10-Q · April 29, 2026
Q2 Holdings (QTWO) reported a strong Q1 2026 with revenues of $216.5 million, surpassing both the prior quarter and analyst estimates. While EPS came slightly below expectations at $0.63, growth in revenue and improved…
Earnings analysis · 10-Q
QTWO earnings analysis
Filed October 28, 2026 · Our reading of the company's report
The latest report
Q2 delivered strong third-quarter execution, with revenue up 11.9% year over year to $225.771 million, gross margin expanding 570 basis points to 59.7%, and operating margin expanding 950 basis points to 15.0%.…
Read full summary
Q2 delivered strong third-quarter execution, with revenue up 11.9% year over year to $225.771 million, gross margin expanding 570 basis points to 59.7%, and operating margin expanding 950 basis points to 15.0%. Subscription growth, ARR and registered users all increased, while operating cash flow improved to $181.656 million for the first nine months. The principal offset is substantial capital deployment, including $304.0 million of note repayment and $158.9 million of repurchases, which reduced liquidity to $123.0 million.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.74
- Segment
- Single operating segment: total revenue was $225.771 million for the three months ended September 30, 2026.
What stood out
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Revenue and subscription growth accelerated
Revenue increased to $225.771 million from $201.704 million, up $24.067 million, or 11.9%, year over year. Subscription revenue rose 14% year over year, driven by additional solutions sold to new and existing customers and customer expansions.
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Material margin expansion
Gross margin expanded to 59.7% from 54.0%, a 570-basis-point improvement, while operating margin increased to 15.0% from 5.5%, a 950-basis-point improvement. Cost of revenues declined 2.1% to $90.928 million despite higher revenue.
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Profitability and EPS improved sharply
Net income increased to $33.220 million from $15.048 million, while reported diluted EPS was $0.74 versus $0.23 in the year-ago quarter. Adjusted EBITDA increased to $67.763 million from $48.818 million.
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Operating cash flow strengthened
Operating cash flow for the first nine months was $181.656 million versus $137.765 million in the prior-year period. Cash generation benefited from $89.717 million of net income and $118.9 million of non-cash adjustments.
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Recurring revenue indicators remained strong
Subscription ARR reached $846.0 million versus $745.4 million a year earlier, up approximately 13.5%, while Total ARR reached $988.6 million versus $888.4 million, up approximately 11.3%. Registered Users increased to 28.5 million from 27.0 million.
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Cloud migration improved cost structure
The company completed migration of its digital banking platform to third-party public cloud providers. The migration reduced quarterly hosting and cloud-related costs by $1.8 million and data-center depreciation by $1.5 million, although management expects cloud costs to increase in absolute dollars as the business grows.
What to watch
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Large cash deployment reduced liquidity
Liquidity declined materially after $304.0 million of convertible-note repayment and $158.9 million of share repurchases during the first nine months. Cash, cash equivalents and investments were $123.0 million at September 30, 2026, although no amounts were drawn on the $125.0 million revolving credit facility.
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Receivables and deferred costs pressure cash
Working-capital investment is absorbing cash: accounts receivable generated a $42.6 million operating cash outflow and deferred solution costs generated a $29.6 million outflow during the first nine months. Management also states that additional financing may not be available on acceptable terms if needed.
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Investment and restructuring costs remain elevated
Management expects ongoing investment in cloud infrastructure, customer support, software development and AI-related tools. Research and development expense increased 6.2% year over year to $41.356 million in the quarter, while quarterly lease and restructuring charges increased 68.4% to $1.352 million.
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Regulatory and operating complexity persists
The filing states that there were no material changes from the risk factors in the 2025 Form 10-K. Nonetheless, the company operates in a highly regulated financial-services environment involving cybersecurity, privacy, fraud and third-party-risk requirements, and it had $1.111 million of quarterly income-tax expense versus $0.160 million a year earlier.
Management's outlook
No quantitative revenue or EPS guidance was provided in the 10-Q. Management stated that subscription revenue is expected to continue increasing as a percentage of total revenue and expects long-term operating efficiencies to reduce several expense categories as a percentage of revenue.
Earlier filings 4
10-K · February 11, 2026
Q2 Holdings presents a clear SaaS-driven strategy centered on its digital banking platform and adjacent offerings (Helix, risk & fraud, digital lending) with scale in financial institutions: more than 1,200 customers,…
10-Q · July 30, 2025
Q2 Holdings demonstrated strong financial performance in Q2 2025 with significant increases in revenue and profit compared to prior periods, indicating a positive growth trajectory. Revenue reached $195.15 million, a…
10-Q · May 7, 2025
Q2 reported revenue of $189.735M for the quarter ended March 31, 2025, up $24.227M (14.6%) year-over-year, with gross profit of $100.990M and gross margin expanding to ~53.2%. Operating income turned positive at $2.189M…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.