Five9, Inc. Q1 FY2026 earnings

Five9 reported first quarter fiscal 2026 revenue of $305.3 million, up 9% from $279.7 million a year earlier. Subscription revenue rose 13% year over year, the second consecutive quarter of accelerating subscription revenue growth, and subscription made up 82% of total revenue. Telecom contributed 12% and professional services 6%. Gross profit was $170.5 million, up from $153.7 million. GAAP gross margin was 55.9%, up from 55.0%, and adjusted gross margin was 63.6%, up from 62.4%. Management credited larger customers, sales and marketing activity, and improved brand awareness for the revenue increase.

The bottom line swung hard. GAAP operating income reached $18.5 million versus an operating loss of $5.4 million in the prior-year quarter, and operating margin went to 6.1% from -1.9%. GAAP net income was $18.4 million, or $0.21 per diluted share, compared with $0.6 million, or $0.01 per diluted share, in the first quarter of 2025. On a non-GAAP basis, net income was $58.6 million, or $0.76 per diluted share, and adjusted EBITDA was $74.5 million, or 24.4% of revenue, up from $52.7 million, or 18.8% of revenue. Stock-based compensation and other adjustments explain most of the GAAP-to-non-GAAP gap.

Cash flow stayed strong. GAAP operating cash flow was $63.9 million, up from $48.4 million, and capital expenditures were $5.3 million versus $4.7 million. The company said it intends to enter a $90 million accelerated share repurchase to close out the existing $150 million program and received board authorization for a new $200 million program. During March 2026, Five9 repurchased 578,742 shares at an average price of $17.28 for $10.0 million. At March 31, 2026, $90.0 million remained available under the 2025 program.

Backlog and retention tell a more nuanced story. Remaining performance obligations were $1.20 billion, up 12.3% from $1.07 billion, and current deferred revenue was $83.3 million, up 11.4% from $74.8 million. The last twelve months subscription and telecom dollar-based retention rate was 105% as of March 31, 2026, while the subscription-only rate was 107%. Both declined year over year. Management attributed the decline to a single large new customer ramping through 2024 and stronger seasonal increases in the second half of 2024, partly offset by AI momentum and expansion of larger existing customers. The company serves more than 3,000 organizations, works with over 1,450 partners, and had no single customer above 10% of revenue.

Guidance points to steady top-line growth. For the full year 2026, Five9 expects revenue of $1.254 billion to $1.266 billion and non-GAAP net income per share of $3.22 to $3.30. For the second quarter of 2026, revenue guidance is $303.0 million to $309.0 million and non-GAAP net income per share is $0.65 to $0.69. The company also announced an enterprise CX AI solution with Google Cloud and named Jay Lee as Chief Marketing and Growth Officer.

Risks remain substantial. Five9 cited global tariff increases, continued inflation, high interest rates, currency fluctuations, and current and potential global conflicts as factors that could hurt demand. It also warned that if AI solutions replace license subscription revenue and the company cannot make up the difference with AI sales, results would suffer. Legal overhang includes a securities class action filed in December 2024 and related derivative actions in California and Delaware, with the court granting in part and denying in part a motion to dismiss in February 2026. The 2025 reduction in force cut global full-time employees by roughly 4%, and management continues to stress cost discipline and a performance-driven culture.