Summary
Q2 Holdings opened fiscal 2026 with sharp profitability gains on steady top-line growth. Revenue in the first quarter ended March 31, 2026 was $216.5 million, up 14.1 percent year over year. Gross profit was $127.9 million, up 26.7 percent. Gross margin was 59.1%, up 5.9 percentage points. Operating income was $27.7 million, up 1164.9 percent. Operating margin was 12.8%, up 11.6 percentage points. Net income was $26.6 million, up 460.5 percent. Diluted EPS was $0.40, up $0.33.
Cash generation improved alongside earnings. Operating cash flow for the quarter was $56.3 million, up 29.4 percent. Capital expenditures were $6.6 million, up 740.4 percent, and are reported as a cash outflow. Deferred revenue, current portion, ended the quarter at $196.8 million, up 13.0 percent. Remaining performance obligations, or backlog, reached $2.74 billion, up 19.1 percent. The company also repurchased approximately 1.8 million shares at an average price of about $55.04 for total consideration of about $97.2 million, leaving $47.8 million on its $150 million share repurchase authorization.
Management highlighted record first-quarter bookings. Q2 Holdings signed nine Enterprise and Tier 1 contracts, including a significant expansion through the Synovus and Pinnacle Financial Partners merger, the largest fraud deal in company history with an Enterprise bank, and net new and expansion agreements with two other Enterprise banks for fraud solutions. Subscription annualized recurring revenue reached $802.3 million, up 14 percent year over year, and total annualized recurring revenue was $944.9 million as of March 31, 2026, compared with $846.6 million as of March 31, 2025. Non-GAAP gross margin was 62.1 percent, up from 57.9 percent, and adjusted EBITDA was $60.0 million, up from $40.7 million. Adjusted EBITDA margin was 27.7 percent, compared with 21.5 percent. Registered Users were 27.8 million as of March 31, 2026, compared with 26.2 million as of March 31, 2025. As of December 31, 2025, the company reported approximately 500 Digital Banking Customer Accounts, 850 Risk & Fraud Customer Accounts, and 150 Relationship Pricing Customer Accounts. The company attributes demand to digital banking and risk and fraud solutions, as financial institutions prioritize technology investment, operational efficiency, and real-time risk management.
Guidance points to slower sequential growth but continued profitability. For the second quarter of 2026, management guided revenue growth of 10 to 12 percent and adjusted EBITDA of $57.5 million to $60.5 million, or 27 to 28 percent of revenue. For the full fiscal year 2026, the company guided revenue growth of 10 to 11 percent and adjusted EBITDA of $237.0 million to $242.0 million, or 27 percent of revenue. The full-year adjusted EBITDA range includes forward-looking non-GAAP information, and Q2 Holdings states it cannot reconcile that measure to GAAP net income without unreasonable effort.
Risks remain centered on the financial services market and the company's execution. The company cites cyberattacks, financial transaction fraud, data and privacy breaches, and new AI capabilities that could help threat actors automate attacks or conduct more targeted fraud. It also points to economic uncertainty, fluctuating interest rates, tariffs and global trade measures, and consolidation among banks and other customers, which can reduce Customer Accounts even when Q2 Holdings retains the combined organization's business. Other named risks include competition, evolving AI regulation, the timing of bookings and implementations, the migration of digital banking platform solutions to third-party public cloud providers, and debt repayment obligations. For the year ended December 31, 2025, net revenue retention was 113 percent, subscription net revenue retention was 115 percent, and revenue churn was 5.2 percent. Those metrics frame the retention backdrop as Q2 Holdings balances growth investments, capital returns, and margin expansion.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $216.5M | $208.2M | +4.0% | $189.7M | +14.1% |
| Gross profit | $127.9M | $115.3M | +11.0% | $101.0M | +26.7% |
| Gross margin | 59.1% | 55.4% | +3.7 pp | 53.2% | +5.9 pp |
| Research & development | $41.9M | $40.6M | +3.1% | $37.9M | +10.6% |
| Sales & marketing | $25.7M | $25.9M | -0.7% | $26.5M | -3.0% |
| General & administrative | $32.2M | $30.5M | +5.7% | $32.3M | -0.4% |
| Total operating expenses | $100.2M | $98.4M | +1.8% | $98.8M | +1.4% |
| Operating income (loss) | $27.7M | $16.9M | +64.2% | $2.2M | +1164.9% |
| Operating margin | 12.8% | 8.1% | +4.7 pp | 1.1% | +11.6 pp |
| Net income (loss) | $26.6M | $20.4M | +30.3% | $4.8M | +460.5% |
| Net margin | 12.3% | 9.8% | +2.5 pp | 2.5% | +9.8 pp |
| Diluted EPS | $0.40 | $0.31 | +$0.09 | $0.07 | +$0.33 |
Risks
Q2 operates in digital financial services, a highly regulated industry subject to extensive and evolving supervisory, consumer protection, privacy and third-party risk management requirements. The MD&A emphasizes compliance with stringent security and technical regulations applicable to financial institutions.
The MD&A states security is paramount because providers must protect sensitive financial data and funds and defend against continually evolving cyber threats and fraud. A breach or fraud incident could disrupt operations and harm customer trust.
Revenue recognition depends on implementation timing, which varies based on implementation capacity, the number of solutions purchased, customer size and needs, and customer readiness. Sales have historically been lower in the first half of the year, which can cause quarterly results to fluctuate.
Merger and acquisition activity within Q2's customer base may reduce Customer Accounts for certain solutions, including where Q2 continues to serve the combined organization and retain underlying contractual relationships, End Users and associated revenues. This can obscure underlying growth trends in reported Customer Account totals.
Q2 completed migration of the computing, storage and processing of its digital banking platform solutions to third-party public cloud service providers. It expects these third-party public cloud costs to increase cost of revenues in absolute dollars over the long term, increasing reliance on external infrastructure providers.
Advances in data analytics, automation and AI are increasing the importance of modern, fast, flexible technology platforms. Failure to keep pace could weaken Q2's competitive position as FinTechs and Alt-FIs reshape End-User expectations for digital financial experiences.
General economic conditions and other global events may impact Q2's business and its customers' spending patterns and budget cycles. These conditions may also disrupt any seasonality trends inherent in historical operating results.
Q2 expects to repay its 2026 Notes upon maturity and relies on cash flow from operations, its $125.0 million Revolving Credit Agreement and access to capital markets. It states there is no assurance that additional financing, if pursued, would be adequate or available on terms acceptable to it.
SaaS KPIs
All quarters →Registered Users
Non-GAAP gross margin
Adjusted EBITDA
Non-GAAP Operating Income
Adjusted EBITDA margin
Remaining Performance Obligations (Backlog)
Total ARR
Commercial Digital Banking Customer Accounts
Consumer Digital Banking Customer Accounts
Digital Banking Customer Accounts
Digital Lending Customer Accounts
Free cash flow
Helix Customer Accounts
Relationship Pricing Customer Accounts
Risk & Fraud Customer Accounts
SMB Digital Banking Customer Accounts
Subscription Annualized Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from Q2 Holdings, Inc.'s SEC filings for Q1 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.