Summary
Q2 Holdings closed fiscal 2025 with fourth quarter revenue of $208.2 million, up 13.8% from the prior-year quarter. Full-year revenue reached $794.8 million, up 14.1%. GAAP gross margin was 55.4% in the fourth quarter, up 2.7 percentage points year over year, and 54.1% for the full year, up 3.2 percentage points. The company swung to GAAP operating income of $16.9 million in the quarter, compared with an operating loss in the prior-year quarter. Full-year operating income was $39.9 million, up from a full-year operating loss. GAAP net income was $20.4 million for the quarter, up from the prior-year quarter, and $52.0 million for the full year, up from a full-year net loss. Diluted EPS for the full year was $0.80, up from a loss per share.
Cash generation accelerated. Fourth quarter operating cash flow was $63.7 million, up 48.0%, and full-year operating cash flow was $201.5 million, up 48.4%. Capital expenditures were $2.0 million in the quarter, up 38.8%, and $6.8 million for the full year, up 1.8%. Free cash flow for the full year was $173.4 million, compared with $106.7 million for 2024. The balance sheet showed deferred revenue of $155.0 million, up 12.6% year over year. Remaining performance obligations, or backlog, were $2.69 billion, up 21.2% year over year and up $175 million sequentially. Subscription annualized recurring revenue rose to $780.1 million, up 14%. Non-GAAP gross margin was 58.6% in the quarter and 58.0% for the full year, while adjusted EBITDA was $51.2 million in the quarter, up from $37.6 million, and $186.5 million for the full year, up from $125.3 million. The company signed eight Enterprise and Tier 1 contracts in the quarter, including a net new agreement with a Tier 1 bank for commercial digital banking and relationship pricing, and an expansion with a $40 billion bank for commercial digital banking and fraud solutions.
Management issued guidance for the first quarter of 2026 and full-year 2026. First quarter total revenue is expected between $212.5 million and $216.5 million, representing year-over-year growth of 12 to 14 percent. First quarter adjusted EBITDA is guided to $52.5 million to $55.5 million, or 25 to 26 percent of revenue. For full-year 2026, total revenue is expected between $871.0 million and $878.0 million, or year-over-year growth of 10 percent, with adjusted EBITDA of $225.0 million to $230.0 million, or 26 percent of revenue. The company also introduced initial expectations for 2027: subscription revenue growth of approximately 12.5 to 13 percent and adjusted EBITDA margin expansion of approximately 150 to 200 basis points. Longer term, the framework targets non-GAAP gross margin of approximately 65 percent and adjusted EBITDA margin of approximately 35 percent by year-end 2030.
Capital allocation included retiring $191 million of convertible debt at maturity and repurchasing approximately 69 thousand shares at an average price of approximately $72.52 for total consideration of approximately $5.0 million, leaving $145.0 million on the share repurchase authorization. Operating metrics showed approximately 27.3 million Registered Users as of December 31, 2025, compared with 24.7 million as of December 31, 2024, while net revenue retention was 113% and subscription net revenue retention was 115% for 2025. Revenue churn was 5.2% for 2025, compared with 4.4% for 2024. Risks include cyberattacks, financial transaction fraud, data and privacy breaches, economic uncertainty, consolidation in the financial services industry, evolving regulation including around AI, competition, implementation timing and customer readiness, third-party cloud migration, and debt repayment obligations. The company also flagged that forward-looking guidance excludes items such as stock-based compensation, depreciation and amortization, and legal settlements, and it cannot provide a GAAP reconciliation for adjusted EBITDA without unreasonable effort.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $208.2M | $201.7M | +3.2% | $183.0M | +13.8% |
| Gross profit | $115.3M | $108.8M | +5.9% | $96.3M | +19.7% |
| Gross margin | 55.4% | 54.0% | +1.4 pp | 52.6% | +2.7 pp |
| Research & development | $40.6M | $38.9M | +4.4% | $35.7M | +13.7% |
| Sales & marketing | $25.9M | $26.4M | -1.9% | $27.2M | -4.9% |
| General & administrative | $30.5M | $31.7M | -4.0% | $30.0M | +1.5% |
| Total operating expenses | $98.4M | $97.8M | +0.6% | $97.9M | +0.5% |
| Operating income (loss) | $16.9M | $11.0M | +53.3% | -$1.6M | +1170.7% |
| Operating margin | 8.1% | 5.5% | +2.6 pp | -0.9% | +9.0 pp |
| Net income (loss) | $20.4M | $15.0M | +35.9% | $164.0K | +12365.2% |
| Net margin | 9.8% | 7.5% | +2.4 pp | 0.1% | +9.7 pp |
| Diluted EPS | $0.31 | $0.23 | +$0.08 | $0.00 | +$0.31 |
Risks
Substantially all revenues are from financial services customers, particularly RCFIs. Economic pressures, fluctuating interest rates, commercial real estate loan scrutiny, bank failures and consolidation could cause customers to delay or reduce spending, renegotiate or terminate contracts, or replace Q2 solutions.
Many financial institutions have merged or been acquired and failures and consolidations are likely to continue, with very few new financial institutions being created. M&A can reduce Customer Accounts or create larger institutions with more leverage to negotiate terms or replace solutions.
Q2 completed migration of its digital banking platform computing, storage and processing from third-party data centers to third-party public cloud providers, with AWS and Microsoft Azure as primary providers. Outages, provider changes or security incidents at these providers could interrupt customer services and increase costs; third-party public cloud service provider and software costs increased $13.4 million in the year ended December 31, 2025.
Solutions process sensitive PII and financial transactions including ACH, real-time payments, debit and credit card, cryptocurrency and check clearing. Increasing integrations, cloud reliance and AI-enabled threats raise the risk that fraud, account takeover or a security breach goes undetected and causes financial loss, regulatory enforcement and customer attrition.
Q2 solutions calculate interest, principal, remaining balance and payment amounts and can serve as the system of record. Defects, processing errors or customer configuration issues could lead to liability, regulatory fines, customer disputes, lost business and reputational harm.
Functionality depends on integrations with core processing software and other third-party services, but Q2 has no formal arrangements with many providers for API access. Providers may limit or discontinue access, change terms, compete with Q2 or experience outages, which could impair or prohibit use of Q2 solutions.
Sales to larger financial services providers involve prolonged evaluations that typically last from six to nine months or longer and are costly and unpredictable. Economic or industry events during the sales cycle can cause customers to delay, reduce or cancel planned digital spending.
Q2 must develop AI strategies and solutions and keep pace with evolving technological requirements, including AI, as customer and regulatory demands change. Failure to do so could harm competitiveness, product adoption and market position.
Q2 and its customers face evolving regulation of AI, machine learning, data privacy and money movement services. Increased regulatory scrutiny could raise costs, add complexity and limit offerings, while violations could lead to enforcement and fines.
Q2 must repay its 2026 Notes upon maturity and has a $125.0 million revolving credit agreement, none drawn as of December 31, 2025, with covenants and default provisions. Conversion or cash settlement of convertible notes could dilute stockholders or strain liquidity, and capped call counterparties present credit risk.
Annual revenue churn was 5.2% for the year ended December 31, 2025, compared to 4.4% for 2024 and 6.1% for 2023. Revenue churn reflects cancellations and downgrades that could reduce recurring revenue growth and indicate customer satisfaction or competitive pressures.
Q2 must manage growth, a broader product portfolio and higher volume or more complex customer configurations. Failure to scale implementation, support and internal controls could increase costs, delay revenue recognition and harm service quality.
U.S. tariffs and potential retaliatory measures introduce uncertainty. While Q2 does not purchase significant physical goods, tariffs could contribute to inflation, affect third-party cloud or service provider costs and reduce customer demand; to date these developments have not had a material impact.
SaaS KPIs
All quarters →Registered Users
Non-GAAP gross margin
Adjusted EBITDA
Adjusted EBITDA margin
Remaining Performance Obligations (Backlog)
Commercial Digital Banking Customer Accounts
Consumer Digital Banking Customer Accounts
Digital Banking Customer Accounts
Digital Lending Customer Accounts
Helix Customer Accounts
Relationship Pricing Customer Accounts
Risk & Fraud Customer Accounts
SMB Digital Banking Customer Accounts
Summary, forecast, risks and KPIs are extracted from Q2 Holdings, Inc.'s SEC filings for Q4 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.