Q2 Holdings, Inc. Q2 FY2026 earnings

Q2 Holdings started the second half of 2026 with a stronger income statement. Revenue rose 12.6% year over year to $219.8 million in the June 2026 quarter, and management said the top line was up 2% from the first quarter of 2026. GAAP gross margin reached 59.2%, up 5.7 percentage points from a year earlier, and gross profit increased 24.5% to $130.2 million. Operating income climbed 198.2% to $29.3 million, lifting operating margin to 13.4%, up 8.3 percentage points. Net income rose 153.8% to $29.9 million, and diluted EPS came in at $0.46, up $0.28. The non-GAAP picture was also better. Adjusted EBITDA was $62.8 million, up from $45.8 million in the prior-year quarter, and adjusted EBITDA margin expanded to 28.6% from 23.5%. Non-GAAP gross margin moved to 62.3% from 57.5%. The company ended the quarter debt-free after retiring its convertible notes in June.

Operationally, Q2 signed eight Enterprise and Tier 1 contracts in the quarter. A Top 25 U.S. Enterprise bank expanded its relationship by adding relationship pricing, a Tier 1 bank signed a net new agreement for retail and commercial digital banking, and two existing Tier 1 digital banking customers added relationship pricing. Subscription Annualized Recurring Revenue increased to $825.5 million, up 15% year over year. Remaining performance obligations, or backlog, were $2.76 billion, up 16.9% from the prior-year quarter and up $400.0 million. Registered Users stood at 27.8 million at June 30, 2026, compared with 26.2 million a year earlier. The CONNECT 26 conference drew over 1,500 attendees representing over 900 existing and prospective customers. Q2 introduced Q2 Assistant and demonstrated Q2 Code, and its User Activity Monitoring product already has double-digit early-adopter customers. Net revenue retention was 113% for 2025, while annual revenue churn was 5.2%.

Guidance points to a slower growth rate in the next quarter than the company just posted. For the third quarter of 2026, Q2 guided total revenue to year-over-year growth of 8 to 10 percent. Third-quarter adjusted EBITDA is expected to be $58.5 million to $61.5 million, or 27 to 28 percent of revenue. For the full year 2026, the company raised guidance on both revenue and adjusted EBITDA, to total revenue growth of 11 percent and adjusted EBITDA of $244.0 million to $248.0 million, or 28 percent of revenue. The board also approved up to an additional $350 million of share repurchases, bringing total currently available capacity to approximately $375 million. In the second quarter, Q2 repurchased 0.5 million shares at an average price of approximately $45.67 for total consideration of $22.9 million. It had $24.9 million remaining on the $150 million authorization announced in November 2025.

Cash generation remained solid. First-half operating cash flow was $117.0 million, up 26.9%, while capital expenditures rose 296.2% to $8.3 million. Deferred revenue was $186.8 million, up 4.1% from the prior-year quarter. On a year-to-date basis, revenue increased 13.4% to $436.3 million. Net income for the first half rose 242.1% to $56.5 million, and diluted EPS was $0.87, up $0.62. Operating income for the six months climbed 374.1% to $57.0 million, with operating margin at 13.1%, up 9.9 percentage points. Gross margin for the first half was 59.2%, up 5.8 percentage points.

The quarter carried familiar risks. Q2 flagged cyberattacks, financial transaction fraud, data and privacy breaches, and the chance that more capable AI models help threat actors or autonomous systems exploit vulnerabilities. It also cited global economic uncertainty, bank mergers and acquisitions, new financial regulations, competition, and reliance on a limited number of third-party AI vendors. The sales cycle for larger customers remains long and unpredictable, and the transactional business depends on End-User behavior outside the company's control. Those risks matter because Q2's model depends on continued bookings, implementation timing, and renewals. For now, the debt-free balance sheet, $375 million of repurchase capacity, and raised full-year guidance give management more room to fund growth and return capital.