Q2 Q2 Earnings Call Highlights

Q2 NYSE: QTWO reported second-quarter 2026 results above the high end of its guidance, citing subscription revenue growth, record adjusted EBITDA and continued demand for its digital banking, fraud, commercial banking and Relationship Pricing offerings.

Revenue totaled $219.8 million, up 13% from a year earlier and 2% sequentially. Adjusted EBITDA reached a record $62.8 million, or 28.6% of revenue, while free cash flow was $51 million. The company raised its full-year outlook for revenue and adjusted EBITDA and increased its expected subscription revenue growth rate.

Subscription growth and margin expansion

Chief Financial Officer Jonathan Price said subscription-based revenue rose 15% year over year and represented 83% of total revenue at quarter-end. Revenue growth was driven primarily by new customer go-lives and expansions among existing customers.

Total annualized recurring revenue reached $971 million, up 13% from $861 million a year earlier and 3% from the first quarter. Subscription ARR increased 15% to $826 million. Ending backlog was $2.8 billion, increasing 17% year over year and 1% sequentially.

Non-subscription revenue was roughly flat from the prior-year period. Price said growth in transactional revenue was largely offset by continued pressure in discretionary professional-services offerings, a trend the company expects to persist.

Non-GAAP gross margin was 62.3%, up about 480 basis points year over year and 20 basis points sequentially. Price attributed the improvement in part to the completion of Q2’s cloud migration earlier this year and to a larger mix of higher-margin subscription revenue.

Operating expenses totaled $81.7 million, or 37.2% of revenue. The year-over-year increase was primarily related to higher research-and-development personnel costs supporting product and artificial-intelligence investments. Adjusted EBITDA grew 37% from the prior year, with margin expanding about 510 basis points.

Bookings, cross-selling and bank M&A

Chief Executive Officer Matt Flake said the company recorded eight Tier 1 and enterprise wins across its portfolio during the quarter. He highlighted customer activity in digital banking, risk and fraud, and Relationship Pricing.

One top-25 U.S. bank expanded its relationship with Q2 by adopting its Relationship Pricing capabilities. The bank had initially selected Q2’s small-business and commercial digital banking products in 2023, then added risk and fraud products in 2025. Flake said the latest expansion demonstrated the company’s land-and-expand strategy and the potential to sell several product lines to large customers over time.

Flake also described a Tier 1 digital banking win tied to consolidation in the banking industry. A Q2 customer with approximately $2 billion in assets was acquired by a bank with approximately $9 billion in assets. Following a competitive review that included the acquiring bank’s incumbent provider, the combined institution chose Q2’s platform for the entire bank.

The company said banking-sector mergers and acquisitions can create opportunities whether a Q2 customer is the acquirer or the acquired institution, as the combined bank reassesses the technology it needs after a transaction.

AI products and fraud focus

At its CONNECT 26 customer conference, Q2 introduced and demonstrated several AI-related offerings. Flake said customer conversations centered on practical applications that could improve banker productivity, speed the development of personalized digital experiences and strengthen fraud protection.

• Q2 Assistant: An AI capability intended to help bankers use natural language to access information and navigate workflows within the digital banking platform.
• Q2 Code: An AI-assisted development capability that uses natural-language prompts and Q2’s software development kit to help customers, partners and Q2 teams build and customize digital experiences.
• Account Takeover: A fraud product that uses AI to monitor behavioral signals and user interactions, identify potential account compromise and intervene in real time.

Flake said Q2 Assistant was the most frequently demonstrated item in the company’s exhibit hall at CONNECT. The Account Takeover product has already attracted a double-digit number of early-adopter customers, while Q2 Code and Q2 Assistant each had single-digit early-adopter participation at the time of the call.

The company expects the products to reach general availability in the fourth quarter. Price said revenue conversion from these products should be materially faster than a digital banking or Relationship Pricing implementation, though management said it was too early to provide specific revenue timing or financial contribution estimates.

Management also said the fraud portfolio is growing faster than the overall business and could continue to do so for years. Flake said Q2’s platform position across retail, small-business and commercial banking gives the company access to behavioral and transaction data that can help identify unusual activity.

Balance sheet, buybacks and outlook

Q2 ended the quarter with $106 million in cash equivalents and investments, compared with $379 million at the end of the first quarter. The decline reflected repayment of $304 million in convertible notes at maturity and $23 million in share repurchases. With the June retirement of its final convertible notes tranche, Q2 ended the quarter debt-free.

The company repurchased approximately $125 million of stock under its existing $150 million authorization through the end of the quarter. Its board approved an additional $350 million repurchase authorization, bringing total available capacity to approximately $375 million.

For the third quarter, Q2 forecast revenue of $218.5 million to $222.5 million and adjusted EBITDA of $58.5 million to $61.5 million. For full-year 2026, the company projected revenue of $881 million to $886 million, representing approximately 11% growth, and adjusted EBITDA of $244 million to $248 million, or approximately 28% of revenue.

Q2 raised its full-year subscription revenue growth expectation to approximately 14.5% from a prior forecast of 14%. Price said the increase reflected year-to-date bookings strength and first-half subscription revenue performance.

About Q2 (NYSE:QTWO)

Q2 Holdings, Inc develops and delivers cloud-based digital banking solutions that enable banks and credit unions to enhance customer and member experiences. The company's core offerings include the Q2 Platform, a comprehensive suite of online and mobile banking applications for retail and commercial customers, as well as digital onboarding, payments, and fraud prevention tools. Q2's platform also provides analytics and reporting capabilities designed to help financial institutions tailor products, optimize workflows, and drive engagement.

Founded in 2004 and headquartered in Austin, Texas, Q2 serves hundreds of financial institutions across the United States and Canada.

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