Vertex, Inc. Earnings Call Highlights Cloud and AI Momentum

Vertex, Inc. ((VERX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Vertex, Inc. struck a constructive tone on its latest earnings call, balancing solid double-digit full-year growth with a candid view of near-term headwinds. Management highlighted strong cloud momentum, resilient retention, and stable profitability, while acknowledging pressure from lower true-up revenue, softer collections, and higher spending to fund AI and e-invoicing initiatives.

Revenue Growth Remains Solid Despite True-Up Drag

Vertex reported Q4 revenue of $194.7 million, up 9.1% year over year and in line with guidance, with full-year revenue reaching $748.4 million, up 12.2%. Management emphasized that growth would have been nearly 2 percentage points higher for 2025 without a roughly $10 million shortfall in true-up revenue, which also reduced Q4 growth by about 4 points.

Subscription and Cloud Businesses Power the Model

Subscription revenue reached $166.2 million in Q4, up 8.9% year over year, with the full-year total at $639.7 million, up 12.8%. Cloud remained the standout, with Q4 cloud revenue up 23% to $94.6 million and full-year cloud up 27.9% to $352.9 million, underscoring the ongoing shift toward SaaS tax solutions.

Recurring Revenue and Retention Stay Resilient

Annual recurring revenue climbed 11.3% to $671 million, reflecting healthy underlying demand even amid some churn. Net revenue retention stood at 105% and gross retention at 94%, squarely within the 94%–96% target range, signaling that existing customers are largely sticking with Vertex and expanding over time.

Profitability Holds with Stable EBITDA Margins

Adjusted EBITDA in Q4 was $42.5 million, up 11.6% year over year, while full-year adjusted EBITDA reached $161.5 million, up 6.3%. Margins were steady at roughly 21.8% in Q4 and 21.6% for the year, with EBITDA coming in about $0.5 million above the high end of guidance despite heavier investment in growth initiatives.

Customer Metrics and New Wins Point to Upside

Average annual revenue per customer rose 12.4% to $137,867, indicating deeper penetration within the base. New logo revenue grew roughly 20% in 2025, fueled by several large deals, including a European healthcare provider well into seven figures and multiple mid- to high-six-figure wins linked to SAP S/4HANA migrations.

AI Investments and Product Innovation Gain Traction

Vertex leaned into AI in 2025, launching Smart Categorization and expanding its CoPilot offering to enhance tax workflows. Early adoption has been encouraging, with multiple marquee six-figure retail wins and new partnerships with Kintsugi and cpa.com designed to expand AI-powered offerings for SMBs and partners.

E-Invoicing Cross-Sell Delivers Early Wins

The company’s first full year in e-invoicing produced strong traction, with cross-sell of e-invoicing lifting ARR by more than 20% on average for example customers. Vertex also secured multiple multi-country e-invoicing wins, adding new logos with initial ARR in the mid- to high-five-figure range and expanding its international footprint.

Balance Sheet Strength Supports Buybacks and Flexibility

Vertex ended Q4 with over $314 million in unrestricted cash and $300 million of unused capacity on its credit facility, giving it ample financial flexibility. The company repurchased roughly $10 million of stock at about $20 per share and still has about $140 million remaining under its authorization, signaling confidence in long-term value.

Attrition, Upsell Moderation, and Free Cash Flow Pressure

Management acknowledged higher attrition and softer upsell and cross-sell activity in 2025, with lost customers skewing smaller at under $50,000 in ARR versus the $138,000 company average. Free cash flow also disappointed, with Q4 at $10.1 million and the full year at $47.6 million, though about $7 million of late Q4 collections slipped into January.

Margin Pressure and Higher Operating Spend

Services gross margin declined to 34.9% in Q4 from 37.6% a year earlier, reflecting lower margins at Ecosio and heavier consulting investments. Operating expenses stepped up as Vertex ramped growth initiatives, with R&D climbing to $71.3 million from $56.4 million and sales and marketing rising to $178 million, up 15.3% year over year.

SAP S/4HANA and Inorganic Comps Affect Near-Term Growth

Vertex continues to win SAP S/4HANA-related tax engine deals, but management flagged that decision timing within these migrations has become longer and less predictable. In addition, quarterly cloud growth is facing a tough comparison as the company laps the Ecosio acquisition and its inorganic boost, creating short-term headwinds for reported growth rates.

Guidance Signals Confidence in an Acceleration

For 2026, Vertex guided revenue to a range of $823.5 million to $831.5 million, implying roughly 10% to 11.1% growth over 2025, with cloud revenue expected to grow about 25%. Adjusted EBITDA is projected between $188 million and $192 million, or about a 23% margin at the midpoint, while Q1 2026 guidance calls for revenue of $193.5 million to $196.5 million and margins around 21.5%.

Vertex’s call painted a picture of a business investing aggressively into AI, cloud, and e-invoicing while maintaining solid profitability and balance sheet strength. While true-up variability, higher attrition among smaller customers, and weaker collections have weighed on near-term optics, management’s guidance and strategic bets suggest confidence that growth and margins can both trend higher from here.