Key Highlights

  • Revenue reached USD 225.8 million, up 12% year over year, with subscription revenue growing 14%.
  • GAAP net income more than doubled to USD 33.2 million, or USD 0.52 per diluted share.
  • Adjusted EBITDA hit a record USD 67.8 million, a 30% margin, up from 24.2% a year earlier.
  • Subscription ARR rose 13.5% to USD 846 million, and backlog increased 10% to USD 2.8 billion.

Q2 Holdings, Inc. (NYSE:QTWO) reported third-quarter 2026 revenue of USD 225.8 million, up 12% from USD 201.7 million a year earlier and above a consensus estimate of USD 221.23 million. Earnings per share of USD 0.74, a figure not presented in the 10-Q or call remarks, came in above a consensus estimate of USD 0.71. On a GAAP basis, net income was USD 33.2 million, or USD 0.52 per diluted share, versus USD 15.0 million, or USD 0.23, in the prior-year quarter.

Subscription revenue climbed to USD 188.2 million and made up 83% of the total, while transactional revenue was USD 18.1 million and services and other revenue was USD 19.6 million. Chief executive Matthew Flake said bookings were led by digital banking and included seven tier 1 and enterprise wins, along with credit union deals from a roughly USD 3 billion institution and a roughly USD 10 billion institution.

Margins, Cash Generation and Leadership Change

GAAP gross margin rose to 59.7% from 54.0%, and non-GAAP gross margin reached 62.6%, up 470 basis points, which management credited to its cloud migration and a richer subscription mix. GAAP income from operations was USD 34.0 million compared with USD 11.0 million. Non-GAAP operating expenses were 36.2% of revenue, down from 37.7%, even as research and development spending rose to support product and AI work.

Operating cash flow was USD 65 million and free cash flow was USD 55 million, up 48%. The company repurchased about USD 39 million of stock and held cash and investments of USD 123 million with no debt after retiring its convertible notes in June, leaving about USD 336 million under the buyback authorization. Separately, the company appointed its chief financial officer as co-chief executive and board member, with that executive continuing as finance chief while a successor search proceeds. Flake remains president and chairman.

Guidance Raised for 2026

For the fourth quarter, the company guided to revenue of USD 226 million to USD 230 million and adjusted EBITDA of USD 62.4 million to USD 65.4 million. Full-year 2026 revenue guidance was raised to USD 888 million to USD 892 million, with subscription revenue growth of about 14.5%. Adjusted EBITDA is guided to USD 253 million to USD 256 million, or about 28.6% of revenue at the midpoint.

Management reiterated its 2027 targets of subscription revenue growth of 12.5% to 13% and adjusted EBITDA margin expansion of 150 to 200 basis points. It also said spending on the product roadmap steps up from late in the third quarter, and that non-subscription revenue is projected to be roughly flat for 2026.

Reference Points for the Next Report

Four items frame the next report. The first is the fourth-quarter revenue range of USD 226 million to USD 230 million against the USD 225.8 million just delivered. The second is adjusted EBITDA, with the quarterly range of USD 62.4 million to USD 65.4 million sitting below the USD 67.8 million record as investment ramps. The third is the AI rollout: Q2 Code, Q2 Assistant and user activity monitoring are scheduled to become generally available within 90 days, and nearly 20 institutions joined the user activity monitoring early adopter program. The fourth is recurring revenue, with total ARR at USD 988.6 million and free cash flow conversion guided to at least 90% for the full year.