AI-Media Technologies (ASX:AIM): Investors are panicking that it’ll be a victim of AI

AI-Media Technologies (ASX:AIM) is not the only ASX stock with investors panicking that AI will make it go the way of Blockbuster and Kodak…but there are arguably more signs that the fears are legitimate than most other companies.

We acknowledge anyone from the company or an investor may take issue with that statement. But the share price re-action was what it was – >30%. The revenue decline was what it was. The company formally withdrew FY29 targets which it had been spruiking for 2 years. And it is now only $82m, less than half of what it listed at in 2020.

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AI-Media Technologies (ASX:AIM): A provider of caption services

Ai-Media Technologies’ bread and butter is captioning and media accessibility services. The heart of AI-Media’s product suite is the LEXI family of tools – a collection of AI-driven captioning and language solutions designed to automate what was once labour-intensive work. LEXI started with automatic live captioning offerings that use machine learning to convert speech to text in real time with an accuracy that rivals traditional human captioners at a fraction of the cost, and this suite has expanded substantially.

Beyond LEXI Text for automatic live captions, the toolkit now includes LEXI Recorded for rapid transcription of pre-recorded content, LEXI Translate for real-time multilingual subtitling, LEXI Voice for live voice translation across languages, and additional elements like LEXI Local for on-premises deployment, LEXI AD for AI-generated audio descriptions, and LEXI DR for disaster recovery of captioning workflows.

These tools integrate with a broader ecosystem that includes proprietary caption delivery infrastructure such as the iCap Cloud Network and a range of caption encoders capable of working with broadcast and IP systems. AI-Media also continues to offer human captioning and translation services as part of its end-to-end accessibility portfolio, although these represent a declining share of the overall business.

Adapting to AI (so it says)

The evolution of AI-Media’s LEXI suite has been closely tied to advancements in speech recognition, natural language processing and AI more broadly. Releases like LEXI 3.0 introduced features such as speaker identification and automated caption placement, significantly improving accuracy and reducing manual intervention, and more recent innovations like LEXI Voice are extending the platform into live speech translation.

Partnerships with technology providers, including speech-to-text specialists, have supported these developments and helped position the company’s AI tools as competitive alternatives to human-intensive workflows.

Despite this transition toward AI-driven offerings, AI-Media’s business model is not immune to the very forces reshaping its industry. As AI advances, many of the tasks traditionally performed by professional captioners, translators and transcribers are increasingly automated, raising broader questions about the sustainability and differentiation of specialised services.

This shift accelerates the commoditisation of core capabilities like automatic speech recognition, with larger cloud-AI providers and independent ASR platforms offering increasingly capable models at lower cost, which can erode pricing power and margins for specialised vendors.

Sceptical investors

The ironic thing is that Ai-Media’s shares rallied significantly after its FY25 results. And rightly so – its Annual Recurring Revenue (ARR) was $17m, its technology revenue rose 19% to $41.1m, now representing 63% of total revenue – impressive considering that these products did not exist at its 2020 IPO. Its gross profit was $45.1m, up 6%, underlying EBITDA rose 11% to $4.6m, and operating cash flow rose 48% to $5.3m.

Ai-Media reiterated once more its FY29 targets including for $150m revenue and $60m EBITDA. At its AGM, the company purported a long-term moat based off 5 pillars: Encoders (7,062 of which were installed), LEXI, Workflow orchestration (with integrations streamlining operations), its iCAP Network and data security.

But its 1H26 results were received badly with a 30% share price plunge on the same day. The company withdrew its FY29 targets and (to us) this stood out more than anything else. The Board said this was withdrawn,’ Given the structural evolution of the business model and the accelerating pace of change in AI-driven markets’.

There were some growth figures including ARR which rose 80% to $30m and its gross margin which rose to 70%. But EBITDA was negative by $1.7m and its total revenue was down 6%. The company said this was a short-term effect due to the transition. Investors were promised that it would deploy next-generation AI-native encoders under a Hardware-as-a-Service model, representing the first major hardware release upgrade in a decade.

Conclusion

Think about this. Why would you pay for something you can get for free? You could probably upload a video into ChatGPT and get it transcribed. The challenge all businesses threatened by AI is to prove that they are worth paying for…a task not impossible, but difficult. And even if you will ultimately be able to do so, investors will want to see evidence.