Summary
Q2 Holdings posted a clear swing to GAAP profitability in the first quarter of fiscal 2025. Revenue was $189.7 million, up 14.6% from the prior-year quarter. Gross profit was $101.0 million, up 22.8%. Gross margin was 53.2%, up from 49.7%. Operating income was $2.2 million compared with an operating loss of $14.2 million in the prior-year quarter. Operating margin was 1.2% compared with negative 8.6%. Net income was $4.8 million compared with a net loss of $13.8 million. Diluted EPS was $0.07 compared with negative $0.23. The swing reflected revenue growth and an improved gross margin.
Cash generation also strengthened. Operating cash flow was $43.5 million, up 224.0% from $13.4 million. Capital expenditures were $0.8 million, down 44.1% from $1.4 million. Free cash flow, a non-GAAP measure, was $37.8 million versus $6.0 million in the prior-year quarter. On the non-GAAP side, adjusted EBITDA was $40.7 million, up from $25.2 million in the prior-year quarter and $37.6 million in the fourth quarter of 2024. Adjusted EBITDA margin was 21.5% compared with 15.2%. Non-GAAP gross margin was 57.9%, up from 54.9% in the prior-year quarter and 57.4% in the fourth quarter of 2024. Deferred revenue was $174.1 million, up 31.5% from $132.4 million. Remaining performance obligations were $2.30 billion, up 19.8% from $1.92 billion.
Operational metrics point to durable demand. Subscription annual recurring revenue rose to $702.4 million, up 14% year over year; as of March 31, 2025 it was $702.4 million compared with $615.1 million a year earlier. Total annual recurring revenue was $846.6 million compared with $761.0 million. Registered Users were 26.2 million at March 31, 2025 compared with 23.0 million at March 31, 2024. The company signed five Tier 1 and Enterprise contracts in the quarter. Those included an expansion agreement with an existing Enterprise customer, a Top 50 US bank, for risk and fraud solutions, and a relationship pricing contract with a new Tier 1 customer. Q2 also secured renewals with three of its top 10 largest customers across digital banking, Helix, and relationship pricing. Management said renewal opportunities for 2025 and 2026 are anticipated to be comparable to levels seen over the past two years. Net revenue retention was 109% for 2024, subscription net revenue retention was 114%, and revenue churn was 4.4%. The company had 460 Installed Customers as of December 31, 2024.
Guidance covers the second quarter and the full year. For the second quarter of 2025, Q2 guided adjusted EBITDA of $41.0 million to $44.0 million, or 21 to 23 percent of revenue, and revenue growth of 10 to 13 percent year over year. For the full year 2025, the company guided adjusted EBITDA of $170.0 million to $175.0 million, or 22 percent of revenue, and revenue growth of 11 to 12 percent. Management tied the outlook to the critical role the company plays in helping financial institutions grow deposits and to a broad customer base.
The risk list remains long. The company cited tariffs and trade measures, market volatility, inflationary pressures, monetary policy changes, and possible retaliatory tariffs. It also flagged cyberattacks, financial transaction fraud, data and privacy breaches, economic uncertainty, bank mergers and acquisitions, competition, AI-based solution development and related regulation, sales cycle length, booking timing, cloud migration, regulatory scrutiny of banking-as-a-service, and debt repayment obligations. Q2 said tariffs have not had a material impact to date but is monitoring the trade landscape. The quarter showed better profitability and cash flow, yet the company still faces a cautiously uncertain financial services backdrop.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $189.7M | $183.0M | +3.7% | $165.5M | +14.6% |
| Gross profit | $101.0M | $96.3M | +4.8% | $82.3M | +22.8% |
| Gross margin | 53.2% | 52.6% | +0.6 pp | 49.7% | +3.5 pp |
| Research & development | $37.9M | $35.7M | +6.0% | $34.9M | +8.6% |
| Sales & marketing | $26.5M | $27.2M | -2.5% | $25.4M | +4.3% |
| General & administrative | $32.3M | $30.0M | +7.8% | $30.2M | +7.1% |
| Total operating expenses | $98.8M | $97.9M | +0.9% | $96.4M | +2.5% |
| Operating income (loss) | $2.2M | -$1.6M | +239.0% | -$14.2M | +115.4% |
| Operating margin | 1.1% | -0.9% | +2.0 pp | -8.6% | +9.7 pp |
| Net income (loss) | $4.8M | $164.0K | +2798.2% | -$13.8M | +134.3% |
| Net margin | 2.5% | 0.1% | +2.4 pp | -8.4% | +10.9 pp |
| Diluted EPS | $0.07 | $0.00 | +$0.07 | -$0.23 | +$0.30 |
Risks
A new risk factor discusses U.S. tariffs imposed in March 2025 and potential retaliatory tariffs, warning they may indirectly affect Q2 through inflationary pressures, third-party service provider or cloud infrastructure partner cost structures, or customer demand. Management states no material impact to date but continues to monitor the evolving trade landscape.
MD&A reports continued declines in customer demand for certain discretionary solutions, namely professional services, which management attributes to customer spending patterns and budget cycles and expects to continue until the general economic outlook improves. This may limit services and other revenue even as subscription revenue grows.
SaaS KPIs
All quarters →Registered Users
Non-GAAP gross margin
Adjusted EBITDA
Installed Customers
Non-GAAP Operating Income
Adjusted EBITDA margin
Total ARR
Free cash flow
Subscription ARR
Summary, forecast, risks and KPIs are extracted from Q2 Holdings, Inc.'s SEC filings for Q1 FY2025 (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.