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Q2 Holdings (QTWO)
NYSE:QTWO
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Q2 Holdings
(NYSE:QTWO)
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Rating:67Neutral
Price Target:
$61.00
▲(20.13% Upside)
The score is driven primarily by improving fundamentals (profitability, strong operating/free cash flow, and deleveraging) and a generally positive earnings outlook with margin expansion targets. These strengths are tempered by weak technical momentum (price below key moving averages with negative MACD) and a stretched valuation (very high P/E with no dividend support).
Positive Factors
Cash generation & FCF conversion
A sustained step-up in operating cash flow and near-complete free cash flow conversion provides durable funding to reduce debt, invest in product and sales, and support strategic initiatives without fresh external financing. Strong FCF underpins balance-sheet flexibility and long-term execution capacity.
High recurring subscription mix & ARR growth
A large, growing subscription base and expanding ARR create revenue predictability and high-margin recurring cash flows. This mix supports customer lifetime value, cross-sell of risk/fraud and payments products, and makes topline more resilient versus one-off services over multi-year horizons.
Margin expansion & cloud migration
Completion of customer cloud migration and targeted gross/EBITDA margin goals imply structural cost benefits and operating leverage. Higher gross margins and announced long‑term margin targets support durable earnings power, enabling reinvestment while maintaining improved profitability.
Negative Factors
Revenue growth deceleration
A sharp slowdown in top-line growth forces reliance on cost and margin gains to sustain earnings progress. If revenue momentum does not reaccelerate, the company must consistently execute efficiency and cross-sell strategies to offset weaker organic expansion, increasing execution risk over coming quarters.
Rising revenue churn
Higher churn erodes recurring revenue and elevates retention costs; it can stem from M&A-related attrition or product fit issues. Persistent elevated churn reduces visibility into ARR sustainability and forces greater sales/engineering spend to replace lost customers, pressuring long-term margin durability.
Weakness in non-subscription revenue
Declining services and transaction revenue narrows revenue diversification and can depress near-term total revenue growth. As non-subscription streams are margin-dilutive or timing-sensitive, continued weakness reduces cross-sell levers and makes ARR growth reliant on subscription strength alone, increasing concentration risk.
Q2 Holdings (QTWO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.27B
Dividend YieldN/A
Average Volume (3M)937.67K
Price to Earnings (P/E)66.2
Beta (1Y)1.40
Revenue Growth13.93%
EPS GrowthN/A
CountryUS
Employees2,476
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.69
Shares Outstanding62,404,373
10 Day Avg. Volume1,243,201
30 Day Avg. Volume937,666
Financial Highlights & Ratios
PEG Ratio-0.37
Price to Book (P/B)6.78
Price to Sales (P/S)5.64
P/FCF Ratio23.04
Enterprise Value/Market Cap0.96
Enterprise Value/Revenue3.96
Enterprise Value/Gross Profit7.32
Enterprise Value/Ebitda32.00
Forecast
1Y Price Target
$77.30Price Target Upside52.23% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering11
EPS Forecast (FY)2.91
Revenue Forecast (FY)$876.60M
Q2 Holdings Business Overview & Revenue Model
Company DescriptionQ2 Holdings, Inc. provides cloud-based digital banking solutions to regional and community financial institutions (RCFIs) in the United States. The company offers Q2 Consumer Banking, a browser-based digital banking solution and comprehensive financial institution branded digital banking capabilities; Q2 Small Business and Commercial, a mobile and tablet digital banking solution; Q2mobile Remote Deposit Capture, a partnered solution that allows remote check deposit capture. It also provides Q2 Sentinel, a security analytics solution; Q2 Patrol, an event-driven validation product; Q2 SMART, a targeting and messaging platform; and Q2 CardSwap that allows account holders receiving newly issued cards to automatically change their payment information. In addition, the company offers Q2 Gro, a digital account opening, and digital sales and marketing platform; Q2 Biller Direct, a bill payment solution; ClickSWITCH allows financial institutions to direct deposits to the end user. Centrix Dispute Tracking System, an electronic transaction dispute management solution; Centrix Payments I.Q. System, an ACH file monitoring and risk reporting solution; Centrix Exact/Transaction Management System, a fraud prevention tool; and Q2 Caliper Software Development Kit. Futher, it provides Q2 Contextual PFM, which allows end users to add external accounts and view them together with internal accounts on digital banking home page; Q2 Goals that enables end users to establish and save towards specific savings goals; Q2 Cloud Lending, a digital lending and leasing platform; PrecisionLender platform, a cloud-based, data-driven sales enablement, pricing, and portfolio management solution; and Q2 BaaS, a portfolio of open API financial services. The company was formerly known as CBG Holdings, Inc. and changed its name to Q2 Holdings, Inc. in March 2013. Q2 Holdings, Inc. was founded in 2004 and is headquartered in Austin, Texas.
How the Company Makes MoneyQ2 Holdings generates revenue primarily through a subscription-based model, where financial institutions pay recurring fees for access to its software and services. Key revenue streams include software licensing fees, transaction fees, and professional services related to implementation and ongoing support. Additionally, the company benefits from partnerships with various financial institutions and technology providers, allowing it to expand its market reach and enhance its product offerings. The increasing demand for digital banking solutions and the ongoing transition of financial services to online platforms contribute significantly to Q2's earnings.
Q2 Holdings Earnings Call Summary
Earnings Call Date:Feb 11, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 05, 2026
Earnings Call Sentiment Positive
The call was broadly positive: the company delivered strong 2025 results with double-digit revenue and subscription growth, meaningful adjusted EBITDA and margin expansion, robust free cash flow and conversion, large-bookings momentum (including significant Tier 1 wins), and a clear long-term profitability framework. Key challenges include higher revenue churn driven by M&A activity, a weaker and shrinking non-subscription revenue base that is margin-dilutive, some sequential cost pressure from R&D and migration expenses, a cash balance decline tied to debt retirement and buybacks, and guidance that signals a moderate deceleration in growth beyond 2025. On balance, financial and operational execution and a strong pipeline outweigh the near-term headwinds.Q4-2025 Updates
Positive Updates
Strong Subscription Revenue Growth
Q4 subscription revenue grew 16% year-over-year; full year subscription revenue grew 17% and represented 82% of total revenue, supporting higher-margin mix and recurring revenue stability.
Revenue Growth and Record Annual Performance
Total revenue was $208.2M in Q4 (up 14% YoY, +3% sequential) and full year revenue was $794.8M (up 14% YoY), the highest annual growth rate since 2021.
Robust ARR and Backlog Expansion
Total ARR reached $921M (up 12% YoY) and subscription ARR grew to $780M (up 14% YoY). Ending backlog was $2.7B, up 7% sequentially and 21% year-over-year.
Record Adjusted EBITDA and Margin Expansion
Full year adjusted EBITDA was $186.5M (up 49% YoY from $125.3M) with adjusted EBITDA margins expanding by approximately 550 basis points year-over-year; Q4 adjusted EBITDA was a record $51.2M (up 36% YoY).
Strong Free Cash Flow and Conversion
Generated meaningful free cash flow: Q4 free cash flow ~$57M and full year free cash flow $173M, representing a 93% free cash flow conversion rate as a percentage of adjusted EBITDA (exceeding the 90% target).
Bookings Momentum and Large Deal Wins
Q4 was the company's second-largest bookings quarter (following a record Q3); full year included 26 Tier 1/enterprise deals with eight in Q4, including major wins (Tier 1 relationship pricing/commercial digital banking, a $40B digital banking customer expansion, a Helix top-five credit union deal, and the largest fraud deal in company history with a $200B bank).
Commercial and Transaction Volume Growth
Commercial processed over $4.0T in transactions in 2025, representing 21% YoY growth; December was the first month to exceed $400B in transaction volume, highlighting commercial traction.
Risk & Fraud Product Strength and Cross-Sell
Risk and fraud emerged as one of the fastest-growing product lines, performing strongly as both stand-alone and cross-sold solutions and contributing materially to upmarket success and expansions.
Gross Margin Improvement and Cloud Migration Progress
Q4 gross margin was 58.6% (up from 57.4% YoY); full year gross margin was 58% (up ~200 bps YoY). They completed customer cloud migration in January 2026 and expect >60% gross margins in 2026 with further cloud-related cost benefits thereafter.
2026 Guidance and Long-Term Financial Framework
Provided 2026 guidance: FY revenue $871M–$878M (~10% YoY growth), raising subscription revenue growth outlook to at least 14%; full-year adjusted EBITDA guidance $225M–$230M (~26% of revenue). Introduced longer-term targets (by 2030: non-GAAP gross margins ≥65% and adjusted EBITDA margins ≥35%).
Negative Updates
Increase in Revenue Churn
Revenue churn increased to 5.2% in 2025 from 4.4% in 2024, driven in part by elevated M&A activity, which can create near-term churn volatility despite being largely net-positive over time.
Non-Subscription Revenue Weakness and Decline Expectation
Total non-subscription revenues increased only 2% for the full year 2025 and company expects combined services and transactional (non-subscription) revenue to decline mid-single-digits in the near term; non-subscription trends are dilutive to margins and contribute to total ARR growing more slowly than subscription ARR.
Cash Balance Decline from Debt Retirement and Buybacks
Cash, cash equivalents, and investments fell to $433M from $569M in the prior quarter due primarily to the retirement of $191M of convertible notes that matured in November and $5M of open-market share repurchases, reducing liquidity versus prior quarter.
Sequential Cost Pressures from R&D and Migration Costs
Operating expenses as a percent of revenue improved year-over-year but rose modestly sequentially driven by higher R&D investments; cloud migration costs also partially offset gross margin gains in 2025 before benefits fully accrue in 2026 and beyond.
Expected Slower Growth Trajectory Beyond 2026
Guidance and long-term outlook imply a moderation in growth versus recent outperformance: FY2026 revenue guide implies ~10% growth, and the company expects 2027 subscription revenue growth in the ~12.5%–13% range, indicating deceleration from 2025 levels (three-year average subscription growth ~16%).
Backlog and Renewal Timing Uncertainty
Management noted sequential backlog fluctuations can occur based on timing of renewal opportunities, introducing quarter-to-quarter visibility variability into near-term revenue recognition.
Company Guidance
Management guided Q1 2026 revenue of $212.5–216.5M and full‑year 2026 revenue of $871–878M (≈10% y/y), raised full‑year subscription revenue growth to at least 14% (vs. prior ~13.5%), and expects Q1 adjusted EBITDA of $52.5–55.5M and full‑year adjusted EBITDA of $225–230M (≈26% of revenue); they also target gross margins north of 60% in 2026 (versus ~58% in FY25) and noted cloud migration completion to drive further cost savings. Management provided initial 2027 targets of subscription growth of 12.5–13% and adjusted‑EBITDA margin expansion of 150–200 bps, and a longer‑term goal of ≥65% non‑GAAP gross margin and ≥35% adjusted‑EBITDA margin by 2030. They cited supporting operating metrics—ending backlog $2.7B (+21% y/y), total ARR $921M (+12% y/y), subscription ARR $780M (+14% y/y), FY25 adjusted EBITDA $186.5M (+49% y/y), and FY25 free cash flow $173M with 93% conversion—as the basis for the outlook.Q2 Holdings Financial Statement Overview
Summary
Strong multi-year improvement with a swing to profitability in 2025 (positive net income and EBIT), materially higher operating/free cash flow in 2025, and reduced leverage as debt declined while equity rose. The key risk is slowing revenue growth in 2025, increasing reliance on continued efficiency and cash-flow durability.Income Statement
Revenue has grown steadily from $403M (2020) to $795M (2025), though the growth rate has slowed recently (2025: ~3.3% vs. low-double-digits in 2022–2024). Profitability has improved meaningfully: the company moved from sizable losses in 2020–2024 to positive net income in 2025 ($52M) and positive EBIT ($40M). Gross profit dollars also expanded alongside revenue, supporting the turn to profitability. Key watchout: the recent deceleration in top-line growth suggests the earnings improvement must increasingly come from efficiency rather than rapid expansion.72
Positive
Balance Sheet
Leverage has improved notably, with total debt declining to $346M in 2025 from ~$543–$549M in 2023–2024, while equity increased to $662M. This implies a much healthier debt-to-equity position in 2025 (roughly ~0.5 using provided debt and equity), versus ~1.0–1.75 during 2021–2024. Total assets have remained fairly stable around ~$1.2–$1.4B, suggesting the balance sheet is not expanding through heavy borrowing. Remaining risk: the company operated with elevated leverage in prior years, and ongoing profitability needs to hold to keep the balance sheet strengthening trajectory intact.69
Positive
Cash Flow
Cash generation is a standout. Operating cash flow rose sharply to $201M in 2025 (from $136M in 2024 and $70M in 2023), and free cash flow reached $195M in 2025 (up from $129M in 2024), with strong free cash flow growth (~18.6% in 2025). This indicates improving cash conversion and funding flexibility. The main weakness is historical volatility: operating and free cash flow were weak/negative in 2020 and only modestly positive in 2021–2022, so investors should watch whether the 2023–2025 step-up is sustainable through cycles.83
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 794.81M | 696.46M | 624.62M | 565.67M | 498.72M |
| Gross Profit | 429.59M | 354.48M | 302.65M | 256.35M | 225.03M |
| EBITDA | 115.06M | 42.89M | 29.02M | -37.74M | -23.20M |
| Net Income | 52.01M | -38.54M | -65.38M | -108.98M | -112.75M |
Balance Sheet | |||||
| Total Assets | 1.28B | 1.29B | 1.20B | 1.35B | 1.39B |
| Cash, Cash Equivalents and Short-Term Investments | 367.63M | 446.63M | 324.01M | 433.35M | 427.73M |
| Total Debt | 346.12M | 542.99M | 548.92M | 733.34M | 621.97M |
| Total Liabilities | 614.47M | 777.00M | 752.95M | 930.70M | 814.75M |
| Stockholders Equity | 661.81M | 517.80M | 448.48M | 419.02M | 570.30M |
Cash Flow | |||||
| Free Cash Flow | 194.65M | 129.06M | 39.65M | 6.50M | 5.47M |
| Operating Cash Flow | 201.46M | 135.75M | 70.29M | 36.56M | 31.09M |
| Investing Cash Flow | -4.03M | -21.08M | 113.27M | -165.56M | -65.13M |
| Financing Cash Flow | -188.97M | 13.32M | -152.01M | 5.88M | -51.16M |
Q2 Holdings Technical Analysis
Negative
50.78
Price Trends
66.12
Negative
66.60
Negative
75.84
Negative
Market Momentum
-4.24
Positive
24.09
Positive
7.10
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For QTWO, the sentiment is Negative. The current price of 50.78 is below the 20-day moving average (MA) of 58.05, below the 50-day MA of 66.12, and below the 200-day MA of 75.84, indicating a bearish trend. The MACD of -4.24 indicates Positive momentum. The RSI at 24.09 is Positive, neither overbought nor oversold. The STOCH value of 7.10 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for QTWO.
Q2 Holdings Risk Analysis
Q2 Holdings disclosed 55 risk factors in its most recent earnings report. Q2 Holdings reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Q2 Holdings Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | $3.90B | -135.06 | -3.92% | ― | 35.87% | 85.20% | |
68 Neutral | $4.44B | -197.00 | -0.64% | ― | 11.63% | 50.72% | |
68 Neutral | $6.78B | -170.17 | -2.58% | ― | 50.91% | 54812.50% | |
67 Neutral | $3.27B | 66.21 | 8.82% | ― | 13.93% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | $1.88B | -84.70 | -2.04% | ― | 12.14% | -19.29% | |
57 Neutral | $3.26B | -70.82 | ― | ― | 19.86% | 8.58% |
* Technology Sector Average
QTWO
Q2 Holdings
50.78
-34.99
-40.80%
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CWAN
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.