Summary
Yext's fiscal 2027 second quarter continued a deliberate reshaping of its customer base. Revenue of $111.1 million in the quarter was down 1.8% year over year from $113.1 million, and the erosion comes almost entirely from small accounts. Total ARR ended July 31, 2026 at $440.8 million, a 1% decrease from $444.4 million a year earlier. ARR from customers paying $50,000 or more a year reached $405.9 million, up 2% year over year and 92% of the total. ARR from customers below that threshold fell 22% to $34.9 million, with $10.1 million of net churn in that group over the past twelve months. Net retention for the $50K cohort improved to 98% from 96%, and gross retention for that group rose to 90% from 89%. Total customer net retention was 96%. Management said enterprise ARR growth accelerated from roughly 1% in fiscal Q1 and expects the momentum to carry into the third quarter of fiscal 2027.
Profitability was thinner on a GAAP basis even as adjusted margins expanded. Gross profit was $83.8 million, down from $85.0 million, although gross margin improved to 75.5% from 75.2% as data center costs rose $0.9 million and personnel and lease costs declined. Operating income of $17.6 million fell 40.8% from $29.7 million, and operating margin dropped 10.4 percentage points to 15.8% from 26.2%. The year-ago expense base was unusually low because of a one-time fair value benefit tied to Hearsay contingent consideration, so the expense comparison reflects that distortion more than any change in the current cost structure. Net income fell 50.8% to $13.1 million from $26.8 million. Diluted EPS rose to $0.13 from $0.03 while the weighted average basic share count dropped about 19% year over year to 100.1 million. Adjusted EBITDA rose 29% to $34.0 million, and Adjusted EBITDA margin expanded 730 basis points to 31% from 23%. Non-GAAP EPS was $0.21.
Cash generation was light for seasonal reasons. Operating cash flow was $7.9 million, down 5.5% from $8.4 million a year earlier, and capital expenditures were $0.3 million. Free cash flow was $7.7 million, compared with $37.0 million in fiscal Q1, and $53.0 million for the twelve months ended July 31, 2026. Most contracts bill annually, with collections concentrated in the fourth and first fiscal quarters, so the second and third quarters sit at the low point. Yext expects a meaningful step-up in trailing twelve month free cash flow beginning in the third quarter as it laps roughly $20 million of Hearsay retention payments made in fiscal 2026. Remaining performance obligations were $488.4 million, up 9.8% from $445.0 million, and deferred revenue, current, was $179.6 million, down 3.2%. The balance sheet held $86.8 million of cash and cash equivalents, $13.5 million of restricted cash and $147.7 million of debt, for net debt of $60.9 million, about 0.5 times trailing twelve month Adjusted EBITDA.
Capital return stayed heavy. Yext repurchased 1.8 million shares at an average price of $4.78, roughly 2% of shares outstanding, and ended July with 99.3 million shares outstanding. That was the first quarter to show the full effect of the $140.0 million tender offer completed in the spring, which retired 24.3 million shares at $5.75 each. About $106.2 million remained available under the repurchase program. Stock-based compensation expense was $10.0 million, down 23% from a year ago. On efficiency, the first half of fiscal 2027 produced 25% more bookings with 24% fewer quota-carrying sales reps than the first half of fiscal 2026, a 66% increase in bookings per rep.
The product push centers on AI search. Yext closed the GoShine acquisition in June and folded it into Scout as Brand Scout, took Action Center to general availability on August 5, and released a free prototype of Corvo AI for small businesses at askcorvo.com. Guidance for the rest of fiscal 2027 calls for Adjusted EBITDA margin building toward 30% through the year and GAAP net income margins of 10% to 15% in each remaining quarter. Management does not expect GoShine revenue to be material to consolidated results this fiscal year. The sub-$50K cohort is in managed runoff, and macroeconomic conditions, foreign currency swings and competition from AI-native entrants could all pressure results. The credit agreement requires minimum qualified cash of at least $35.0 million and carries an excess cash flow sweep of up to 30% when annualized recurring revenue falls below $350.0 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2027 | Q1 FY2027 | QoQ | Q2 FY2026 | YoY |
|---|---|---|---|---|---|
| Revenue | $111.1M | $107.9M | +3.0% | $113.1M | -1.8% |
| Gross profit | $83.8M | $78.7M | +6.5% | $85.0M | -1.4% |
| Gross margin | 75.5% | 73.0% | +2.5 pp | 75.2% | +0.3 pp |
| Research & development | $19.4M | $21.5M | -9.8% | $23.4M | -17.0% |
| Sales & marketing | $26.3M | $29.4M | -10.5% | $32.1M | -18.0% |
| Total operating expenses | $66.3M | $73.1M | -9.4% | $55.4M | +19.7% |
| Operating income (loss) | $17.6M | $5.6M | +214.6% | $29.7M | -40.8% |
| Operating margin | 15.8% | 5.2% | +10.6 pp | 26.2% | -10.4 pp |
| Net income (loss) | $13.1M | $2.6M | +400.9% | $26.8M | -50.8% |
| Net margin | 11.8% | 2.4% | +9.4 pp | 23.6% | -11.8 pp |
| Diluted EPS | $0.13 | $0.02 | +$0.11 | $0.03 | +$0.10 |
| Customers | 50,000 | 50,000 | ±0.0% | — | — |
Risks
The Risk Factors state revenue growth has slowed and even contracted, and MD&A reports revenue down 1.8% in FY2027 Q2 vs the prior-year quarter and down 1.6% for the six months ended July 31, 2026, primarily driven by customer attrition. Total ARR declined 1% to $440.8 million as of July 31, 2026.
ARR from customers with less than $50,000 declined 22% to $34.9 million as of July 31, 2026 compared with the prior-year period, while dollar-based net retention for that cohort fell to 79% from 91% and gross retention dropped to 69% from 78%. This points to elevated churn and contraction in the smaller customer base.
Operating income was down 40.8% to $17.6 million in FY2027 Q2 vs the prior-year quarter and down 24.8% to $23.1 million for the six months ended July 31, 2026. Net income was down 50.8% to $13.1 million and down 42.7% to $15.8 million over the same periods, and operating margin was down 10.4 percentage points in the quarter.
Risk Factors cite limited acquisition experience and challenges integrating acquired businesses, including the Hearsay acquisition and the GoShine AI Ltd. acquisition completed June 14, 2026. MD&A discusses fair value movements in Hearsay contingent consideration as a driver of results.
The company completed a $140.0 million tender offer in March 2026 and borrowed $50.0 million under a delayed draw term loan; Risk Factors state repurchases will diminish cash reserves and could impact the ability to pursue strategic opportunities. The Risk Factor states the capital allocation strategy, including the recently completed self-tender offer, may not be effective at enhancing stockholder value.
Risk Factors state the company is incorporating generative AI into some products, which may present compliance and reputational risks, and that regulatory developments related to AI use could adversely affect products and services. MD&A says AI is forcing rapid evolution of multiple industries and changing market opportunities and customer behavior.
The May 2025 credit agreement requires minimum qualified cash of at least $35.0 million and minimum consolidated EBITDA, restricts stock repurchases and dividends, and includes a mandatory prepayment sweep if ARR falls below $350.0 million. Total ARR was $440.8 million as of July 31, 2026.
Risk Factors state a significant portion of revenue is dependent on third-party reseller customers whose efforts the company does not control, and these resellers may not renew, purchase fewer licenses, renegotiate contracts, merge or declare bankruptcy. Lower demand from certain reseller customers has resulted in non-renewals and requests for extended billing and payment terms.
The top five customers accounted for approximately 8% of revenue for the fiscal year ended January 31, 2026, and the company previously experienced attrition of one of these top five customers. Loss of additional large customers could materially reduce revenue.
Risk Factors cite inflation, trade disputes, tariffs, geopolitical conflicts and reduced technology spending, while MD&A says macroeconomic uncertainty may cause customers to reduce, suspend or delay technology spending or seek contract concessions. Revenue for FY2027 Q2 included a negative impact from foreign currency exchange rates of approximately $0.2 million on a constant currency basis.
Risk Factors state failure to adequately manage the sales force will impede growth, and recent strategic realignment resulted in a net decrease in sales personnel. The company also plans to transition a portion of its services business to third-party service providers, which may negatively impact revenue growth rates.
Growth depends on strategic relationships with over 200 Publisher Network application providers, including Amazon Alexa, Apple, Bing, Facebook, Google Business Profile, OpenAI, and Yelp. Loss of access or new provider fees could make the network less efficient and accurate, and termination or impairment of relationships with a limited number of providers could lead to loss of a significant number of customers.
MD&A discloses strategic transaction costs related to CEO Michael Walrath's non-binding proposal to acquire all outstanding shares. Risk Factors warn the capital allocation strategy, including the self-tender offer, could distract from executing on the core business.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Adjusted EBITDA
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Adjusted EBITDA Margin
Free Cash Flow Margin
Free Cash Flow
Summary, forecast, risks and KPIs are extracted from Yext, Inc.'s SEC filings for Q2 FY2027 (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 6, 2026.