in AI application deployment, the future for the cloud stock looks bright.