Q2 (QTWO) Q3 2025 earnings summary

Executive summary

• Delivered record Q3 2025 results with revenue of $201.7 million, up 15% year-over-year, driven by strong bookings, robust sales across all major product lines, and significant new and expanded Tier 1 and Enterprise contracts.

• Adjusted EBITDA rose to $48.8 million, up 50% year-over-year, with margin improving to 24.2%.

• Net income for Q3 2025 was $15.0 million, reversing a net loss of $11.8 million in Q3 2024.

• Announced leadership changes, including a new COO and Chief Business Officer, and authorized a $150 million share repurchase program.

• Showcased AI advancements and platform innovation at Dev Days 2025, emphasizing new AI offerings and integration strategies.

Financial highlights

• Q3 2025 revenue was $201.7 million, up 15% year-over-year, with subscription revenue growing 18%.

• Adjusted EBITDA reached $48.8 million, with a margin of 24.2%.

• Free cash flow for the nine months ended September 30, 2025, was $116.8 million, up from $69.9 million in the prior year.

• Cash, cash equivalents, and investments totaled $569 million at quarter end.

• Gross margin improved to 57.9% (non-GAAP), up from 56% a year ago.

• Total ARR grew to $888.4 million, up 12% year-over-year, with subscription ARR at $745.4 million, up 14%.

• Backlog increased to $2.5 billion, up 24% year-over-year and 7% sequentially.

Outlook and guidance

• Raised full-year 2025 revenue guidance to $789–$793 million (13–14% growth) and Adjusted EBITDA to $182.5–$185.5 million (23% margin).

• Q4 2025 revenue expected at $202.4–$206.4 million; Adjusted EBITDA at $47.2–$50.2 million.

• 2026 outlook: subscription revenue growth of ~13.5%, gross margin at least 60%, Adjusted EBITDA margin expansion of ~250 basis points.

• Three-year annualized average Adjusted EBITDA margin expansion target increased to 450 basis points.

• Free cash flow conversion outlook of at least 90% for 2026 reiterated.