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FIVN Q3 Earnings & Revenues Surpass Estimates, Both Increase Y/Y
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Key Takeaways
Five9's Q3 non-GAAP EPS rose 5.1% to 82 cents, while revenues grew 13.1% to $323.3M; both beat estimates.
Subscriptions rose 16% to account for 83% of Q3 revenues, while dollar-based retention improved to 109%.
Five9's $325M Level AI deal is expected to dilute adjusted EBITDA margin in 2027 but lift it in 2028.
Five9, Inc. (FIVN - Free Report) reported non-GAAP earnings of 82 cents per share for the third quarter of 2026, up 5.1% from 78 cents a year earlier. The result beat the Zacks Consensus Estimate of 80 cents by 2.5%, supported by subscription growth and momentum in artificial intelligence offerings.
Revenues climbed 13.1% year over year to $323.3 million, topping the consensus by 1.56%. Subscription revenues grew 16%, outpacing total sales, while the trailing-12-month subscription dollar-based retention rate improved to 109% from 107% a year earlier.
FIVN's Revenue Mix Shifts Toward Subscriptions
Subscriptions represented roughly 83% of third-quarter revenues, up from 81% in the year-ago period. Telecom contributed 11%, down from 12%, while professional services accounted for 6%, compared with 7% last year. The higher subscription mix reflects the growing contribution from platform-based recurring sales.
Revenue growth was driven primarily by larger customers, supported by sales and marketing efforts and improved brand awareness. Five9 had more than 4,000 customers at quarter-end. Remaining performance obligations on contracts with original terms exceeding one year totaled $1.61 billion, with roughly three-fourths expected to be recognized within 24 months.
Adjusted gross profit rose 11.0% year over year to $199.4 million, but adjusted gross margin contracted 110 basis points to 61.7% from 62.8%.
GAAP gross profit totaled $172.7 million, while its margin declined to 53.4% from 55.0% in the prior-year quarter.
Cost of revenues increased 17.1% to $150.6 million. Five9 cited higher third-party expenses associated with customer activity, data-center and public-cloud capacity costs, internal-use software amortization and increased carrier rates. The faster rise in delivery costs relative to sales weighed on gross profitability.
FIVN's Q3 Operating Spending and Profitability
Non-GAAP research and development expenses rose 13.9% to $29.9 million, while non-GAAP sales and marketing spending increased 11.0% to $70 million.
Non-GAAP general and administrative expenses declined 1.9% to $18.3 million, reducing their share of revenues to 5.7% from 6.5%.
Adjusted EBITDA increased 13.3% to $81.23 million from $71.7 million, with margin unchanged at 25.1%.
Meanwhile, GAAP net income fell 19.3% to $14.5 million from $18 million. GAAP earnings declined to 19 cents per share from 21 cents.
The company also implemented a workforce reduction of approximately 3% during the quarter, incurring $4.3 million in cash restructuring costs. Those costs were excluded from adjusted EBITDA, contributing to the divergence between adjusted and GAAP profitability.
Five9's Cash Flow and Liquidity Position
Operating cash flow slipped 1.4% year over year to $58.4 million from $59.2 million. Free cash flow, a non-GAAP measure after capital expenditures, advanced 13.1% to $43.3 million from $38.3 million.
As of Sept. 30, 2026, FIVN held $697.7 million in cash, equivalents and marketable investments, largely unchanged from $696.9 million as of Dec. 31, 2025. Working capital totaled $773.9 million, while convertible senior notes had a carrying value of $738.2 million. The company also had $200 million remaining under its 2026 share repurchase authorization.
FIVN's Level AI Deal Targets Broader Reach
Five9 announced an agreement to acquire Level AI for $325 million in cash yesterday. The AI-native company offers voice-of-the-customer analytics, agent assistance, and automated quality management. Its standalone products will also expand Five9's reach to customers using other contact-center platforms.
Level AI has approximately $20 million in annual recurring revenues, growing around 50% year over year. Five9 expects the transaction to close in 2026, with approximately one percentage point of adjusted EBITDA margin dilution in 2027 and margin accretion in 2028. The acquired business is expected to reach EBITDA breakeven in roughly six months.
Five9's Q4 & 2026 Outlook
For the fourth quarter of 2026, management expects revenues of $328 million to $334 million and non-GAAP earnings of 88-92 cents per share. GAAP earnings are projected at 28-36 cents per share. The guidance excludes any contribution from Level AI.
For 2026, revenues are forecast between $1.269 billion and $1.275 billion, with non-GAAP earnings of $3.17-$3.21 and GAAP earnings of 75-83 cents per share.
The updated non-GAAP earnings midpoint of $3.19 is below August's $3.26 projection, reflecting revised timing for organizational changes and a higher-than-expected diluted share count.
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FIVN Q3 Earnings & Revenues Surpass Estimates, Both Increase Y/Y
Key Takeaways
Five9, Inc. (FIVN - Free Report) reported non-GAAP earnings of 82 cents per share for the third quarter of 2026, up 5.1% from 78 cents a year earlier. The result beat the Zacks Consensus Estimate of 80 cents by 2.5%, supported by subscription growth and momentum in artificial intelligence offerings.
Revenues climbed 13.1% year over year to $323.3 million, topping the consensus by 1.56%. Subscription revenues grew 16%, outpacing total sales, while the trailing-12-month subscription dollar-based retention rate improved to 109% from 107% a year earlier.
FIVN's Revenue Mix Shifts Toward Subscriptions
Subscriptions represented roughly 83% of third-quarter revenues, up from 81% in the year-ago period. Telecom contributed 11%, down from 12%, while professional services accounted for 6%, compared with 7% last year. The higher subscription mix reflects the growing contribution from platform-based recurring sales.
Revenue growth was driven primarily by larger customers, supported by sales and marketing efforts and improved brand awareness. Five9 had more than 4,000 customers at quarter-end. Remaining performance obligations on contracts with original terms exceeding one year totaled $1.61 billion, with roughly three-fourths expected to be recognized within 24 months.
Five9, Inc. Price, Consensus and EPS Surprise
Five9, Inc. price-consensus-eps-surprise-chart | Five9, Inc. Quote
Five9's Gross Margins Feel Cost Pressure
Adjusted gross profit rose 11.0% year over year to $199.4 million, but adjusted gross margin contracted 110 basis points to 61.7% from 62.8%.
GAAP gross profit totaled $172.7 million, while its margin declined to 53.4% from 55.0% in the prior-year quarter.
Cost of revenues increased 17.1% to $150.6 million. Five9 cited higher third-party expenses associated with customer activity, data-center and public-cloud capacity costs, internal-use software amortization and increased carrier rates. The faster rise in delivery costs relative to sales weighed on gross profitability.
FIVN's Q3 Operating Spending and Profitability
Non-GAAP research and development expenses rose 13.9% to $29.9 million, while non-GAAP sales and marketing spending increased 11.0% to $70 million.
Non-GAAP general and administrative expenses declined 1.9% to $18.3 million, reducing their share of revenues to 5.7% from 6.5%.
Adjusted EBITDA increased 13.3% to $81.23 million from $71.7 million, with margin unchanged at 25.1%.
Meanwhile, GAAP net income fell 19.3% to $14.5 million from $18 million. GAAP earnings declined to 19 cents per share from 21 cents.
The company also implemented a workforce reduction of approximately 3% during the quarter, incurring $4.3 million in cash restructuring costs. Those costs were excluded from adjusted EBITDA, contributing to the divergence between adjusted and GAAP profitability.
Five9's Cash Flow and Liquidity Position
Operating cash flow slipped 1.4% year over year to $58.4 million from $59.2 million. Free cash flow, a non-GAAP measure after capital expenditures, advanced 13.1% to $43.3 million from $38.3 million.
As of Sept. 30, 2026, FIVN held $697.7 million in cash, equivalents and marketable investments, largely unchanged from $696.9 million as of Dec. 31, 2025. Working capital totaled $773.9 million, while convertible senior notes had a carrying value of $738.2 million. The company also had $200 million remaining under its 2026 share repurchase authorization.
FIVN's Level AI Deal Targets Broader Reach
Five9 announced an agreement to acquire Level AI for $325 million in cash yesterday. The AI-native company offers voice-of-the-customer analytics, agent assistance, and automated quality management. Its standalone products will also expand Five9's reach to customers using other contact-center platforms.
Level AI has approximately $20 million in annual recurring revenues, growing around 50% year over year. Five9 expects the transaction to close in 2026, with approximately one percentage point of adjusted EBITDA margin dilution in 2027 and margin accretion in 2028. The acquired business is expected to reach EBITDA breakeven in roughly six months.
Five9's Q4 & 2026 Outlook
For the fourth quarter of 2026, management expects revenues of $328 million to $334 million and non-GAAP earnings of 88-92 cents per share. GAAP earnings are projected at 28-36 cents per share. The guidance excludes any contribution from Level AI.
For 2026, revenues are forecast between $1.269 billion and $1.275 billion, with non-GAAP earnings of $3.17-$3.21 and GAAP earnings of 75-83 cents per share.
The updated non-GAAP earnings midpoint of $3.19 is below August's $3.26 projection, reflecting revised timing for organizational changes and a higher-than-expected diluted share count.
FIVN’s Zacks Rank & Stocks to Consider
Five9 currently carries a Zacks Rank #3 (Hold).
Analog Devices (ADI - Free Report) , Braze (BRZE - Free Report) and NVIDIA Corporation (NVDA - Free Report) are among the better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Currently, Analog Devices, Braze and NVIDIA carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Analog Devices’ shares have appreciated 33.1% year to date. ADI is scheduled to report its fourth-quarter fiscal 2026 results on Nov. 24.
Braze’s shares have gained 33.5% year to date. BRZE is slated to report its third-quarter fiscal 2027 results on Dec. 8, 2026.
NVIDIA’s shares have declined 2.6% year to date. NVDA is set to report its third-quarter fiscal 2027 results on Nov. 17, 2026.