NiCE Q3 Earnings Call Highlights

Key Points

• NiCE beat Q3 guidance: Revenue rose 8% year over year to $791 million and adjusted EPS was $2.84. Cloud revenue grew 10.6%, or 12.2% excluding a resolved $10 million customer-related credit.
• AI and international business showed momentum: AI ARR climbed 46% to $392 million, while international revenue rose 33%. CXone backlog grew 27%, though management noted slower growth in several cloud businesses outside its core CXAI platform.
• NiCE is targeting greater efficiency while maintaining its 2026 outlook: It plans to cut about 5% of its workforce and reiterated revenue guidance of $3.17 billion to $3.19 billion, while raising adjusted EPS guidance to $11.12–$11.32.

NiCE NASDAQ: NICE reported third-quarter revenue and adjusted earnings above the high end of its guidance, while management said it is taking steps to improve cloud growth and streamline operations through a workforce reduction of about 5%.

Total third-quarter revenue rose 8% year over year to $791 million, and non-GAAP earnings per share reached $2.84. Chief Executive Officer Scott Russell said both measures exceeded the company’s guidance range. Cloud revenue totaled $623 million, or 79% of total revenue, up 10.6% from a year earlier.

Chief Financial Officer Beth Gaspich said cloud growth was affected by a $10 million credit related to an “atypical customer-related matter.” About $9 million of the credit was recorded against non-CXone cloud revenue, with the remaining amount recorded in services. Excluding the credit, cloud revenue would have risen 12.2%, while total revenue would have increased 9%.

Gaspich said the matter was fully resolved, there was no future exposure, and the customer relationship and annual recurring revenue remained intact. She also said the credit was not associated with pricing discounts or a renewal event.

AI and CXone Growth Drivers

Russell said the company is positioning its CXAI platform to address a potential rise in customer interactions as consumers increasingly use personal AI agents to engage with businesses. He said NiCE Cognigy supports agent-to-agent and Model Context Protocol capabilities alongside voice and digital channels, and that the company is working with Meta and other partners on the Personal Agent Protocol.

The company’s AI annual recurring revenue grew 46% year over year to $392 million, representing 16% of cloud revenue. Russell said Cognigy had its strongest quarter of the year for both deal volume and new customer additions, while AI backlog increased about 40% year over year.

Management said nearly all of its AI revenue comes from production deployments rather than pilots or proofs of concept. Still, Russell acknowledged that large enterprises are adopting AI at a measured pace because of requirements involving security, governance, reliability and scale.

NiCE is increasing its ability to support deployments through partner certifications, forward-deployed engineering resources and product development through NICE Labs. Russell said the company had fully staffed its forward-deployed engineering team since the end of the second quarter, and engagement levels were increasing.

CXone backlog grew 27% year over year, compared with 15% growth in total cloud backlog. The company also said CXone seat-count growth accelerated sequentially during the quarter. Russell said enterprises continue to use AI both for automation and to augment human agents, rather than solely as a replacement for customer-service personnel.

Cloud Growth Challenges and International Momentum

Management said cloud growth remained below its expectations due to slower growth in several areas outside the core CXAI platform. These included standalone hosted workforce management, network connectivity services, and cloud migrations in the financial crime and compliance business.

Gaspich said customers in the financial crime and compliance segment have continued to renew and invest in on-premise Actimize products, contributing to a 30% increase in total product revenue during the quarter. Financial crime and compliance revenue rose 13% to $135 million, while customer engagement revenue increased 7% to $656 million.

Standalone workforce management cloud offerings are still growing, according to management, but at a slower rate. Russell said workforce management embedded in the broader CXone platform continues to perform well, and the company is focused on moving customers toward its unified offering.

International markets were a bright spot. International revenue increased 33% year over year, including 45% growth in Europe, the Middle East and Africa. International cloud revenue rose 50% on a constant-currency basis. NiCE reported its first Cognigy wins in Japan, Singapore and the Philippines, as well as its first combined CXone and Cognigy deal in China.

The company also said global systems integrator-driven annual contract value grew nearly sevenfold year over year in the third quarter. Cognigy practitioner certifications among partners nearly quadrupled sequentially, management said.

Margin, Cash Flow and Workforce Actions

Non-GAAP gross margin was 66.5%, or about 67% excluding the customer credit. Operating income was $214 million, producing a 27% operating margin. Gaspich said NiCE expects to finish 2026 slightly above the high end of its prior 25% to 26% operating-margin range while continuing to invest in AI, go-to-market initiatives and partners.

Operating cash flow was $98 million and free cash flow was $69 million. Free cash flow was affected by acquisition- and divestiture-related costs, advisory fees, collection timing and an office closure, Gaspich said. The company ended the quarter with $351 million in cash and short-term investments and no debt.

NiCE repurchased $72 million of stock during the third quarter and $383 million year to date. Shares outstanding at the end of September were about 57.5 million, down 6% year over year.

The company plans to reduce its global workforce by approximately 5%, with efficiencies concentrated primarily in product development, go-to-market, customer support and services. NiCE expects restructuring charges of approximately $15 million to $20 million, primarily in the fourth quarter, which will be excluded from non-GAAP results.

Management said the changes are intended to simplify the organization, reduce management layers, increase use of AI tools, and expand partner-led deployment capabilities. Gaspich said the actions support NiCE’s previously discussed 2028 operating-margin target of 27%.

2026 Outlook Maintained

NiCE reiterated its full-year revenue outlook of $3.17 billion to $3.19 billion, representing 8% growth at the midpoint, and raised its adjusted EPS guidance to $11.12 to $11.32.

The company now expects full-year cloud revenue growth of approximately 12%, excluding the customer credit. Gaspich cited the absence of Cognigy’s inorganic contribution after the acquisition anniversary, less foreign-exchange benefit than a year ago and a weaker-than-usual seasonal cloud uplift so far in the fourth quarter.

Free cash flow margin is projected at approximately 10% to 12% on a reported basis, or 12% to 14% excluding nonrecurring acquisition, divestiture and restructuring-related items.

Russell said NiCE continues to expect cloud growth to accelerate in 2027 and 2028, though management did not provide a detailed outlook or quarterly growth trajectory for next year. The company also said it continues to work with advisers on alternatives for its non-CX assets, with no further update provided.

About NiCE (NASDAQ:NICE)

NICE Ltd. NASDAQ: NICE is a technology company that provides cloud-based software and artificial intelligence solutions for customer experience, employee engagement, and business operations. Its platforms help organizations manage customer interactions across voice, digital, and other communication channels while using analytics and automation to improve service and operational performance.

The company's portfolio includes NICE CXone, a cloud customer experience platform that supports contact-center operations, workforce management, analytics, and digital engagement.

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