Earnings Call Insights: Five9, Inc. (FIVN) Q4 2025
Management View
- Michael Burkland, outgoing Chairman, opened by noting, "We've grown Five9 from approximately $10 million in annual revenue to a $1.2 billion run rate," highlighting the company's transformation and expressing confidence in Amit Mathradas as the new CEO. Burkland stated, "Our enterprise AI annual run rate revenue surpassed $100 million in the fourth quarter," and attributed solid Q4 results to record enterprise AI bookings, accelerating revenue growth, and robust free cash flow.
- Amit Mathradas, CEO, emphasized, "I joined Five9 for a simple reason. That is I believe we have a large opportunity in front of us and that we have the right foundation to capture more of it," and committed to clarity in communication about business performance.
- Burkland cited market expansion, stating, "Gartner forecasts the market for traditional CCaaS to grow at a 9% CAGR and the gen AI customer service market to grow at a 34% CAGR through 2029 to a combined annual spend of $48 billion."
- Andy Dignan, President, highlighted, "Partners expand our reach. They bring us into more enterprise buying motions and speed up time to value for customers. Five9 has been partner-first for years."
- Bryan Lee, CFO, commented, "We're pleased to report strong Q4 results with total revenue coming in at $300 million, representing 8% growth year-over-year. Subscription revenue growth accelerated to 12% year-over-year in the fourth quarter, primarily driven by: first, enterprise AR revenue growth accelerating to 50% year-over-year."
Outlook
- Bryan Lee provided guidance: "For 2026 revenue, we're initiating our guidance at a midpoint of $1.254 billion, which is in line with the high-level outlook we provided last quarter. For Q1 revenue, we're guiding to a midpoint of $299.5 million."
- Lee added, "We continue to expect revenue to return to double-digit growth in the second half of 2026, driven by our strong backlog of both new logo and installed base bookings."
- Lee also stated, "We're guiding 2026 non-GAAP EPS to a midpoint of $3.18 per diluted share... We're also guiding to continued GAAP profitability in 2026 with a midpoint of $0.91 per diluted share for GAAP EPS."
- The company plans to host an Investor Day in late 2026 to provide details on strategic priorities and long-term financial outlook.
Financial Results
- Five9 reported Q4 total revenue of $300 million and subscription revenue growth of 12% year-over-year.
- Enterprise AI annual run rate revenue surpassed $100 million, with enterprise AI revenue growth accelerating to 50% year-over-year.
- Adjusted EBITDA margin reached 26%, while free cash flow margin expanded to 22% in Q4.
- Q4 GAAP EPS was $0.23 per diluted share; non-GAAP EPS was $0.80 per diluted share.
- Full year 2025 total revenue was $1.15 billion, with subscription revenue growing 13% year-over-year. 2025 GAAP EPS was $0.45 per diluted share, non-GAAP EPS $2.96 per diluted share.
- The company ended Q4 with $697 million in cash and investments.
- Five9 completed a $50 million accelerated share repurchase, buying back approximately 2.6 million shares; $100 million remains under authorization through December 2027.
Q&A
- Damon Coggin, Barclays: Asked about the breakdown of AI revenue between greenfield and existing customers, and its role in the 2026 guide. Michael Burkland responded, "This is a combination of us having a lot of success with new logo attach of AI and also penetration into our installed base. I don't think we quantified the breakdown between the two, but I can tell you both are growing at a significant rate and very strong."
- Sitikantha Panigrahi, Mizuho: Inquired about changes Mathradas might bring. Amit Mathradas said, "It's a little bit early. I'm still getting my feet around our product and our road maps. But what is really exciting is the stat we put out, which is we've already done $100 million in ARR of AI, and it's growing."
- Ryan MacWilliams, Wells Fargo: Asked what the contact center will look like in five years. Burkland responded, "The AI opportunity is massive... providing both AI-driven solutions as well as solutions for the human agents in an orchestrated fashion. That is our power, that is the power of our platform."
- Peter Levine, Evercore: Asked about risk from LLM-native platforms. Burkland replied, "Mainly the data advantage is number one... being able to orchestrate across this entire interaction set is an absolute competitive moat."
- Samad Samana, Jefferies: Asked about guidance mechanics. Bryan Lee said, "If you look at DBRR first... that alone makes up about 2/3 of that $105 million of incremental revenue. So the remaining 1/3 is actually fully covered by the backlog that we have."
- Additional questions addressed vertical-specific performance, AI penetration, Google partnership, and the impact of AI on gross margins (Lee: "AI Agents... have gross margins in the high 70s and 80s").
Sentiment Analysis
- Analysts were largely positive, expressing congratulations on leadership changes and enthusiasm about AI growth, but asked probing questions on AI adoption, competitive threats, and revenue mechanics.
- Management maintained a confident and optimistic tone during prepared remarks, frequently providing detailed explanations. In Q&A, management was transparent about early days for new leadership and evolving AI products, with occasional hesitancy from Mathradas regarding specific product road map changes.
- Compared to the previous quarter, analysts' tone improved, focusing more on opportunity than risk, while management's confidence was bolstered by tangible AI growth metrics and the successful CEO transition.
Quarter-over-Quarter Comparison
- Guidance language remained consistent, with the 2026 revenue target reaffirmed at $1.254 billion and an increase in non-GAAP EPS guidance to $3.18 from the previous $3.14 outlook.
- Strategic focus shifted to highlighting enterprise AI revenue acceleration (from 41% to 50% year-over-year) and the successful CEO transition.
- Analysts in the previous quarter pressed on commercial segment underperformance and seasonality, while this quarter's focus shifted to AI revenue composition, vertical performance, and platform differentiation.
- Management confidence increased, supported by record AI metrics and strong free cash flow.
Risks and Concerns
- Management cited macroeconomic challenges, high interest rates, and currency exchange fluctuations as ongoing risks.
- Bryan Lee noted, "Q4 adjusted gross margin was 63%, down by approximately 40 basis points year-over-year, primarily driven by lower gross margins in telecom usage and PS."
- Analysts raised concerns about potential disruption from LLM-native platforms and the complexity of customer AI adoption, but management pointed to the platform's data and orchestration advantages as mitigation.
Final Takeaway
Five9 closed 2025 with record AI-driven growth, a successful CEO transition to Amit Mathradas, and robust financial performance including a $1.15 billion revenue year and a positive outlook for 2026. The company projects $1.254 billion in revenue for 2026 and expects double-digit growth to resume in the second half, underpinned by accelerating enterprise AI adoption and a strong backlog. Management emphasized the strategic importance of partnerships, particularly with Google Cloud, and reinforced Five9’s differentiation through its unified CX platform and data-driven approach. The company remains focused on operational excellence and sustained profitability as it advances in a rapidly expanding AI-powered CX market.
