Q2 (QTWO) Q3 2026 earnings summary

Executive summary

• Q3 revenue was $225.8M, up 11.9% YoY; net income was $33.2M versus $15.0M, and adjusted EBITDA was $67.8M, up 39%, with a 30.0% margin.

• Revenue and adjusted EBITDA exceeded the high end of guidance; strong bookings, a healthy pipeline and early AI fraud demand supported raised FY2026 guidance.

• Seven Tier 1 and Enterprise contracts were signed, with bookings led by digital banking.

Financial highlights

• Q3 subscription revenue was $188.2M versus $165.2M YoY; subscription revenue grew 14% YoY and reached 83% of total revenue.

• GAAP gross margin was 59.7%, versus 54.0% YoY; non-GAAP gross margin was 62.6%, versus 57.9%.

• GAAP operating income was $34.0M versus $11.0M; diluted EPS was $0.52 versus $0.23.

• Adjusted EBITDA was $67.8M versus $48.8M YoY; margin was 30.0% versus 24.2%.

• Operating cash flow was $65M and free cash flow was $55M, up 48% YoY; nine-month free cash flow was $150.2M versus $116.8M.

Outlook and guidance

• Q4 2026 revenue guidance is $226.0M–$230.0M and adjusted EBITDA guidance is $62.4M–$65.4M.

• FY2026 revenue guidance was raised to $888M–$892M, representing 12% growth; adjusted EBITDA guidance was raised to $253M–$256M, or 28%–29% of revenue.

• FY2026 subscription revenue growth is expected at ~14.5%; non-subscription revenue is expected to decline slightly in Q4 and be roughly flat for the year.

• FY2027 targets include 12.5%–13% subscription revenue growth and 150–200 bps adjusted EBITDA margin expansion; AI revenue is not included.