Five9 NASDAQ: FIVN reported first-quarter 2026 results that management said showed an “encouraging start to the year,” highlighted by accelerating subscription revenue growth and results that came in above the high end of guidance ranges. On the company’s earnings call, CEO Amit Mathradas—who noted it was his first full earnings call as CEO—outlined operational and strategic priorities aimed at improving execution while positioning the company for broader adoption of AI in customer experience.
Management emphasizes culture, operating discipline, and clearer metrics
Mathradas said his work will be framed around four priorities: “building a performance-driven culture rooted in accountability and transparency,” “optimizing operations,” “stabilizing and strengthening the core business,” and “winning in AI-empowered customer experiences.” He said he has spent his first months in the role meeting with teams across the company and is focused on raising urgency and accountability, including organizational design changes meant to reduce “spans and layers” and internal bureaucracy.
He also emphasized improving investor communication and measurement. “Going forward, we will demonstrate progress through clearer, relevant, and trackable metrics,” he said, adding that investors “want evidence, not ambition.” CFO Bryan Lee echoed that theme, saying the company is committed to transparency and has posted supplemental metric disclosure on its investor relations website in a format intended to “help simplify your modeling.”
Mathradas said operational review efforts that began before he joined helped drive a 470 basis point increase in EBITDA margin from 2024 to 2025, and he described additional work now underway, including portfolio “deep dives” with external advisors to align investments to long-term competitive priorities.
Q1 results: revenue up 9%, subscription up 13%, AI annual run rate above $125 million
Lee reported Q1 revenue of $305 million, up 9% year over year. Subscription, telecom, and professional services represented approximately 82%, 12%, and 6% of revenue, respectively. Subscription revenue grew 13% year over year.
Lee attributed subscription growth to a combination of CCaaS growth of 8% and AI revenue growth of 68%. He said AI revenue grew to “an annual run rate of over $125 million” and clarified that the AI figure “now includes both enterprise and commercial, providing a complete view of this growth driver.” AI represented about 13% of total subscription revenue in Q1, up from approximately 8% a year earlier, according to Lee.
Lee also said the AI growth rate accelerated from 49% in Q4 2025 to 68% in Q1 2026, “primarily driven by a backlog ramping earlier than anticipated.” During Q&A, management added that the acceleration reflected “a combination of number of factors” across “many customers,” including instances where customers were aligned faster internally, allowing deployments to move more quickly.
Profitability improved year over year. Adjusted gross margin was 64% versus 62% in the prior-year quarter. Adjusted EBITDA was $74 million, or 24% of revenue, compared with $53 million, or 19% of revenue, in Q1 last year.
Cash flow was also positive, with cash from operations of $64 million (21% of revenue) and free cash flow of $49 million (16% of revenue). Lee said margins benefited by “slightly more than one percentage point” due to “a one-time discount negotiated with a key vendor” that is not expected to recur. The company ended the quarter with $724 million in cash, cash equivalents, and short-term investments.
Retention, seat trends, and pipeline commentary
Lee reported last-twelve-month (LTM) dollar-based retention rate (DBRR), defined as retention of recurring revenue from subscription plus telecom, of 105%, unchanged from Q4 2025. He added that the company will transition its DBRR disclosure to LTM subscription DBRR, which was 107% in Q1 compared with 106% in Q4 2025. Lee said both DBRR metrics “stabilized in Q1” and are expected to be “at relatively similar levels, ±1 percentage point” in Q2 before “inflecting in the second half of the year.”
On seat counts, Lee said seat count “continues to grow at a healthy rate, relatively in line with the CCaaS revenue growth” and reiterated that commentary from the prior quarter “continues to be the case.” He added that the backlog includes “a large portion that’s CCaaS oriented” and “a smaller portion but fast-growing portion that’s AI.”
President Andy Dignan said RFP and pipeline levels have remained “at elevated levels that we’ve talked about for the last two years,” and he noted increased “AI first” conversations in the pipeline.
AI strategy: platform focus, governance, and cloud migration dynamics
Mathradas described AI as a catalyst that shifts contact center spending from labor toward technology, arguing that enterprises want integrated platforms rather than disconnected point solutions. He said customers are seeking “a complete customer experience platform” that can manage “the orchestration, the data, the integrations, and the governance needed to run reliably in production.” He also said agent roles are being “elevated, not eliminated,” particularly in regulated industries where oversight is required.
Asked about on-premise versus cloud dynamics, Mathradas said a “vast majority” of customers are still on-prem and that some are exploring whether they can “deploy AI on-prem” first. He described results as “a little bit of a mixed bag,” citing data and architecture constraints that can limit AI performance without a unified cloud foundation. Dignan added that Five9 can “deliver AI at the beginning but also migrate them at the same time,” addressing customer concerns that cloud migration must be completed before AI benefits can be realized.
In another exchange, Mathradas said enterprises are inundated with AI vendors, but customers value “tried and tested” solutions with “security and governance,” even if they are not “the bleeding edge of everything.” He said trust and governance are becoming more important in large-organization buying decisions.
Mathradas also described a shift away from “simply selling seats” toward “selling a complete solution based on capabilities and consumption.” In Q&A, he said the company is transitioning new logos and renewals toward “a fixed revenue model where they are committing to a revenue number,” which provides predictability and flexibility to replace seat value with AI tools over time. Dignan added that customers’ willingness to make “three and five year decisions” reflects confidence in Five9’s roadmap and supports longer-term revenue commitments.
Guidance raised for 2026; buybacks expanded and accelerated
For Q2, Lee guided total revenue to a midpoint of $306 million (range $303 million to $309 million). He guided non-GAAP EPS to a midpoint of $0.60 per diluted share, with a range of $0.65 to $0.69, and said the “largest driver of the sequential decline” is the one-time vendor discount that benefited Q1.
For the second half of 2026, Lee said the company expects total revenue growth to “accelerate to double digits,” driven by backlog from new logo and install-based bookings, and expects non-GAAP EPS to increase sequentially through the second half. For the full year, Five9 raised revenue guidance to a midpoint of $1.26 billion (range $1.254 billion to $1.266 billion), up from the initial midpoint of $1.254 billion. Non-GAAP EPS guidance was raised to a midpoint of $3.26 (range $3.22 to $3.30), up from the initial midpoint of $3.18. Lee said the guidance increase reflects Q1 performance and backlog visibility, covering “all of the Q1 beat plus a little bit more.”
Lee reiterated expectations that adjusted EBITDA margin will “exceed 24%” for the year and that free cash flow will be approximately $175 million. He noted that organizational design initiatives are expected to initially result in “higher temporary expenses” intended to yield longer-term efficiencies. He also said purchases of PP&E are expected to be about 3.5% of revenue in 2026 due to a “global data center refresh.”
On capital allocation, Mathradas said the company intends to complete the remaining amount of its $150 million share repurchase authorization by the end of Q3 and that the board authorized an additional $200 million share repurchase program. Lee added that after repurchasing $10 million of shares in Q1, the company plans to enter into an accelerated share repurchase program for the remaining $90 million under the current authorization, expected to be completed by the end of Q3, while executing the new $200 million program “opportunistically.”
Asked about longer-range guidance, Lee said the company is not providing 2027 guidance on the call, noting ongoing portfolio deep dives and the recent addition of a new Chief Marketing and Growth Officer.
In closing remarks, Mathradas said the company has had “a good start to the year,” but added “there’s obviously more work to be done” as Five9 aims to build on momentum and pursue opportunities in AI and customer experience.
About Five9 NASDAQ: FIVN
Five9, Inc NASDAQ: FIVN is a leading provider of cloud-based contact center software designed to help organizations manage customer interactions across voice, email, chat, social media and other digital channels. Its platform offers features such as intelligent routing, analytics, workforce optimization and integrated customer relationship management (CRM) connectors. The company emphasizes AI-driven capabilities, including virtual agents and predictive dialing, to enhance both agent productivity and customer experience.
Founded in 2001 and headquartered in San Ramon, California, Five9 completed its initial public offering in February 2014.
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