Five9 Inc (FIVN) Q3 2025 Earnings Call Highlights: AI Growth and Strategic Partnerships Drive ...

This article first appeared on GuruFocus.

Release Date: November 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Enterprise AI bookings grew more than 80% year over year, contributing to improvements in backlog. Subscription revenue, which constitutes 81% of total revenue, grew 10% year over year. Adjusted EBITDA grew 37% year over year to a margin of 25%, with record free cash flow growth of 84% year over year. Five9 Inc (NASDAQ:FIVN) was named a leader in the 2025 Gartner Magic Quadrant for CAS for the 8th year and in IDC's inaugural Marketscape for European CCas. Strong momentum with strategic partners, including a significant milestone with ServiceNow and increased bookings with Salesforce and Google Marketplace.

Negative Points

Revenue growth was negatively impacted by approximately 5% due to a tough comparison from the largest customer completing its multi-year ramp. Commercial business revenue declined more than anticipated, affecting overall growth. LTM dollar-based retention rate decreased to 107% from 108% in the previous quarter. The transition of bookings to revenue is taking longer than expected, with significant impacts anticipated in the second half of 2026. There is a wider guidance range for Q4 revenue, indicating uncertainty in achieving expected outcomes.

Q & A Highlights

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Q: What happened in the quarter that led to only meeting the high end of guidance, unlike previous quarters where Five9 exceeded expectations? A: Brian, CFO, explained that the current growth environment does not support large beats. Subscription revenue, which is 81% of total revenue, grew 10% year over year, down from 16% in the previous quarter. This was mainly due to tough comparisons from their largest customer completing a multi-year ramp and minimal seasonal uptake. Additionally, there was an unexpected decline in commercial revenue, which was more pronounced than anticipated due to underallocation of demand and a gap in sales capacity as more commercial reps were promoted to enterprise roles.

Q: Why is it taking so long for record bookings to translate into revenue? A: Brian, CFO, noted that the record install-based bookings are primarily from upsell and cross-sell activities, including AI and new business units within existing customers. These bookings have a ramp similar to new logos, converting to revenue over multiple quarters. The Q4 guidance reflects this backlog starting to convert into revenue, with more significant impacts expected in 2026.

Story Continues

Q: How has the bookings environment evolved with the increased focus on AI, and what is the impact of seasonal hiring? A: Mike, CEO, highlighted that AI bookings grew 80% year over year, and non-AI enterprise bookings also hit a Q3 record. The bookings environment is strong, with the highest number of million-dollar-plus logos in two years. Regarding seasonality, there was minimal seasonal uptake on the subscription side, but a slight uptick in telecom usage was observed, which could lead to potential upside if it continues.

Q: What differentiates Five9 in the international market, and how is the BT relationship contributing to progress? A: Andy, President, stated that the BT relationship remains strong, providing reseller market access and services. Five9 continues to see upside in the international market, leaning heavily on partner go-to-market strategies while also investing in AI and digital solutions, which are key technology areas internationally.

Q: Are there any changes in the competitive environment, particularly with new players like Zoom and Amazon Connect? A: Andy, President, mentioned that in the pure CCAS space, the main competitors remain the same. While Zoom is seen in the mid-market, Five9's win rates remain strong. The company continues to succeed with its AI-first go-to-market strategy, and there are no major changes in the competitive dynamics.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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