Summary
LivePerson's fiscal 2026 second quarter showed a business under severe pressure. Revenue fell 11.9% to $52.5 million. Year-to-date revenue fell 11.9% to $109.5 million. The operating loss widened to $67.7 million, down 952.4% from the prior-year quarter. The net loss widened to $72.6 million, down 361.9%. Diluted EPS was -$6.11, down $3.61. Operating margin was -129.0%, down 118.2 percentage points. For the first half, the net loss was $81.4 million, down 172.7%, and diluted EPS was -$6.87, down 22.5%. Management tied the top-line decline to customer cancellations and downsells, plus lower professional services. The company continues to see slower renewals and new business bookings. Customers are uncertain about LivePerson's financial stability. Broader macroeconomic and industry factors are extending enterprise buying cycles, including for high-value AI solutions.
Cost cuts have been aggressive. Headcount at period end fell across every major function. Cost of revenue headcount was 147, down from 176. Sales and marketing headcount was 128, down from 221. General and administrative headcount was 97, down from 138. Product development headcount was 241, down from 358. Those reductions follow restructuring activities that were substantially completed by December 31, 2025. General and administrative expenses still rose sharply because of merger-related costs, legal and consulting costs, and bad debt expense. Salary, stock-based compensation, and employee-related expenses fell. The quarter also included a goodwill impairment charge tied to the merger agreement and debt restructuring. That charge pushed the operating loss far below the prior-year level.
Cash flow improved. Operating cash flow was $1.24 million in the quarter, up 110.6% from the prior-year quarter. Year-to-date operating cash flow was $10.79 million, up 173.0%. Capital expenditures were $2.51 million in the quarter, down 20.0%. Year-to-date capital expenditures were $5.15 million, down 25.3%. Deferred revenue was $46.21 million, down 19.2%. Remaining performance obligations were $147.30 million, down 25.3%. The company says current cash and cash equivalents will satisfy working capital and capital requirements for at least the next 12 months. The indenture for the 2029 Notes requires a minimum cash balance of $60.0 million at all times. LivePerson also repurchased a portion of its 2026 Notes in April 2026 and recorded a gain on troubled debt restructuring. The balance sheet remains dependent on the pending merger and the related debt agreements.
The strategic backdrop is the merger with SoundHound AI. LivePerson, SoundHound, and merger subsidiaries entered the original merger agreement on April 21, 2026. They amended and restated it on July 2, 2026. The deal includes a $7.00 to $12.00 per share collar. The interim goodwill impairment test as of June 30, 2026 used a market-based approach. That approach relies on the potential settlement value of the 2026 Notes, LivePerson's market capitalization, and the fair value of LivePerson's debt. Because fair value approximated carrying value after the impairment charge, future declines in LivePerson or SoundHound stock prices, adverse changes to or termination of the merger agreement or notes restructuring agreement, or increases in carrying value could trigger more goodwill impairment charges. Those charges could be material.
Risks are stacking up. Revenue recognition over the term of customer contracts means the impact of slower bookings may not show up immediately. It could still hurt long-term revenue. The company has a history of net losses and negative cash flows. It may need additional equity or debt financing. If financing is unavailable, it may have to cut sales and marketing and product development further. The merger agreement and notes agreements include covenants and fundamental change provisions that could accelerate debt. The strategic focus is on closing the merger and stabilizing the business.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $52.5M | $57.0M | -7.8% | $59.6M | -11.9% |
| Gross profit | $36.7M | $41.4M | -11.4% | $41.6M | -11.7% |
| Gross margin | 69.9% | 72.7% | -2.8 pp | 69.7% | +0.2 pp |
| Research & development | $10.4M | $12.2M | -14.7% | $13.8M | -25.0% |
| Sales & marketing | $13.8M | $13.8M | -0.1% | $19.9M | -30.8% |
| General & administrative | $24.0M | $12.1M | +97.8% | $7.9M | +201.8% |
| Total operating expenses | $120.2M | $58.7M | +104.7% | $66.0M | +82.0% |
| Operating income (loss) | -$67.7M | -$1.8M | -3766.4% | -$6.4M | -952.4% |
| Operating margin | -129.0% | -3.1% | -125.9 pp | -10.8% | -118.2 pp |
| Net income (loss) | -$72.6M | -$8.8M | -722.0% | -$15.7M | -361.9% |
| Net margin | -138.2% | -15.5% | -122.7 pp | -26.4% | -111.9 pp |
| Diluted EPS | -$6.11 | -$0.73 | -$5.38 | -$0.17 | -$5.94 |
Risks
The pending merger with SoundHound may not be completed because conditions include LivePerson stockholder approval and no injunction, and either party may terminate if the First Merger is not completed by October 21, 2026, or in certain instances by December 5, 2026. Failure to complete the Mergers could negatively impact LivePerson's stock price, business, and financial results.
The integration of LivePerson into SoundHound may not be as successful as anticipated, and SoundHound may not achieve intended benefits or do so within the intended timeframe. Potential difficulties include failure to realize revenue and cost savings, loss of key employees, unknown liabilities, and diversion of management attention.
Uncertainty about the Mergers may impair LivePerson's ability to attract, retain, and motivate key personnel and could cause customers, industry contacts, and business partners to change existing relationships. The Amended and Restated Merger Agreement also restricts LivePerson from taking certain corporate actions without SoundHound's consent.
MD&A states LivePerson continues to observe slower than anticipated renewals and new business bookings, primarily driven by customer uncertainty regarding its financial stability and broader macroeconomic and industry factors extending enterprise buying cycles, including for high-value AI solutions. Revenue was down 11.9% for the quarter and down 11.9% year to date.
Revenue decreased 11.9% to $52.5 million for the quarter and 11.9% to $109.5 million year to date, driven by decreases in hosted services of $4.7 million and $10.5 million from customer cancellations and downsells and decreases in professional services of $2.4 million and $4.4 million. Deferred revenue was down 19.2% and remaining performance obligations were down 25.3% versus the prior-year quarter.
LivePerson recorded a $51.8 million goodwill impairment charge for the quarter and year to date due to triggering events including the Original Merger Agreement, the Notes Restructuring Agreement, and declines in LivePerson and SoundHound common stock prices. Because fair value approximated carrying value after the charge, future stock price declines, adverse changes to or termination of the merger agreements, or increases in net assets could result in additional material goodwill impairment charges.
As of June 30, 2026, LivePerson had an accumulated deficit of $1,139.9 million. The indenture governing the 2029 Notes requires a minimum cash balance of $60.0 million, and the 2026 Notes, 2029 Notes, and Second Lien Notes are subject to repurchase at holder option upon a Fundamental Change and to events of default that could accelerate amounts owed.
Employee retention at LivePerson may be particularly challenging during the pendency of the Mergers, as employees may experience uncertainty about their roles with SoundHound following the Mergers. This uncertainty may impair LivePerson's ability to attract, retain, and motivate key personnel until the Mergers are completed and for a period thereafter.
LivePerson has incurred and expects to continue incurring substantial non-recurring costs for legal, accounting, financial advisory, printing, employee retention, severance, and filing fees. If the Amended and Restated Merger Agreement is terminated under specified circumstances, LivePerson may owe a $5 million termination fee plus SoundHound's documented transaction expenses.
MD&A states LivePerson operates in a competitive environment characterized by aggressive investment in artificial intelligence and other technological innovation by competitors with significant resources and investment capital. Product development costs decreased 25% for the quarter and 24% year to date, and capitalized development was $2.4 million and $4.8 million versus $3.0 million and $6.3 million in the comparable periods.
Securities class action and derivative lawsuits are often brought against public companies that have entered into merger agreements. Defending such claims could result in substantial costs and divert management time, and an injunction could delay or prevent completion of the Mergers.
LivePerson stockholders receiving SoundHound Common Stock in the First Merger will not receive cash consideration, other than cash in lieu of fractional shares, with which to pay any tax liability resulting from the First Merger, which is intended to be treated as a taxable transaction for U.S. federal income tax purposes.
General and administrative expenses increased 202% to $24.0 million for the quarter, primarily due to merger-related costs of $13.4 million, an increase in other legal and consulting costs of $2.6 million, and an increase in bad debt expense of $2.2 million. The year-to-date increase also included $15.0 million of merger-related costs and a $2.2 million increase in bad debt expense.
Summary, forecast, risks and KPIs are extracted from LIVEPERSON 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.