5 Interesting Learnings From Klaviyo at $1.2 Billion in ARR
Perhaps the most undervalued public B2B / SaaS leader today. At just 6.1x ARR multiples with 32% YoY growth, Klaviyo is trading at a significant discount to peers with similar growth profiles. The company is executing across every dimension—growth, profitability, expansion, and innovation—yet the market hasn’t fully recognized the autonomous CRM category they’re creating. With 176K+ customers, Rule of 40 performance in the top 7% of all software companies, and three massive growth engines just getting started, this feels like a coiled spring.
#1. 54% Of ARR Now From Multi-Product Customers
Here’s what’s remarkable: 54% of Klaviyo’s ARR now comes from multi-product customers, yet only 30% of their mid-market and enterprise customers use more than one Klaviyo product. That delta represents enormous whitespace. Even more compelling, when Shopify brands add SMS to email, they generate 37% more Klaviyo Attributed Value, and Tibi saw 100x+ ROI after adopting Email, SMS, and Marketing Analytics together.
The expansion math is straightforward and powerful. Email pricing is based on sends, while their newer products like Marketing Analytics/AKDP and Mobile price on profiles, with uplift ranging from 0.1x to 1x of email spend. Service—which is still in beta—prices on profiles, conversations, and tickets with an estimated uplift of 1.8x to 3.3x compared to email. With 8 products now in GA (up from 4 at IPO), and customers only scratching the surface of adoption, the multi-product motion is a durably compounding growth driver.
What’s most impressive? This isn’t just theory—it’s showing up in cohort data. Customer cohorts from 2015-2023 have all shown consistent expansion through 2024, with older cohorts continuing to grow ARR year after year. The platform stickiness combined with expanding surface area creates a beautiful expansion story.
#2. 108% Net Revenue Retention with 88% Gross Retention—Best-in-Class Unit Economics
Klaviyo delivered 108% NRR in Q2 2025, which alone is strong. But the real story is in the composition. Gross retention has held steady at 88% since IPO—meaning they’re only losing 12% of revenue to churn annually. That’s exceptional for a company serving everyone from entrepreneurs to enterprise.
The NRR bridge tells the complete story: expansion is the most heavily weighted factor, driven by favorable email expansion trends as customers send more volume. Cross-sell contributes meaningfully from SMS adoption and early Marketing Analytics uptake. And unlike many SaaS companies that maintain NRR through price increases while retention deteriorates, Klaviyo’s foundation is rock-solid gross retention.
Why does this matter? Because average revenue per customer increased 29% from $5,200 at IPO to $6,700 in Q2 2025, while the customer base grew 30% from 135,000 to 176,000+ customers over the same period. They’re expanding accounts and efficiently adding new logos. The efficiency of growth is stunning—this isn’t a story of buying revenue with massive CAC or sacrificing retention for growth.
#3. 50% of New ARR From Self-Serve / Assisted, 25% From Partners, 25% From Sales-Driven
Here’s the GTM efficiency story that underpins everything: half of Klaviyo’s new ARR comes through self-serve and sales-assisted motions, with another 25% through focused sales, and 25% through the partner ecosystem.
The self-serve engine is powered by three drivers: free and paid organic inbound, branded search, and product-led growth that converts naturally as customers scale. Klaviyo doesn’t need to deploy massive field sales teams to capture half their new business. Customers discover them, try them, and buy—often before ever talking to a salesperson. This is the compounding benefit of having 176,000+ customers generating word-of-mouth, 5,000+ agencies recommending them, and 350+ integrations creating natural discovery moments.
The partner ecosystem (25% of new ARR) acts as a force multiplier, expanding reach through CRM and modernization practices. Agencies and systems integrators are essentially an outsourced sales force that comes with built-in customer relationships and implementation expertise. Partners de-risk the customer buying decision and accelerate time-to-value, which feeds back into the self-serve flywheel.
What makes this GTM mix so powerful? The S&M spend has held steady at 33-34% of revenue even as they’ve scaled from $642M to $1.078B in ARR. Most B2B companies moving upmarket see S&M balloon as they build enterprise sales capacity. Klaviyo is moving upmarket (MM/enterprise growing at 39% CAGR) while maintaining S&M efficiency because the self-serve foundation carries so much of the load. That’s the magic of product-led growth combined with strategic sales—you get the best of both worlds.
#4. International Is 35% of Revenue and Growing 43% Annually—With Massive Runway
EMEA and APAC now represent 35% of revenue (up from 31% at IPO) and are growing at a 43% CAGR.
The phased approach is elegant: Phase 1 starts with self-service/product-led growth, Phase 2 layers in the partner ecosystem, Phase 3 adds inside sales, and Phase 4 brings in-country sales support. This means they can enter 100+ revenue-generating countries without massive upfront investment, then pour fuel on what’s working. The platform now supports 11 languages and has SMS coverage in 22 countries, with both expanding aggressively.
The early results from targeted investment are striking: France saw ~2.5x new ARR growth and Spain saw ~3.0x new ARR growth from IPO to Q2 2025. And they’re building the infrastructure for sustained expansion—multi-currency support, expanded data center footprint, and localized product experiences. Given that they’re penetrated just ~1% of their current TAM, and international markets represent the majority of B2C commerce opportunity, this growth engine has a very long runway.
#5. The AI-First Autonomous CRM Is Real—And Expanding the TAM from $68B to $160B+
This is key to Klaviyo expanding beyond marketing automation — what took it to the first $1B in ARR. Marketing Agent launched in Q4 2025 with essential flows, forms, and weekly campaigns, with Black Friday/Cyber Monday prompt-based campaigns, French and German content generation coming in Q4, and flow optimization plus SMS/WhatsApp content generation planned for H1 2026. Customer Agent launched with chat and SMS in GA, email in beta (GA in Q4), and is expanding to WhatsApp with advanced features like tone and voice settings, knowledge gap detection, and agent-facilitated returns.
At IPO, Klaviyo’s TAM was $68B in marketing automation. With the autonomous CRM encompassing marketing, service, and analytics, their TAM expanded to $160B. They’re literally creating a new category—the AI-first B2C CRM where one brain, powered by unified customer data and 350+ integrations, orchestrates both pre- and post-sale experiences.
The technical foundation is purpose-built for this: 6M profile updates per account per hour, 270 deploys per day, 50+ ML models in production, 3.4B average daily events processed, 1.4B emails sent daily, and 8B+ consumer profiles. And they’re investing heavily to maintain velocity: 18% of revenue goes to R&D, and they’ve released 200+ features already in 2025. In one stunning example, they went from AI announcement to live in production in 72 hours (August 26 to August 29).
The vision is clear: every customer gets a personal AI assistant that knows their preferences, purchase history, and context—delivering 1:1 personalization at scale across every channel. As they execute this, they’re not just growing within their current market—they’re expanding the entire opportunity set.
4 More Interesting Learnings:
• Profitability trajectory is ahead of schedule: Non-GAAP operating margin hit 12.3% in FY25 (guidance midpoint), targeting 15-17% by FY28 exit, and 20%+ long-term—all while maintaining 30%+ growth
• Partner ecosystem is a force multiplier: 5,000+ agencies and systems integrators, with leading service partners generating millions in revenue for Klaviyo customers—and 25% of new ARR comes through partners
• Gross Margins Compressing Strategically—SMS Cross-Sell Success Comes With a Trade-Off. Non-GAAP gross margins have compressed from 80% at IPO to 76% in Q2 2025. In most SaaS companies, declining gross margins would be a red flag. At Klaviyo, it’s a feature, not a bug—and it reveals something fascinating about their multi-product strategy. The primary driver? SMS cross-sell success comes with lower gross margins than email.
• Operating leverage is building across the P&L: G&A fell from 15% of revenue in FY23 to 12% in H1’25, R&D from 20% to 18%, while S&M held at 33-34%—showing disciplined scaling with room for continued margin expansion
Why So Undervalued—Especially Compared To Shopify?
The Shopify comparison makes the valuation gap even more striking. Shopify trades at roughly 10-11x revenue multiples, while Klaviyo sits at just 6.1x ARR despite being deeply embedded in the Shopify ecosystem and growing faster on a percentage basis. Both companies are platform plays powering modern commerce, both have strong network effects, and both are expanding their TAM through product innovation. Yet the market values them vastly differently.
The partnership itself is a testament to Klaviyo’s strategic value. Shopify’s CFO Jeff Hoffmeister stated: “Our partnership with Klaviyo is an extension of our core mission. We are both committed to providing merchants of all sizes with the tools they need to succeed in a complex market. Ours is a powerful collaboration where we each focus on our strengths. Klaviyo’s expertise in consumer engagement is an incredible complement to our platform.” This isn’t a vendor relationship—it’s a strategic partnership between two category leaders. Klaviyo has 350+ pre-built integrations, with Shopify being foundational, and together they’re powering the connected stack for B2C modernization.
Several factors likely explain the valuation disconnect, none of which seem particularly durable:
First, there’s the perception issue. Klaviyo is still seen by many as “just an email marketing tool” despite having evolved into a full AI-first B2C CRM with Marketing, Service, and Analytics. The company launched in 2012 with email, and old perceptions die hard. The market hasn’t yet repriced the stock to reflect the autonomous CRM category they’re creating—even though the TAM expansion from $68B to $160B is very real and the products are shipping today, not in some distant future.
Second, scale and awareness. Shopify is a $100B+ market cap company that every investor knows. Klaviyo is a $7.1B market cap company that many institutional investors are still discovering. The company only went public in September 2023, so it’s relatively new to public markets. As more investors dig into the metrics—108% NRR, 88% GRR, Rule of 40 in the top 7% of software companies, 39% CAGR in mid-market and enterprise—the quality of execution becomes undeniable.
Third, the “picks and shovels” discount. Klaviyo enables commerce rather than directly facilitating transactions like Shopify. Markets often value transaction-based businesses more richly because the unit economics feel more tangible and the growth seems more directly tied to overall commerce trends. But this misses the point: Klaviyo’s $176K+ in KAV generated for customers since 2021 shows they’re driving measurable ROI, and their pricing model captures a share of that value creation. Dollar Shave Club literally said, “You’re going to have to pry Klaviyo from my cold dead hands”—that’s the kind of mission-critical positioning that should command premium multiples.
Fourth, margin profile evolution. Shopify has demonstrated a clear path to 20%+ operating margins. Klaviyo is earlier in that journey (12.3% non-GAAP operating margin today, targeting 15-17% by FY28, 20%+ long-term), and the market may be discounting the stock until that margin expansion fully materializes. But the trajectory is crystal clear, and they’re actually ahead of their own internal timeline on profitability.
Here’s what the market seems to be missing: Klaviyo is executing a multi-product platform strategy with better unit economics than most SaaS companies, expanding upmarket faster than the overall business is growing, building a global footprint with capital efficiency, and shipping AI products that are expanding their TAM by 2.4x. They’ve penetrated just ~1% of their addressable market. The growth engines aren’t slowing down—they’re accelerating.
The quality of revenue is exceptional: 88% gross retention, 108% net retention, 50% of new ARR from self-serve and organic channels, 40% CAGR in $50K+ customers, and cohorts that continue expanding for 5-10 years. This isn’t a “grow at all costs” story propped up by unsustainable CAC. This is profitable, efficient, durable growth with three massive whitespace opportunities (multi-product, international, enterprise) that are all working simultaneously.
At 6.1x ARR with 32% growth and a clear path to 20%+ operating margins, Klaviyo looks materially mispriced. The comparison to Shopify—a strategic partner that validates their mission-critical role in modern commerce—only underscores the disconnect. As the market begins to understand that Klaviyo isn’t an email tool but rather the autonomous CRM powering the future of B2C engagement, a rerating seems inevitable. The fundamentals are there. The execution is there. The innovation is there. The multiple just hasn’t caught up yet.
