The Appen Ltd (ASX: APX) share price is roaring higher on Thursday morning.

At the time of writing, the artificial intelligence data services company's shares are up 6% to $2.78.

Why is the Appen share price roaring higher?

The catalyst for today's gain has been the release of Appen's fourth quarter update before the market open.

Appen has delivered a positive fourth quarter update, revealing major signs of improvement in its financial performance despite an overall revenue decline.

The company reported revenue of $66.7 million for the fourth quarter, down 7% from the prior corresponding period. However, this decline was due to the loss of Google (NASDAQ: GOOG) as a major customer, which contributed $23.3 million in revenue in the previous period.

Excluding Google, revenue actually grew 37% year-on-year from $48.6 million in the fourth quarter of FY 2023.

Appen also reported a strong quarter-on-quarter performance, with revenue rising 23.3% from the previous quarter. This was largely driven by growth in generative AI projects. This suggests that Appen is making progress in capitalising on the increasing demand for artificial intelligence training data.

On the profitability front, Appen demonstrated continued improvement. Underlying EBITDA (before foreign exchange impacts) came in at $4.7 million for the quarter. This represents a $1.9 million increase from the $2.8 million reported in the same period last year.

Underlying cash EBITDA (before foreign exchange) was $3.2 million, which represents a significant $2.6 million improvement from $0.7 million a year earlier. Management noted that with its cost-cutting programs now complete, the focus has firmly shifted to achieving profitable growth.

Appen's cash position remains solid, with $54.8 million in cash on hand as of 31 December 2024. This provides the company with a stable financial footing as it continues to execute its growth strategy.

Management Commentary

Appen's CEO & Managing Director, Ryan Kolln, described the quarter as the culmination of a transformative year for the company. He said:

Q4 marks the end of a transformative year. We have strengthened our business and are well positioned for sustained profitable growth.

Kolln also highlighted the company's return to EBITDA profitability, noting that the strong quarter-on-quarter revenue growth and improved cash EBITDA were key achievements. The CEO adds:

We are very pleased to have built on the return to EBITDA profitability in Q3 FY24. In Q4, we delivered strong quarter-on-quarter revenue growth and improved underlying EBITDA and underlying cash EBITDA profitability.

He also pointed to continued growth in large language model (LLM)-related projects as a driver of positive revenue momentum. Kolln adds:

We're continuing to experience LLM-related growth which is contributing to our positive revenue performance. China continues to experience significant revenue growth, and we have conviction in the potential of our Enterprise and Government divisions."

Overall, Appen's latest results suggest that while challenges remain, the company is moving in the right direction with improving financials and a focus on sustainable, profitable growth.

The Appen share price is now up more than 700% over the past 12 months.