Q2 Holdings Leaves AI Revenue Out Of Its 12.5% To 13% 2027 Growth Outlook
Management said the 2027 outlook counts no meaningful AI revenue, and that margins on the new products are untested at scale.
Q2 Holdings, which sells cloud-based digital banking software to banks and credit unions, built its reiterated 2027 outlook of 12.5% to 13% subscription revenue growth without any meaningful contribution from its new AI products, executives said on the company's Wednesday earnings call.
AI sits outside the 2027 math
Asked by an analyst at Truist about the revenue ramp for its AI products, Co-CEO and CFO Jonathan Price said it is too early to discuss, because the products are not yet generally available and pricing is still being tested. Early adopters get more favorable pricing, he said, and the revenue is "not factored into the guidance." Strong traction once the products reach general availability "could provide upside."
An analyst at Stifel asked whether the 2027 framework holds any meaningful AI contribution. Price answered, "The latter part is correct, yes," and said fraud should grow faster than the rest of the business.
On pricing, Price said the model will not be uniform across products or even customer types, but that every case so far involves some form of hybrid model. Pricing "has not been a major hurdle," he said, and he pointed to 2028 and beyond for the real revenue opportunity.
Early margins look good, scale is untested
An analyst at Morgan Stanley asked about gross margins on agent-style workflows. Price said early returns in the early-adopter phase "look good," but "we just haven't seen it yet at scale."
He added that management is "confident that this is going to look positive, but we just don't know enough yet to say it with certainty at scale in GA."
Co-CEO Matt Flake said the company remains on pace to start general availability of Q2 Code, Q2 Assistant and User Activity Monitoring, an AI account-takeover tool, over the next 90 days. Nearly 20 financial institutions joined the monitoring early-adopter program, roughly twice what management expected. Price said monitoring should reach general availability late this year.
A raised 2026 outlook and a new co-CEO
Third-quarter revenue was $225.8 million, up 12% from a year earlier. Adjusted EBITDA hit a record $67.8 million, or 30% of revenue, and free cash flow was $55 million. Subscription revenue grew 14% and made up 83% of the total.
Q2 raised its 2026 revenue outlook to $888 million to $892 million and adjusted EBITDA to $253 million to $256 million. For 2027 it also reiterated 150 to 200 basis points of adjusted EBITDA margin expansion.
The company also named Price co-CEO alongside Flake, who stays president and chairman. Price joins the board and remains CFO while a successor is sought.
Flake also took a "swag," as he put it, that the share of digital banking customers using Q2's fraud products could reach 60% to 70% over the next two to three years.
The company has about $336 million left on its buyback authorization, and Price said it could theoretically use all of it over the next 12 to 24 months.
Sources
- Q2 Holdings (QTWO) Q3 Earnings and Revenues Beat Estimates — Yahoo Finance
- Q2 Holdings: Q3 Earnings Snapshot | wusa9.com — Associated Press
- Q2 Holdings (QTWO) vs. PYPL and NCNO: Can AI-Powered Banking Infrastructure Unlock Its Next Growth Phase? — Yahoo Finance
- Q2 Holdings, Inc. Announces Third Quarter 2026 Financial Results; Appoints Jonathan Price as co-CEO — businesswire.com
