Blackbaud Q3 2026 Revenue Rises 4.1% as Profit Growth Outpaces Sales

Blackbaud reported third-quarter 2026 revenue of $292.6 million, up from $281.1 million a year earlier, as recurring software and payments revenue increased. Profitability grew faster than revenue, while the social-impact software provider said it expects to finish 2026 in the upper half of its existing guidance ranges.

Non-GAAP organic revenue increased 4.1% year over year. The $11.5 million rise in quarterly revenue included gains of $4.3 million from contractual recurring revenue, $6.9 million from transactional recurring revenue and $0.3 million from one-time services.

Non-GAAP adjusted EBITDA rose 11% to $111.1 million from $99.7 million. Non-GAAP diluted earnings per share increased 24% to $1.36 from $1.10, reflecting earnings growth that exceeded the pace of revenue expansion.

2026 outlook points to stronger cash generation

For the full year, Blackbaud expects revenue of $1.173 billion to $1.179 billion, with a midpoint of $1.176 billion that implies 4.25% growth. Non-GAAP adjusted EBITDA is projected at $430 million to $438 million, representing 7% growth at the $434 million midpoint.

The company forecasts non-GAAP EPS of $5.15 to $5.25, with the $5.20 midpoint implying 17% growth. Non-GAAP free cash flow is expected to reach $280 million to $290 million, or 37% growth at the $285 million midpoint. Blackbaud said it expects its results to land in the upper half of those ranges.

The guidance assumes a 24.5% non-GAAP annualized effective tax rate, interest expense of $62 million to $66 million and 45 million to 46 million fully diluted shares. Capital expenditures are expected to total $60 million to $70 million, including approximately $52 million to $62 million of capitalized software-development costs.

Blackbaud said its 2026 free-cash-flow forecast includes a $10 million to $15 million nonrecurring net benefit, primarily from a positive cash-tax impact related to the One Big Beautiful Bill Act. That benefit is expected to be partly offset by costs associated with the company’s global workforce transition.

Larger renewal cohort weighs on near-term retention

A larger group of contracts coming up for renewal remains a constraint on 2026 growth. Blackbaud’s contractual recurring renewal cohort is approximately 40% larger than in 2025, which the company expects to reduce full-year revenue growth by 0.5 to 0.75 percentage points. That effect is already incorporated into its guidance.

The company also continues to expect a near-term decline in reported gross dollar retention as more recurring revenue comes up for renewal. Management expects retention to return to its more recent range of 91% to 92% by the end of 2027 after the larger cohort passes. Blackbaud reported gross dollar retention of 92% in 2025, excluding EverFi, which was divested at the end of 2024.

Blackbaud’s revenue model is predominantly recurring. Contractual recurring software represented 64% of 2025 revenue, while transactional recurring payments accounted for 34%. One-time services and other revenue made up the remaining 2%. For 2026 through 2030, the company is targeting mid-single-digit growth from contractual recurring revenue and mid- to high-single-digit growth from transactional recurring revenue, while it expects the drag from one-time services to become neutral.

Margin expansion and capital allocation

Blackbaud is targeting 4% to 6% annual revenue growth from 2026 through 2030, alongside 6% to 8% growth in non-GAAP adjusted EBITDA and at least 13% growth in non-GAAP EPS. It aims to expand its free-cash-flow margin from a projected 24% in 2026 to more than 28% and achieve a Rule of 45 result by 2030.

Management expects EBITDA growth to outpace revenue growth through operating leverage and efficiency measures. Its initiatives include platform modernization, closure of two remaining colocation data centers, vendor consolidation, a global workforce strategy and broader internal use of artificial intelligence. The company identified its Agents for Good products as potential upside to its long-term revenue targets, though those targets do not depend on that potential contribution.

Blackbaud is also continuing its share-repurchase program. Common shares outstanding have declined 16% since the fourth quarter of 2023 to 45.1 million at the end of the third quarter. The company had $832 million remaining under its $1 billion board authorization as of Sept. 30 and expects to allocate more than half of cumulative free cash flow from 2026 through 2030 to repurchases. It is also targeting a debt-to-EBITDA ratio below 2.0 times over the medium and long term, while retaining the option to pursue acquisitions in vertical markets it already serves.

The outlook remains subject to renewal uncertainty, execution of cost and growth initiatives, charitable-giving trends, lengthy sales and implementation cycles, leverage and interest costs, acquisition risks, international expansion, technological change, and cybersecurity and data-protection liabilities. Blackbaud also cautioned that its forward-looking non-GAAP measures have not been reconciled with comparable GAAP measures because some components cannot be estimated with reasonable certainty.