Cerence (CRNC) Q3 2026 earnings summary

Executive summary

• Q3 FY26 revenue grew 12% year-over-year to $69.6 million, with net income of $1.5 million and adjusted EBITDA up 50% to $13.5 million, exceeding guidance.

• Connected Services revenue increased over 20% year-over-year, reflecting strong adoption of AI-powered solutions.

• Free cash flow for the quarter reached $20 million, with cash and equivalents at $127.6 million at quarter end.

• The Board authorized the first-ever share repurchase program, up to $30 million over 12 months, reflecting confidence in business fundamentals.

• Key customer wins included a multi-brand Cerence xUI award from Stellantis and the first Mobile Work Agent customer.

Financial highlights

• Total Q3 revenue: $69.6 million (guidance: $68M–$72M), up from $62.2 million last year.

• License revenue: $41.6 million, with $12.5 million from fixed and $29.1 million from variable contracts.

• Connected Services revenue: $15.5 million, up 20% year-over-year; Professional Services revenue: $12.5 million, down 18%.

• Gross margin for the quarter was 76%, up from 73.7% year-over-year.

• Adjusted Total Billings TTM increased 6% year-over-year to $240 million.

Outlook and guidance

• FY26 revenue guidance: $310M–$314M; gross margin 78%–79%; adjusted EBITDA $66M–$70M; free cash flow $76M–$82M.

• Q4 FY26 revenue expected at $61M–$65M, with no fixed license revenue anticipated.

• Q4 gross margin projected at 72%–75%; net income and adjusted EBITDA both forecast at $1M–$5M.

• FY27 expected to deliver high single to low double-digit revenue growth, driven by xUI and non-automotive expansion.

• Management expects continued revenue impact from global automotive production delays and evolving customer demand.