Q2 Holdings Q3 Revenue Rises 12% as Adjusted EBITDA Margin Reaches 30%

Q2 Holdings Inc. reported double-digit revenue growth and a wider adjusted EBITDA margin for the third quarter of 2026, supported by subscription revenue and continued digital-banking bookings. The financial technology provider also outlined a full-year outlook that implies 12% revenue growth and an adjusted EBITDA margin of 28% to 29%.

Revenue for the quarter ended September 30 rose 12% year over year to $225.8 million from $201.7 million. Subscription revenue, which represented 83% of total revenue, increased to $188.2 million from $165.2 million. Transactional revenue was $18.1 million, while services and other revenue reached $19.6 million.

GAAP net income more than doubled to $33.2 million, or $0.52 per diluted share, from $15.0 million, or $0.23 per diluted share, a year earlier. GAAP operating income increased to $34.0 million from $11.0 million.

On a non-GAAP basis, gross profit rose 21% to $141.3 million, while gross margin expanded to 62.6% from 57.9%. Adjusted EBITDA increased 39% to $67.8 million, and the corresponding margin widened to 30.0% from 24.2%. Non-GAAP net income was $46.9 million, or $0.74 per diluted share, compared with $34.1 million, or $0.50 per share, in the prior-year quarter.

Subscription metrics and bookings

Subscription annualized recurring revenue increased 13% year over year to $846 million, up $101 million from the end of the third quarter of 2025. Total annualized recurring revenue grew 11%, with the presentation noting that declines in non-subscription ARR continued to weigh on the overall growth rate. Subscription ARR is an operating metric rather than a forecast of future revenue and can be affected by contract timing and renewal rates.

Remaining performance obligations, or committed backlog, totaled approximately $2.8 billion at quarter-end. That represented 10% year-over-year growth but was essentially unchanged sequentially, increasing by $5 million. Q2 Holdings expects 54% of the backlog to be recognized within 24 months and another 33% during months 25 through 48.

The company signed seven contracts with Tier 1 and Enterprise customers during the quarter. Those agreements included new commercial digital-banking deals with a Tier 1 credit union and a Tier 1 bank, as well as an expansion agreement under which an Enterprise bank added several risk and fraud products.

Management said credit unions were again an important contributor to bookings, including several Tier 1 wins and some of the quarter’s largest contracted deals. The company also reported early demand for its AI-driven fraud offering, with early-adopter sign-ups running at roughly twice its initial expectation as it works toward general availability.

Cash flow and balance sheet

For the first nine months of 2026, net cash provided by operating activities rose to $181.7 million from $137.8 million a year earlier. Free cash flow, which deducts property and equipment purchases and capitalized software development costs, increased to $150.2 million from $116.8 million.

Q2 Holdings ended September with approximately $123 million in cash, cash equivalents and investments, excluding restricted cash. The company used $158.9 million to repurchase shares and $304.0 million to repay maturing convertible notes during the first nine months of the year.

2026 outlook and longer-term objectives

For the fourth quarter, Q2 Holdings expects revenue of $226 million to $230 million and adjusted EBITDA of $62.4 million to $65.4 million. Full-year revenue is projected at $888 million to $892 million, representing approximately 12% growth, while adjusted EBITDA is expected to range from $253 million to $256 million.

The company’s current full-year assumptions include subscription revenue growth of approximately 14.5%, a non-GAAP gross margin of about 62% and an adjusted EBITDA margin of roughly 28.6% at the midpoint of guidance. It also expects free cash flow conversion above 90%.

For 2027, Q2 Holdings identified preliminary objectives of 12.5% to 13% subscription revenue growth and 150 to 200 basis points of adjusted EBITDA margin expansion. Its longer-term framework targets a non-GAAP gross margin of about 65% and an adjusted EBITDA margin of approximately 35% by the end of 2030. These objectives are directional and do not constitute guidance.

The company’s forward-looking disclosures cited potential pressure on more discretionary services revenue and cautioned that actual results could differ from management’s expectations. Q2 Holdings also does not provide a reconciliation of forward-looking adjusted EBITDA to GAAP net income because the timing and size of excluded items—including stock-based compensation, depreciation, amortization and restructuring charges—cannot be predicted with reasonable certainty.