Five9’s Revenue Growth Outpaced Profit as Evercore Cut Its Rating

Evercore ISI downgraded Five9 (NASDAQ: FIVN) on Nov. 6, even as the contact-center software company reported faster growth in its artificial intelligence business. The firm cut its rating to In Line from Outperform and retained a $24 price target, according to Yahoo Finance.

Evercore said a clear turning point in growth was not yet visible and that near-term positive catalysts were lacking. Five9’s third-quarter results showed higher revenue and adjusted earnings, alongside lower GAAP profit and narrower gross margins.

Revenue rose 13% while GAAP profit fell

Five9 reported third-quarter revenue of $323.3 million, up 13% from $285.8 million in the same period of 2025. Subscription revenue grew 16%, faster than overall revenue, according to the company’s financial results release.

GAAP net income declined to $14.5 million from $18.0 million. It represented 4.5% of revenue, down from 6.3% a year earlier. GAAP earnings per diluted share fell to $0.19 from $0.21.

Both reported gross-margin measures declined. GAAP gross margin fell to 53.4% from 55.0%, while adjusted gross margin decreased to 61.7% from 62.8%.

Non-GAAP net income moved in the opposite direction from GAAP profit, increasing to $63.7 million from $60.6 million. Non-GAAP earnings per diluted share rose to $0.82 from $0.78. Non-GAAP net income fell as a share of revenue, however, to 19.7% from 21.2%.

Adjusted EBITDA rose to $81.2 million from $71.7 million and remained at 25.1% of revenue in both quarters. GAAP operating cash flow slipped to $58.4 million from $59.2 million.

Five9’s adjusted measures exclude items included in its GAAP results. Its adjusted gross margin calculation, for example, adds back stock-based compensation, depreciation and certain acquisition-related costs. The company says non-GAAP measures supplement rather than replace GAAP figures.

Five9 also reported a trailing-12-month subscription dollar-based retention rate of 109% as of Sept. 30. The corresponding rate including telecom was 107%.

AI revenue grew 91% as Five9 agreed to buy Level AI

Third-quarter AI revenue was approximately $45 million, up 91% from a year earlier, according to Yahoo Finance. Management raised its full-year AI revenue growth outlook to at least 75% from at least 60%.

In its risk disclosures, Five9 said AI could handle an increasing share of contact-center interactions. The company warned that if sales of additional AI products fail to replace decreases in subscription revenue from licenses, its revenue and results could suffer.

Five9 has signed an agreement to buy Level AI for $325 million in cash. In the results release, CEO Amit Mathradas said the acquisition would strengthen Five9’s competitive position, broaden the customers it can serve and add AI talent. The company expects the deal to close in the fourth quarter of 2026, subject to customary conditions.

Earnings guidance excludes the pending acquisition

Five9’s fourth-quarter guidance does not include any contribution from Level AI. The company forecasts revenue of $328 million to $334 million, GAAP earnings of $0.28 to $0.36 per diluted share and non-GAAP earnings of $0.88 to $0.92 per diluted share. The non-GAAP earnings range was below estimates, according to Yahoo Finance.

For full-year 2026, Five9 projects revenue of $1.269 billion to $1.275 billion and non-GAAP earnings of $3.17 to $3.21 per diluted share. That earnings range implies a lower midpoint than the $3.26 cited in prior quarters, Yahoo Finance reported. Five9’s full-year GAAP earnings forecast is $0.75 to $0.83 per diluted share.

The company reaffirmed rather than raised its EBITDA margin and free-cash-flow targets, according to Yahoo Finance.

Downgrade followed a broad market sell-off

Evercore’s rating change came after a sharp market decline on Nov. 5. The Nasdaq Composite fell 5.52%, its deepest one-day drop in 19 months, and closed more than 10% below its Oct. 6 record, according to Reuters reporting cited by Yahoo Finance.

The S&P 500 fell 4.36%, while the Dow Jones Industrial Average lost 3.44%. Chipmakers and other AI-linked stocks took the brunt of the decline, Yahoo Finance reported.