Summary
Five9 closed the second quarter of 2026 with revenue of $312.4 million, up 10% from $283.3 million in the second quarter of 2025. Subscription revenue grew 14% year over year, which management described as the third consecutive quarter of accelerating subscription growth. Subscription accounted for 83% of total revenue in the quarter, telecom 11% and professional services 6%. Year-to-date revenue was $617.8 million, up 9.7% from $563.0 million in the first half of 2025. The company also announced a new customer win with total contract value of approximately $100 million, closed through the Google Marketplace.
Profitability improved at the operating line while margins compressed. GAAP gross margin was 53.4%, down from 54.9% a year earlier, and adjusted gross margin was 61.4% compared with 63.0%. Gross profit of $166.7 million rose 7.3%. Operating income was $2.0 million, a swing to a profit from an operating loss of $1.6 million in the prior-year quarter. GAAP net income was $3.4 million, or $0.04 per diluted share, up from $1.2 million, or $0.01 per diluted share. On a non-GAAP basis, net income was $53.5 million, or $0.70 per diluted share, against $58.3 million, or $0.76 per diluted share. Adjusted EBITDA was $70.1 million, or 22.4% of revenue, compared with $67.9 million, or 24.0% of revenue.
Year-to-date GAAP net income was $21.8 million, or $0.25 per diluted share, up from $1.7 million, or $0.02 per diluted share, in the first half of 2025. Operating cash flow was $42.1 million for the quarter, up from $35.1 million, and $106.0 million year to date, up from $83.4 million. Capital expenditures rose to $17.6 million from $3.5 million in the prior-year quarter. Deferred revenue was $73.4 million, up 8.0%, and remaining performance obligations reached $1.45 billion, up 25.9% from $1.15 billion. The balance sheet carried $187.3 million in cash and cash equivalents and $466.8 million in marketable investments, with working capital of $722.1 million. The company had $200.0 million available under its 2026 repurchase program at quarter end.
Retention softened. The trailing-twelve-month subscription dollar-based retention rate was 107% as of June 30, 2026, and the subscription plus telecom rate was 106%, down from 109% and 108% a year earlier. Management tied the decline to a single large new customer that ramped significantly through 2024 and to stronger seasonal increases in the second half of 2024, partly offset by AI momentum and expansion among larger existing customers. General and administrative expense rose 18% in the quarter, driven largely by an $8.4 million impairment charge tied to consolidating the San Ramon headquarters from two floors to one. Five9 also carries a securities class action and related derivative suits, and it flags macroeconomic pressure, tariffs, competition and the risk that AI solutions displace subscription license revenue.
Guidance points to continued growth. For the third quarter of 2026, Five9 expects revenue of $316.0 million to $322.0 million, GAAP net income per share of $0.09 to $0.16 and non-GAAP net income per share of $0.77 to $0.81. For the full year 2026, the company guides to revenue of $1.260 billion to $1.272 billion, GAAP net income per share of $0.71 to $0.82 and non-GAAP net income per share of $3.22 to $3.30. The quarter also brought a new Chief Technology Officer, a new Chief Sales Officer and a new Executive Vice President of Transformation and Strategy, the launch of Five9 Voice AI Agents, and addition to the S&P SmallCap 600 on August 3, 2026.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $312.4M | $305.3M | +2.3% | $283.3M | +10.3% |
| Gross profit | $166.7M | $170.5M | -2.2% | $155.4M | +7.3% |
| Gross margin | 53.4% | 55.9% | -2.5 pp | 54.9% | -1.5 pp |
| Research & development | $42.1M | $39.7M | +6.0% | $39.9M | +5.4% |
| Sales & marketing | $79.7M | $79.5M | +0.3% | $80.7M | -1.2% |
| General & administrative | $43.0M | $32.9M | +30.8% | $36.4M | +18.2% |
| Total operating expenses | $164.8M | $152.0M | +8.4% | $157.0M | +5.0% |
| Operating income (loss) | $2.0M | $18.5M | -89.3% | -$1.6M | +226.6% |
| Operating margin | 0.6% | 6.1% | -5.4 pp | -0.6% | +1.2 pp |
| Net income (loss) | $3.4M | $18.4M | -81.7% | $1.2M | +191.8% |
| Net margin | 1.1% | 6.0% | -5.0 pp | 0.4% | +0.7 pp |
| Diluted EPS | $0.04 | $0.21 | -$0.17 | $0.01 | +$0.03 |
| Customers | 3,000 | 3,000 | ±0.0% | 3,000 | ±0.0% |
Risks
Annual Dollar-Based Retention Rate declined to 106% on a subscription plus telecom basis and 107% on a subscription basis for the twelve months ended June 30, 2026, from 108% and 109% respectively for the twelve months ended June 30, 2025. Management attributes the decrease to year-over-year challenges from a single large new customer ramping significantly throughout 2024 and stronger seasonal increases in the second half of 2024, only partly offset by AI momentum and expansion of larger existing customers.
Gross margin fell to 53.4% in the quarter ended June 30, 2026 from 54.9% in the prior-year quarter, a decline of 1.5 percentage points, as cost of revenue rose 14% to $145.7 million while revenue rose 10%. The increase was driven by higher third-party costs, depreciation, data center and public cloud costs, and amortization of capitalized internal-use software development costs.
MD&A states that new and continued macroeconomic challenges from global tariff increases and potential future increases, current and potential global conflicts, continued inflation, uncertainty regarding consumer spending, high interest rates, and currency fluctuations may harm the business and could have an adverse impact on revenue in future periods.
A putative securities class action filed December 4, 2024 remains pending, and the court granted in part and denied in part Defendants' motion to dismiss on February 23, 2026. Related shareholder derivative actions in the Northern District of California and the District of Delaware have been filed and stayed, and the company states it is unable to estimate the reasonably possible loss or range of losses from the securities lawsuit.
Capital expenditures rose 404.5% to $17.6 million in the quarter ended June 30, 2026 and 178.5% to $22.9 million year to date, alongside $18.5 million of capitalized software development costs in the first half of 2026. The company also entered a $53.9 million five-year data center support and maintenance agreement financed through a non-interest bearing arrangement, adding fixed obligations.
The company is repositioning from a cloud-native solution to an AI-native CX platform built on its Genius AI suite, and states that its future success depends on its ability to innovate and expand internationally. Execution on this transition is central to the growth narrative while the retention rate declined year over year.
SaaS KPIs
All quarters →Adjusted EBITDA Margin
Adjusted Gross Margin
Total Customers
Summary, forecast, risks and KPIs are extracted from Five9, Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.