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VERINT SYSTEMS INC (VRNT)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FYE 2026 revenue and non-GAAP EPS beat: revenue $208.1M vs S&P consensus $194.2M (+7.1%) and non-GAAP diluted EPS $0.29 vs $0.233 (+24.5%); overachievement driven by timing of two unbundled SaaS deals that do not change full-year outlook . Values retrieved from S&P Global.*
  • ARR accelerated to 6% YoY; AI ARR grew 24% YoY and now represents close to ~50% of ARR, supporting confidence to exit FY26 with 8% ARR growth and double-digit free cash flow growth .
  • FY26 guidance maintained: revenue $960M (+/-3%), non-GAAP EPS $2.93, ARR $768M (+/-1%), cash generation $960M, with a slight tweak to cash contribution ($245M vs prior $246M) and lower FY stock-based comp ($59–63M vs $64–69M) .
  • Near-term catalysts: sustained AI-led ARR acceleration, expanding pipeline (+30% YoY rolling four-quarter SaaS pipeline), and Q2 guide of ~$200M revenue and $0.26 non-GAAP EPS sets expectations amid unbundled SaaS timing volatility .

What Went Well and What Went Wrong

What Went Well

  • Strong AI momentum: AI ARR +24% YoY to $354M; management underscored hybrid cloud deployment and “start small, scale fast” approach as key differentiators driving tangible outcomes .
  • Revenue/EPS beat versus guidance: Q1 revenue $208.1M and non-GAAP EPS $0.29 came in ahead due to timing of two unbundled SaaS deals; ARR growth accelerated to 6% YoY .
  • Large AI-driven deals: Signed $13M TCV with a top insurer to boost supervisor capacity by >50% and agent capacity by >25% (10x ROI expected), and an additional eight-figure healthcare deal; pipeline up >30% YoY .

Management quotes:

  • “Customers can benefit from AI value now… start small with quick AI deployments… then quickly scale with the Verint platform.” — Dan Bodner, CEO .
  • “We expect AI ARR to continue to grow more than 20%, an acceleration from last year… expected to drive a 12% increase in free cash flow for the full year.” — Grant Highlander, CFO .

What Went Wrong

  • Gross margin compression: GAAP gross margin 66.7%, down vs Q4 (73.5%) and Q3 (70.8%); non-GAAP gross margin 69.9% vs Q4 (76.1%) and Q3 (72.0%), reflecting mix/timing of unbundled SaaS under ASC 606 .
  • GAAP profitability pressured: GAAP diluted EPS was $(0.04), down from $0.45 in Q4 and $0.39 in Q3; operating income fell to $5.1M vs $46.3M (Q4) and $21.7M (Q3) .
  • Free cash flow down YoY in the quarter: $20.3M vs $54.6M in the prior-year Q1, reflecting working capital timing; company still targets FY double-digit FCF growth .

Financial Results

MetricQ3 FYE 2025 (Oct 31, 2024)Q4 FYE 2025 (Jan 31, 2025)Q1 FYE 2026 (Apr 30, 2025)
Revenue ($USD Millions)$224.193 $253.546 $208.097
GAAP Diluted EPS ($)$0.39 $0.45 $(0.04)
Non-GAAP Diluted EPS ($)$0.54 $0.99 $0.29
GAAP Gross Margin (%)70.8% 73.5% 66.7%
Non-GAAP Gross Margin (%)72.0% 76.1% 69.9%
GAAP Operating Income ($USD Millions)$21.748 $46.324 $5.072
Non-GAAP Operating Income ($USD Millions)$46.916 $83.285 $25.384
Adjusted EBITDA ($USD Millions)$53.468 $89.198 $31.896

Q1 vs S&P Global consensus (beats in bold):

MetricS&P Consensus (Q1 FYE 2026)Actual (Q1 FYE 2026)Surprise
Revenue ($USD Millions)$194.217*$208.097 +$13.880M (+7.1%); Beat
Primary EPS ($)$0.233*$0.29 +$0.057 (+24.5%); Beat
EBITDA ($USD Millions)$29.615*Adjusted EBITDA $31.896 +$2.281M (+7.7%); Beat

Values retrieved from S&P Global.*

Recurring vs Nonrecurring revenue components:

Component ($USD Millions)Q3 FYE 2025Q4 FYE 2025Q1 FYE 2026
Bundled SaaS Revenue$75.220 $80.737 $81.257
Unbundled SaaS Revenue$73.442 $81.122 $66.227
Optional Managed Services$5.739 $5.489 $5.014
Support Revenue$25.457 $24.154 $21.125
Total Recurring Revenue$179.858 $191.502 $173.623
Perpetual Revenue$23.471 $36.316 $17.021
Professional Services & Other$20.864 $25.728 $17.453
Total Nonrecurring Revenue$44.335 $62.044 $34.474

Key KPIs:

KPIQ4 FYE 2025Q1 FYE 2026
Subscription ARR ($USD Millions)$711.753 $709.992
Subscription ARR YoY (%)5.2% 6.3%
AI ARR ($USD Millions)n/a$353.906
AI ARR YoY (%)n/a24.1%
Free Cash Flow ($USD Millions)n/a (FY FCF $129.881) $20.298
Net Debt incl. long-term restricted cash ($USD Millions)$197.777 (Jan 31, 2025) $233.504 (Apr 30, 2025)
Share Repurchases (# shares)Program $200M announced Sep; ongoing [80 in list]~2.5M shares repurchased in Q1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription ARRFY 2026 (Q4 exit)$768M +/-1% $768M +/-1% Maintained
Cash GenerationFY 2026$960M +/-1% $960M +/-1% Maintained
Cash ContributionFY 2026$246M (midpoint) $245M (midpoint) Lowered ($1M)
RevenueFY 2026$960M +/-3% $960M +/-3% Maintained
Non-GAAP Diluted EPSFY 2026$2.93 (midpoint) $2.93 (midpoint) Maintained
Stock-based CompensationFY 2026$64–69M $59–63M Lowered
Amortization of IntangiblesQ2/FY 2026~$6M (Q2), ~$24M (FY) ~$6M (Q2), ~$24M (FY) Maintained
RevenueQ2 FYE 2026n/a~$200M New
Non-GAAP Diluted EPSQ2 FYE 2026n/a~$0.26 New
Non-GAAP Effective Tax RateFY 2026~12% (FY25) baseline ~11% (FY26) Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3–Q4 FYE 2025)Current Period (Q1 FYE 2026)Trend
AI differentiation & outcomesCustomer ROI cases (e.g., $10M+ annual savings; 30s AHT reduction with Copilot) and large TCV wins; platform adds 50+ bots Emphasis on “proven AI outcomes” and hybrid cloud; AI ARR +24% YoY; insurer $13M TCV; healthcare ARR nearly doubled Strengthening
Hybrid cloud adoptionMinimizes rip-and-replace; conversion bookings minimal; partners integrating (e.g., RingCentral) “Layering bots” atop existing environments; start small and scale; hybrid cited as key differentiator Consistent, broadening
Pipeline & bookingsNew SaaS ACV new deals +37% YoY (Q3); record Q4 bookings; pipeline robust Rolling four-quarter SaaS pipeline +30% YoY; expectation for sequential ARR increases Improving
Seat renewals vs AI displacementEarly signs of agent count reduction offset by upsell/revenue; ARR accretive when replacing seats with AI “First inning” of AI adoption; some customers cutting agents, others redeploying; ~4M agents managed unchanged Mixed but constructive
Macro/ROI sellingParalysis easing; ROI focus; short payback cycles; value models refined Boards pressuring for tangible ROI; <6-month ROI emphasis; value selling sharper Improving confidence
Channel/partnersChannels co-sell; cloud-to-cloud integrations; expect multi-year leverage Continued cross-sell model; channels gaining bot proficiency Gradual build

Management Commentary

  • “ARR growth accelerated to 6%, reflecting our continued AI momentum. Both revenue and diluted EPS came ahead of guidance.” — Dan Bodner, CEO .
  • “Our revenue overachievement was primarily due to the timing of two large unbundled SaaS deals and therefore do not impact our revenue and diluted EPS outlook for the year.” — Grant Highlander, CFO .
  • “AI ARR increased 24% year-over-year, reaching $354 million… AI ARR now represents close to 50% of our subscription ARR.” — Grant Highlander, CFO .
  • “With Verint, customers can… start small… and once they prove the value… they can quickly scale with the Verint platform.” — Dan Bodner, CEO .

Q&A Highlights

  • AI noise vs differentiation: Verint’s edge is “proven AI outcomes” and hybrid cloud; customers wary of lab-only demos that fail in production .
  • Adoption curve: Management frames 2025 as “first inning” of real spend; caution persists due to bad bot experiences; strategy focuses on top accounts to seed references across sectors .
  • Seats and ARR economics: Some customers are reducing agents; replacing seats with AI is highly accretive (AI bot ~$1,200–$2,000 license vs ~$200 per seat) and drives ARR growth .
  • Working capital/cash generation: Cash generation model underpins FCF growth; guidance provided both ratable (ARR/cash gen/cash contribution) and P&L (revenue/EPS) views .
  • Channel & partner leverage: Cross-sell with partners; integrations enabling bots to partner clouds; channels building capability on select bot bundles .

Estimates Context

  • Q1 FYE 2026 results beat S&P Global consensus on revenue ($208.1M vs $194.2M) and EPS ($0.29 vs $0.233); adjusted EBITDA was $31.9M vs S&P EBITDA consensus $29.6M. Values retrieved from S&P Global.*
  • Given ASC 606 timing effects on unbundled SaaS, management emphasizes ARR and cash generation for tracking underlying growth; revenue/EBITDA definitions may differ across sources (company reports adjusted EBITDA) .

Key Takeaways for Investors

  • AI-led ARR acceleration (6% YoY) and AI ARR +24% YoY reinforce the trajectory to exit FY26 at ~8% ARR growth and deliver double-digit FCF growth; focus on ARR/cash generation as primary compasses amid ASC 606 volatility .
  • Q1 beat was timing-driven in unbundled SaaS and does not alter the annual revenue/EPS outlook; expect quarterly revenue volatility, but ARR to increase sequentially .
  • Hybrid cloud “layering bots” strategy reduces friction, shortens ROI cycles (<6 months), and supports expansion pathways; pipeline +30% YoY suggests momentum persists .
  • Margins compressed in Q1 versus prior quarters due to mix; watch normalization as bundled SaaS grows >20% YoY and management targets another year of operating margin expansion .
  • Guidance intact; subtle improvements (lower stock-based comp, maintained EPS/ARR) indicate operational discipline; Q2 guide ($200M/$0.26) sets conservative near-term expectations .
  • Trade setup: Near-term sentiment supported by consensus beats and strong AI narratives; medium-term thesis hinges on ARR/cash gen execution and scaling AI consumption within large cohorts (top 25/100 customers growing materially faster) .