Five9 — Third Quarter 2026 Earnings Summary

Financial Performance

• Q3 2026 revenue increased 13% year-over-year to $323.3 million, compared to $285.8 million in Q3 2025.
• GAAP gross margin was 53.4% in Q3 2026, down from 55.0% in Q3 2025.
• Adjusted gross margin was 61.7% in Q3 2026, down from 62.8% in Q3 2025.
• GAAP net income for Q3 2026 was $14.5 million ($0.19 per diluted share), compared to $18.0 million ($0.21 per diluted share) in Q3 2025.
• Non-GAAP net income for Q3 2026 was $63.7 million ($0.82 per diluted share), compared to $60.6 million ($0.78 per diluted share) in Q3 2025.
• Adjusted EBITDA for Q3 2026 was $81.2 million (25.1% of revenue), matching the 25.1% margin of Q3 2025 ($71.7 million).
• GAAP operating cash flow for Q3 2026 was $58.4 million, compared to $59.2 million in Q3 2025.
• Deferred revenue increased to $86.1 million as of September 30, 2026, from $77.5 million as of December 31, 2025.
• Convertible senior notes totaled $738.2 million as of September 30, 2026, up from $735.5 million as of December 31, 2025.
• Cash and cash equivalents were $263.8 million as of September 30, 2026, compared to $232.1 million as of December 31, 2025.

Guidance and Future Outlook

• Full-year 2026 revenue is expected to be between $1.269 billion and $1.275 billion.
• Full-year 2026 GAAP net income per share is projected between $0.75 and $0.83, assuming 77.1 million diluted shares.
• Full-year 2026 Non-GAAP net income per share is projected between $3.17 and $3.21, assuming 77.1 million diluted shares.
• Q4 2026 revenue is expected to be between $328.0 million and $334.0 million.
• Q4 2026 GAAP net income per share is projected between $0.28 and $0.36, assuming 78.0 million diluted shares.
• Q4 2026 Non-GAAP net income per share is projected between $0.88 and $0.92, assuming 78.0 million diluted shares.
• Guidance excludes contributions from the pending Level AI acquisition, expected to close in Q4 2026 subject to closing conditions.

Business Segments and Product Lines

• Subscription revenue grew 16% year-over-year in Q3 2026.
• AI revenue growth accelerated significantly in Q3 2026.
• LTM subscription dollar-based retention rate was 109% as of September 30, 2026.
• LTM subscription and telecom dollar-based retention rate was 107% as of September 30, 2026.
• The company signed a definitive agreement to acquire Level AI.

Market and Competitive Landscape

• Named a Leader in the 2026 Gartner® Magic Quadrant™ for Contact Center as a Service.
• Recognized as a Leader in the 2026 IDC MarketScape: Worldwide Agentic Contact Center-as-a-Service Platforms.
• The company serves more than 4,000 enterprises across 140+ countries.

Risks and Challenges

• Forward-looking statements are subject to risks including macroeconomic challenges, global tariff changes, inflation, high interest rates, and currency fluctuations.
• Risks include inability to attract new customers, customer subscription reductions, and failure to replace license revenue with AI solution revenue.
• Potential risks involve technical infrastructure failures, cybersecurity incidents, data breaches, and failure to retain skilled employees.
• The company faces competition from a high number of competitors and risks associated with rapid technological change in the contact center software market.
• Risks include reliance on third-party telecommunications providers, longer sales cycles for larger organizations, and potential dilution from stock repurchases or acquisitions.
• The company notes a history of losses prior to 2025 and the risk of being unable to sustain profitability.

Management Commentary and Tone

• CEO Amit Mathradas described Q3 as a "solid quarter" with accelerating subscription revenue growth and significantly stepped-up AI revenue growth.
• Management stated that results indicate the "Humantic CX strategy is working."
• Management believes adding Level AI strengthens the competitive position, expands the customer base, and deepens AI talent for continuous innovation.

Other Key Points

• Five9 signed a definitive agreement to acquire Level AI for $325.0 million in cash.
• The company was named to the 2026 Best Workplaces in Technology list by Fortune Media and Great Place To Work®.
• Cash paid for repurchase of common stock was $100.0 million for the nine months ended September 30, 2026.
• Stock-based compensation for the nine months ended September 30, 2026, was $100.6 million.
• The company reported a net cash used in financing activities of $107.7 million for the nine months ended September 30, 2026.
• The company has a significant net operating loss carryforward position affecting tax treatment of non-GAAP adjustments.