Riskified Ltd. (RSKD)

Executive Summary / Key Takeaways

• Riskified (NYSE: RSKD) is establishing itself as a pivotal force in e-commerce risk intelligence, leveraging its proprietary AI platform and vast data network to combat increasingly sophisticated fraud and policy abuse. The company's strategic expansion into new verticals and geographies, coupled with a growing multi-product platform, underpins its long-term growth trajectory.
• The company delivered solid financial performance in the first half of 2025, with revenue up 5% year-over-year to $163.4 million and GMV growing 5% to $70.6 billion, achieving positive adjusted EBITDA for the seventh consecutive quarter. This demonstrates operational discipline amidst an evolving market.
• Technological innovation, particularly in "Agentic Commerce" and the Adaptive Checkout feature, is a core differentiator, enhancing fraud prevention accuracy and optimizing conversion rates for merchants. New product revenue, including Policy Protect, is experiencing triple-digit growth, signaling strong market adoption beyond its core Chargeback Guarantee.
• Riskified is committed to shareholder value, evidenced by an additional $75 million share repurchase authorization and a debt-free balance sheet with $339 million in cash, deposits, and investments as of Q2 2025. The company projects approximately $30 million in positive free cash flow for 2025.
• While facing competitive pressures and a significant merchant churn event in the Home category in late 2024, Riskified's robust pipeline, high win rates in competitive processes (around 70%), and strategic focus on multi-year contracts position it for improved net dollar retention and double-digit revenue growth by 2026.

The E-commerce Battleground: Riskified's AI-Driven Defense

Riskified Ltd., founded in 2012, has evolved into a critical partner for online merchants, providing an e-commerce risk intelligence platform designed to foster trusted relationships between businesses and consumers. At its core, Riskified addresses the pervasive challenge of online fraud and policy abuse, a problem that has grown increasingly complex and sophisticated with the advent of new technologies and fraudster tactics. The company's foundational strength lies in its proprietary global data network, built over more than a decade from billions of historical transactions and hundreds of billions of data attributes, which continuously feeds and refines its advanced artificial intelligence platform. This extensive data advantage is a significant competitive moat, enabling superior predictive capabilities and real-time risk assessment.

The e-commerce landscape is a dynamic battleground where fraudsters are early adopters of new technologies, including "Agentic Commerce," to launch dedicated attacks. Riskified's AI platform is specifically engineered to stay ahead of these emerging threats, providing merchants with the visibility needed to embrace legitimate AI shoppers while blocking sophisticated attacks. This technological edge is crucial as individual merchants often struggle to manage the scale and complexity of modern fraud, which increasingly involves professional, coordinated large-scale attacks, device takeovers, and the manipulation of AI agents with stolen information. Riskified's network effect allows it to identify and block propagating fraud attacks across multiple merchants, offering a collective defense far more effective than standalone solutions.

Technological Leadership and Innovation

Riskified's technological differentiation is central to its investment thesis. The company's core Chargeback Guarantee product, which ensures the legitimacy of online orders, is continuously enhanced by its AI decisioning engine. A key innovation is Adaptive Checkout, launched in Q4 2024. This advanced configuration intelligently adapts the checkout process to the risk level of each transaction, blocking fraudulent attempts before bank authorization and employing selective smart friction, such as automatically asking for a CVV or sending a one-time password prompt for good but risky-looking orders. This dynamic approach aims to optimize the end-to-end conversion flow, with management noting "great adoption, double-digit percentage really growing quickly, both within our current installed base and on a new prospect logo."

Beyond chargeback fraud, Riskified has expanded its multi-product platform to address a wider range of use cases. Policy Protect is a machine learning solution designed to detect and prevent refund and returns policy abuse in real-time, leveraging Riskified's identity engine and risk models. This product has shown remarkable growth, with new product revenue increasing approximately 190% year-over-year in Q1 2025 and well over 100% (around 150%) in Q2 2025. A new refund abuse model, launched in Q2 2025, has generated an improvement of at least 15% in technical performance compared to its predecessor, by leveraging behavioral features across Riskified's network. The Decision Studio tool, part of Policy Protect, empowers merchants with self-service capabilities to create, simulate, and manage customer-facing policy decisions, enabling one merchant to reduce 200 static rules to just 20 dynamic rules. This directly translates to improved customer experiences, reduced manual review work, and significant cost savings for merchants.

The company's R&D efforts are substantial, with plans to increase development and research capacity by almost 20% in 2025 while keeping total expenses flat. This is achieved through workforce restructuring and the incorporation of AI tools to automate internal tasks. These investments are directed at enhancing autonomous training capabilities for customized model performance, developing a performance segmentation system to optimize approval and chargeback rates, and deepening modular machine learning infrastructure for features like early detection models and SKU risk networks. These technological advancements collectively strengthen the platform's accuracy and performance, creating a significant barrier to entry for competitors.

Competitive Landscape and Strategic Positioning

Riskified operates in a competitive environment, but its specialized focus and technological depth provide distinct advantages. While larger payment ecosystem players like PayPal (PYPL), Adyen (ADYEY), Block (SQ), and Visa (V) offer integrated fraud prevention, Riskified's pure-play risk intelligence platform provides a more granular and effective solution for complex e-commerce fraud. Riskified's platform receives significantly more data per transaction—in most cases, three times the level of data compared to gateway solutions—enabling the creation of more features and capabilities. This data advantage allows Riskified to achieve high win rates, consistently around 70% in competitive processes.

Compared to broad payment processors, Riskified's merchant-centric approach and deep expertise in AI-driven risk assessment allow it to offer superior efficiency in fraud mitigation. For instance, while Adyen excels in global scalability, Riskified's targeted solutions can provide greater precision in risk analysis. Similarly, against Block's broader fintech offerings, Riskified's specialized tools can notably reduce fraud-related cart abandonment. The company does not view acquisitions by card networks in the fraud detection space as directly competitive, as these typically focus on different parts of the payments value chain or serve card issuers rather than enterprise e-commerce merchants.

Despite its strengths, Riskified faces competitive pressures, as evidenced by a large merchant in the Home category leaving its network at the end of October 2024. This event, which impacted Q4 2024 revenue by approximately $5 million and is expected to affect 2025 revenue by around $18 million, prompted Riskified to refine its pricing and product bundling strategies and strengthen contract renewal processes. However, the company successfully renewed 100% of its top 20 contracts up for renewal in Q1 2025, with nearly half extended as multi-year agreements, demonstrating strong customer retention outside of this specific churn event.

Financial Performance and Outlook

Riskified has demonstrated a clear path toward profitability and disciplined financial management. For the full year 2024, the company achieved revenue of $327.5 million, marking a 10% year-over-year increase, and GMV grew by 15% to $141.2 billion. Notably, 2024 was Riskified's first full year of positive adjusted EBITDA, reaching $17.2 million, an increase of over 300% year-over-year, with an 800 basis point margin expansion. Free cash flow for 2024 was a record $39 million.

The positive momentum continued into 2025. In the first half of 2025, Riskified reported revenue of $163.4 million, up 5% year-over-year, and GMV of $70.6 billion, a 5% increase. The company achieved positive adjusted EBITDA for the seventh consecutive quarter by Q2 2025, with $2.1 million in Q2 and $3.5 million for the first half. Non-GAAP gross profit margin for Q1 and Q2 2025 stood at approximately 50%. This was slightly down from 53% in the prior year, primarily due to the ramping of new merchants in emerging categories like Money Transfer and Payments and geographies such as Other Americas, which often have different risk profiles during initial integration. However, improvements in core machine learning models and new product revenue partially offset these impacts.

Operating expenses reflect ongoing discipline. Total non-GAAP operating expenses for Q2 2025 were $38.2 million, down from $39.3 million in the prior year, and as a percentage of revenue, they declined from 50% to 47%. For the full year 2025, Riskified anticipates quarterly non-GAAP operating expenses of approximately $38.5 million in the third and fourth quarters. The company expects to exit 2025 with similar employee levels but significantly increased R&D capacity, positioning it for continued leverage.

For the full year 2025, Riskified has updated its revenue guidance to between $336 million and $346 million, with a midpoint of $341 million. Adjusted EBITDA guidance is maintained between $18 million and $26 million, with a midpoint of $22 million. The non-GAAP gross profit margin for 2025 is projected to be approximately 52%, with expectations for improvement in the second half. Riskified anticipates approximately $30 million of positive free cash flow in 2025, with the majority expected in Q4. Management's "North Star" remains achieving double-digit revenue growth in 2026 and adjusted EBITDA margins between 15% and 20% by the end of 2026.

Liquidity and Capital Allocation

Riskified maintains a robust financial position, ending Q2 2025 with $339 million in cash, deposits, and investments, and zero debt. This strong liquidity provides significant flexibility for strategic capital allocation. The company's Board of Directors authorized an additional $75 million share repurchase program on August 15, 2025, bringing the total outstanding authorization to approximately $85 million. In the first half of 2025, Riskified repurchased 9 million shares for approximately $44 million, demonstrating its commitment to managing dilution and enhancing shareholder value. The company expects its share count to decline year-over-year.

Riskified's M&A strategy focuses on product bolt-on acquisitions to accelerate growth and platform expansion, as well as potential consolidation of smaller players in the market to drive scale and synergies. This disciplined approach to capital deployment, combined with strong free cash flow generation, underscores management's confidence in the business fundamentals.

Conclusion

Riskified stands at a pivotal juncture, leveraging its deep technological expertise and expansive data network to redefine e-commerce risk intelligence. The company's AI-powered platform, with innovations like Adaptive Checkout and the rapidly growing Policy Protect, provides a critical defense against the escalating complexity of online fraud and abuse, including emerging threats from Agentic Commerce. While competitive pressures and macroeconomic uncertainties persist, Riskified's strategic diversification across verticals and geographies, coupled with disciplined operational management and a strong balance sheet, positions it for sustained growth. The commitment to achieving double-digit revenue growth and significant adjusted EBITDA margin expansion by 2026, supported by a robust pipeline and ongoing product innovation, underscores a compelling investment thesis centered on technological leadership and a resilient business model in the ever-evolving digital commerce landscape.