Executive Summary / Key Takeaways

• Strategic Pivot Underway: Amwell is undergoing a significant transformation, aggressively shifting its business model towards a high-margin, SaaS-driven platform. This pivot involves divesting non-core assets and focusing intensely on its Converge platform to generate predictable subscription revenue.
• DHA as a Core Catalyst: The successful, albeit partially constrained, one-year extension of the Military Health System (DHA) contract validates Amwell's platform capabilities at scale and provides a substantial, high-quality revenue foundation.
• Clear Path to Profitability: Aggressive cost reduction initiatives across Research & Development, Sales & Marketing, and General & Administrative expenses are driving consistent Adjusted EBITDA improvements, with a firm target of achieving positive cash flow from operations by 2026.
• Technological Differentiation: The Amwell Converge platform, with its advanced architecture and strategic investments in artificial intelligence, serves as a key differentiator, enabling efficient care orchestration, improved outcomes, and a strong competitive moat against fragmented point solutions.
• Market Opportunity Amidst Risks: Amwell is well-positioned to capitalize on the accelerating shift towards technology-enabled care, but investors should monitor competitive pressures, the full scope of future DHA contracts, and the sustained execution of its cost-cutting measures.

Amwell's Vision for Hybrid Care: A Digital Transformation Imperative

Amwell, a pioneer in virtual healthcare since its incorporation in 2006, is now at the forefront of transforming healthcare with technology. The company's mission is to enable health providers, payers, and innovators to achieve their digital ambitions, fostering a coordinated experience across in-person, virtual, and automated care. This strategic evolution is unfolding against a backdrop of profound industry shifts. Consumers are increasingly seeking care online, and the inventory of technology-enabled clinical programs, particularly those powered by artificial intelligence, is rapidly expanding. This growing adoption of tech-enabled care is widely accepted as a crucial catalyst for achieving better, more efficient healthcare.

However, this transformation presents significant challenges for healthcare organizations. They grapple with the need to drive better consumer engagement, address service and data fragmentation, ensure regulatory compliance and care coverage, and consistently demonstrate positive clinical and financial outcomes. Concurrently, clinical program vendors face high customer acquisition costs and pressure to integrate their point solutions into broader, whole-person care models. Amwell positions its unified platform as the central solution to these complexities, empowering clients to leverage technology for efficiency, improved outcomes, and enhanced access to affordable, convenient, and effective care.

The Converge Platform: Amwell's Technological Core and AI Ambition

At the heart of Amwell's strategy is the Amwell Converge platform, the company's latest enterprise platform software and its "go-forward strategy" for digitally enabling scalable healthcare experiences. This cloud-based platform is engineered to be future-ready, reliable, flexible, scalable, secure, and seamlessly integrated with other healthcare software systems. It boasts state-of-the-art data architecture and video capabilities, designed with a user experience focused on the holistic needs of patients, members, and providers.

The Converge platform delivers critical digital capabilities, including virtual primary care, post-discharge follow-up, chronic condition management, virtual nursing, and e-sitting. It aligns these diverse use cases into a single digital care operating system that aggregates data from all care experiences, providing real-time insights. This capability accelerates innovation and interoperability for health system and health plan clients, as well as other healthcare innovators. For investors, this technological foundation translates into a strong competitive moat, enabling Amwell to offer superior value, potentially leading to higher margins through recurring subscription revenue.

Amwell is strategically embracing artificial intelligence as a "most significant and rising catalyst" for tech-enabled care. The company envisions empowering its clients to leverage AI for improvements across multiple fronts, including experience, efficiency, clinical decision-making, and data analytics. This goes beyond automating mundane tasks, aiming to gather and present comprehensive patient data and context, optimize provider time, and inform clinical decisions. Amwell is actively streamlining its teams and challenging them to "harness the power of artificial intelligence to reshape how they work." This commitment is further evidenced by a minority investment in Aingelz, Inc. in March 2025, specifically "intended to support artificial intelligence development." This focus on AI is expected to enhance the platform's capabilities, driving greater efficiency and better outcomes, thereby strengthening Amwell's market positioning and long-term growth prospects.

Strategic Transformation and Operational Focus

Amwell's journey has been marked by a continuous strategic evolution, moving from a pioneering virtual care provider to a platform-centric enterprise. This transformation gained significant momentum in 2024, with a refreshed strategy focused on its core mission and enhanced operational efficiency. A key aspect of this shift was the divestiture of Amwell Psychiatric Care (APC) in January 2025, a legacy psychiatric staffing business. Management determined APC "did not meet our threshold of being an integral part of the Amwell core offering and was not advancing our profitable growth," allowing Amwell to focus resources on its core platform and bolster its balance sheet with up to $30 million in cash. Similarly, the CCAW, JV LLC joint venture with Cleveland Clinic is slated to wind down in the second half of 2025, as direct partnering can now achieve care delivery goals.

Leadership changes underscore this strategic realignment. Dan Zamansky joined as Chief Product and Technology Officer in Q1 2025, bringing expertise from Amazon (AMZN) Healthcare in platform services, AI, and product management. His focus areas include streamlining the consumer experience, improving patient-program matching, and enhancing data infrastructure for analytics. Mark Hirschhorn's expanded role as CFO and Chief Operating Officer, effective Q4 2024, further emphasizes the company's commitment to driving efficiency and product focus. These leadership appointments and strategic divestitures are integral to Amwell's aggressive cost reduction initiatives, which include streamlining teams, implementing new methods like self-service for customers, and migrating from expensive one-time customizations to a more centralized, configured platform approach.

The Military Health System: A Foundational Partnership

A cornerstone of Amwell's growth strategy and a powerful validation of its platform's capabilities is the ongoing partnership with the Defense Health Agency (DHA) for the Military Health System (MHS). By early April 2025, Amwell's full solution for virtual visits was deployed across the entire global MHS enterprise, leading to the decommissioning of the MHS's legacy Video Connect System. Since going live, virtual visits have nearly tripled, with provider and patient satisfaction reported as "very high," exceeding 90%. This deployment successfully expanded to include MHS beneficiaries in the U.S. Coast Guard and MEPCOM, even facilitating virtual visits from deployed units in combat zones.

In August 2025, Amwell received an anticipated one-year extension for this engagement, with the annualized value of the subscription revenue being "slightly greater" than prior billings. However, the 2026 contract extension notably excluded behavioral health and automated care programs due to "budget restrictions being broadly enforced by the Department of Defense." Management, while acknowledging this limitation, maintains "strong conviction" in the clinical, cost, and operational benefits of these solutions, believing they represent "additional software revenue expansion opportunity" in a "more normalized budgeting environment." This partnership serves as a "model for our industry on the value of modernizing healthcare and the power of technology-enabled care," positioning Amwell as a significant contributor to healthcare modernization across the broader federal market.

Financial Performance: A Turn Towards Efficiency

Amwell's financial performance in recent periods reflects its strategic pivot and aggressive cost management. In the second quarter of 2025, total revenue reached $70.9 million, a 13% increase year-over-year. Normalizing for the divestiture of Amwell Psychiatric Care (APC), revenue growth was even stronger at 25% year-over-year. This growth was primarily driven by a significant 47% year-over-year increase in subscription software revenue, which hit $40.4 million in Q2 2025 and constituted 57% of total revenue.
Visit revenue, primarily from the Amwell Medical Group (AMG), saw a 20.8% decline year-over-year in Q2 2025, totaling $22.8 million. However, after normalizing for the APC sale, visit revenue was flat year-over-year, with average revenue per visit increasing by 8.3% due to a favorable mix shift towards virtual primary care and specialty programs. Services and Carepoint revenue also grew by 17.2% year-over-year to $7.7 million, driven by professional services for strategic customers.

The company's profitability metrics are showing marked improvement due to stringent cost controls. Gross margin in Q2 2025 reached 56.1%, a 3.3 percentage point increase from Q1 2025, reflecting the higher software mix and ongoing cost initiatives. This builds on a Q1 2025 gross margin of 52.8%, up 4.3 percentage points from Q4 2024. For the full year 2024, gross margin was 39%, an improvement from 37% in 2023. Operating expenses have seen substantial reductions: Research & Development expenses declined by 12.2% year-over-year in Q2 2025, Sales & Marketing by 32%, and General & Administrative by 25.7%. These reductions were achieved through significant headcount adjustments across all departments and reduced consulting and marketing spend. As a result, Adjusted EBITDA for Q2 2025 was negative $4.7 million, a substantial improvement from negative $35 million in Q2 2024, marking the fifth consecutive quarter of Adjusted EBITDA improvement. Amwell ended Q2 2025 with a robust liquidity position of $219 million in cash and marketable securities and zero debt, having reduced its cash burn to $3 million in the quarter.

Competitive Landscape and Strategic Positioning

Amwell operates in a dynamic and competitive digital health market, facing both direct and indirect rivals. Key direct competitors include Teladoc Health (TDOC), UnitedHealth Group (UNH) through its Optum division, and CVS Health (CVS) with its virtual care offerings.

Amwell's competitive advantage lies in its unified platform approach and technological integration. The Converge platform, by offering a single, delightful patient experience and orchestrating access to a growing number of Amwell-owned and third-party clinical programs, differentiates it from point solution players. This approach enables unified reporting and improved ROI for sponsors, while reducing customer acquisition costs for clinical program vendors. The company's Carepoint devices further enhance its unique hybrid care models, providing specialized equipment for remote diagnostics and in-clinic digital access points. Furthermore, Amwell's proven track record with the DHA, including GovCloud migration and stringent compliance, positions it strongly for other federal market opportunities, a segment where many competitors lack comparable experience.

Compared to Teladoc Health, Amwell competes on technological integration and specialized equipment, potentially offering greater reliability in remote diagnostics. However, TDOC often boasts a broader provider network and has demonstrated stronger revenue growth and cash flow generation. Amwell's platform flexibility and customization for enterprise clients are key differentiators against TDOC's broader scale. Against UnitedHealth Group's Optum, Amwell offers more specialized, direct-access telehealth platforms, while UNH leverages its vast payer ecosystem for bundled services and data analytics, exhibiting superior scale and profitability. CVS Health, with its retail health services, combines telehealth with widespread physical presence for an omnichannel hybrid model, offering greater customer loyalty and accessibility, while Amwell focuses on pure-play digital innovation.

Amwell's competitive moats include its proprietary technology platform, strong partnerships, and the high barriers to entry posed by complex regulatory approvals and the need for established networks. However, vulnerabilities include potential dependency on major clients and the challenge of rapidly scaling operations against larger, diversified players. The company's strategic response involves focusing on high-margin subscription revenue, leveraging AI, and expanding its ecosystem of third-party clinical solutions to enhance market reach and stickiness, thereby mitigating competitive pressures and driving profitable growth.

Outlook and Path to Profitability

Amwell's outlook is firmly anchored in its strategic transformation and disciplined execution. For the full year 2025, the company has revised its revenue guidance to a range of $245 million to $250 million, down from the prior range of $250 million to $260 million. This adjustment primarily reflects the exclusion of behavioral health and automated care programs from the DHA contract extension. Despite this, subscription software revenue is anticipated to represent 53% of total 2025 revenues, a significant increase from approximately 45% in 2024, underscoring the shift to a higher-quality revenue mix. The range for AMG visits remains unchanged at 1.3 million to 1.35 million.

Crucially, Amwell has narrowed its Adjusted EBITDA guidance to a range of negative $50 million to negative $45 million, an improvement from the previous range of negative $55 million to negative $45 million. This revised guidance demonstrates a projected 65% improvement in Adjusted EBITDA performance year-over-year, highlighting the positive impact of earlier and ongoing cost reductions. For Q3 2025, the company expects revenue between $53 million and $56 million, with Adjusted EBITDA in the range of negative $15 million to negative $13 million.

Underpinning this outlook are aggressive cost reduction assumptions: R&D expenses are projected to decline by over 10% year-over-year in 2025, Sales & Marketing by over 25%, and General & Administrative by over 20%. These reductions are driven by streamlining operations and completing the bulk of software configuration work for existing commitments. Management is taking a conservative view on visit volumes but expects less client churn going forward. The company remains steadfast in its goal of achieving positive cash flow from operations during 2026, anticipating ending 2025 with approximately $190 million in cash and over $150 million at year-end 2026. This target is supported by a combination of continued double-digit revenue growth (estimated 11-20% for 2026) and sustained cost savings.

Conclusion

Amwell is executing a profound strategic pivot, transforming into a focused, high-margin SaaS platform company. The strong Q2 2025 financial performance, characterized by robust subscription revenue growth and significant Adjusted EBITDA improvements, provides compelling evidence that this transformation is gaining traction. The Amwell Converge platform, with its advanced technological capabilities and strategic integration of AI, is central to this narrative, positioning the company as a critical enabler in the rapidly evolving digital health ecosystem.

While the nuanced scope of the DHA contract extension and persistent competitive pressures present challenges, Amwell's disciplined cost management, focused strategy, and robust balance sheet underscore its potential for long-term profitable growth. Investors should closely monitor the continued execution of cost controls, the expansion of its high-quality subscription revenue base, and the realization of the full potential of its government and commercial partnerships as key indicators of Amwell's success in achieving its 2026 cash flow positive goal and beyond.