Tech stocks had a strong year in 2021 as they soared until the pandemic ended. But the tech stocks that went public that year found themselves caught between a bull market and a bear market.

Amplitude (NASDAQ:AMPL) is an example. The Software-as-a-Service stock, which specializes in digital analytics and digital product optimization, went public in September 2021. The stock initially soared on broader enthusiasm for the software industry and the strong growth of the company at the time of its debut on the market.

However, like the rest of the software industry, its growth rate quickly slowed as the economy reopened and businesses focused on other priorities. The stock plunged in late 2021 and 2022, and has remained down since then. Amplitude is now down 88% from its peak shortly after its IPO, but signs of a rebound are emerging. Let’s take a look at three reasons why the stock could surge in 2025.

Image source: Getty Images.

1. Customer churn is finally under control

Part of the reason the company has struggled in recent years is that many of its customers, like other software companies, have become too committed to the platform. As a result, revenue growth slowed and has remained weak since 2021. However, the company has now overcome most of these customer defections, paving the way for growth to resume in 2025.

CEO Spenser Skates said during the earnings call:

Annual recurring revenue during the quarter increased 8% to $298 million, slightly higher than reported quarterly revenue, which increased 6% to $75.2 million, a positive sign for accelerating growth. The company continues to expand its large customer base; those with annual recurring revenue of at least $100,000 increased 13% to 567.

Amplitude’s revenue growth figure has been artificially suppressed by post-pandemic customer churn, and as that subsides, its growth rate is expected to return to double digits. As an indicator, its remaining performance obligations (RPOs, a measure of backlog) increased 21% during the quarter to $286.6 million, and long-term RPOs (contracts over 12 months) jumped 49% to $75.5 million. The company said this was the result of closer relationships with its customers and investments in the enterprise segment, i.e. larger customers.

2. It can drive customers away from competitors

Amplitude offers a suite of tools to help businesses understand how their customers use their products so they can improve them, and considers its closest competitor to be Alphabetof Google Analytics and Adobe Analytical.

According to CEO Spenser Skates, Amplitude’s customers are increasingly unhappy with Google Analytics, which Skates says “creates a long line of opportunities for Amplitude” because customers are “dissatisfied with its usability issues (from Google) and its unresolved privacy issues.

Amplitude can grow with the digital optimization market, but it can also grow by taking market share from larger competitors like Google and Adobe.

The company estimated its total addressable market at $37 billion at its IPO, and it’s probably bigger than that today. At its current revenue rate, Amplitude generates less than 1% of that revenue, meaning the opportunity before it is huge if it can capitalize on it. Any challenges faced by Google Analytics should open the door to better revenue growth.

3. Acquisition of Command AI should boost growth

Amplitude made its biggest acquisition to date in October, buying Command AI, a startup that provides AI-based user assistance. Command AI complements Amplitude’s existing analytics platform and delivers more of the functionality its customers are looking for. This will allow them to add things like nudges, tours, onboarding guides, and surveys that their own users can use with their digital products. In an interview with The Motley Fool, Skates explained, “A lot of our customers have been asking for this type of functionality for a while” and noted that the company plans to launch a combined product early next year.

Command AI is just one part of what Amplitude is doing to expand its product portfolio. The company also launched a new program called Amplitude Made Easy, which gives customers just one line of code to get up and running, and Web Experimentation, which allows users to run self-service A/B tests.

Overall, Amplitude’s 6% third-quarter revenue growth won’t turn investors’ heads. But you can see momentum building around the corner with 21% growth in its RPO, decreasing customer churn, competitive weakness from Google, and product improvements. If revenue growth starts to accelerate, the stock could soar.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Adobe and Alphabet. The Motley Fool has a disclosure policy.