Five9 (FIVN 8.11%), a provider of cloud-based contact center software, released its second quarter earnings for fiscal 2025 on July 31, 2025.
Five9 posted GAAP revenue of $283.3 million for Q2 2025, up 12% from the prior year period.
, coming in $8.1 million ahead of analyst expectations. Non-GAAP earnings per share were $0.76, well above the $0.62 analyst forecast (non-GAAP). Five9 highlighted accelerated growth in its Enterprise AI segment, with Enterprise AI revenue increasing 42% year-over-year, achieving a record adjusted EBITDA margin and improved operating cash flow, despite some macroeconomic caution and a sequential dip in its key net retention metric, with LTM dollar-based retention rate at 107% versus 108% in the prior quarter. Overall, the quarter showed broad-based improvement and momentum in both financial and operational metrics.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.76 | $0.62 | $0.52 | 46.2% |
| Revenue | $283.3 million | $275.2 million | $252.1 million | 12.4% |
| Gross Margin | 54.9% | 53.0% | 1.9 pp | |
| Gross Margin (Non-GAAP) | 63.0% | 60.5% | 2.5 pp | |
| Adjusted EBITDA Margin | 24.0% | 16.6% | 7.4 pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
Five9 operates in the software-as-a-service space, specifically providing cloud-based call center platforms for businesses shifting away from traditional, on-premises systems. Its main product allows organizations to manage phone, chat, email, and other customer interactions in a single platform. The system is designed to replace legacy hardware with scalable, flexible solutions that enable remote work and seamless customer engagement across digital channels.
In recent years, Five9’s key areas of focus have included driving adoption of its cloud solutions, accelerating advancements in Artificial Intelligence, supporting digital transformation for clients, and extending its partner ecosystem. These strategies are vital for capturing market share as companies modernize their customer-facing operations. Enterprise migration to the cloud, integration of advanced AI features, and deeper relationships with global partners have become central to Five9's growth and ongoing relevance in a rapidly changing market.
Quarter Highlights and Notable Developments
During Q2 2025, Five9 substantially outperformed its financial guidance and market estimates, with non-GAAP EPS of $0.76 exceeding the analyst estimate of $0.62 and GAAP revenue of $283.3 million surpassing the analyst estimate of $275.17 million. It reported a significant revenue increase, a record high in adjusted EBITDA margin (24.0% non-GAAP), and stronger free cash flow. Non-GAAP earnings were higher than expected, reflecting improved operating efficiency and a favorable revenue mix shift toward subscription and AI-driven services. These results marked the company’s best quarter yet for both operating and free cash flow.
AI revenue in the enterprise market rose 42% year-over-year and now accounts for 10% of enterprise subscription revenue. Management reported that Enterprise AI bookings more than tripled year-over-year, and more than 20% of new large enterprise deals included AI solutions in Q1 2025. Product launches this quarter included new Agentic AI Agents and Trust & Governance tools, both part of the Genius AI suite. These products use machine learning and generative AI to improve call handling and oversight, offering customers real savings and operational improvements.
Subscription revenue -- the portion of revenue tied to ongoing platform usage -- grew by 16% year-over-year. This growth, combined with strong uptake of AI and multi-channel capabilities, improved both GAAP and non-GAAP gross margins and overall profitability. Five9 attributed much of the margin expansion in Q1 2025 to this revenue mix shift and to disciplined cost controls, including a workforce reduction earlier in the year that is expected to save $20–$25 million in annual compensation-related non-GAAP expense. These savings are now being reinvested in high-priority areas such as AI development and go-to-market (sales and marketing) initiatives.
The company’s partnerships and channel strategies played a significant role in the quarter. Integrations with enterprise software providers such as Salesforce, Microsoft, ServiceNow, and IBM are expanding Five9’s reach and enabling joint sales wins, especially in financial services, healthcare, and vehicle mobility. Management noted some resistance to U.S. vendors in international regions during the Q1 2025 earnings call and took a conservative view on international growth for the remainder of 2025.
Regarding specific products, Five9's Agentic AI Agents are virtual representatives powered by artificial intelligence, designed to automate both self-service and assist live agents. The Genius AI suite includes applications for speech recognition, automated insights, and conversation summaries. Five9 Fusion, its integration for Salesforce users, enables enterprise clients to use Five9's voice services alongside CRM data in a unified workflow, further enhancing digital transformation.
Looking Ahead: Guidance and Watch Points
Management’s guidance for Q3 2025 is revenue between $283.0 million and $286.0 million, essentially flat from Q2 2025. Full-year 2025 revenue guidance remains $1.1435 billion to $1.1495 billion, reflecting a prudent approach given current economic conditions and some lengthening of large deal sales cycles. For earnings, the company projects GAAP diluted EPS of $0.06 to $0.12 for Q3 2025 and $0.23 to $0.30 for the full year; Non-GAAP EPS guidance is $0.72 to $0.74 for Q3 2025 and $2.86 to $2.90 for FY2025. Management cited high visibility into the installed customer base as supporting the stability of these forecasts. About 93% of incremental recurring revenue expected in the 2025 outlook is planned to come from existing clients, not new wins.
There is also some risk noted on international deals and go-to-market execution, as well as a significant drop in cash and marketable investments from $362.5 million and $643.4 million as of December 31, 2024, to $205.5 million and $430.4 million as of June 30, 2025, following debt repayment. Continued success in AI product adoption and further penetration of new and existing enterprise clients will be important to monitor. Five9 does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
