Banking software provider Q2 (NYSE:QTWO) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 12.9% year on year to $195.1 million. Guidance for next quarter’s revenue was better than expected at $198 million at the midpoint, 1.6% above analysts’ estimates. Its GAAP profit of $0.18 per share was 77.5% above analysts’ consensus estimates.
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Q2 Holdings (QTWO) Q2 CY2025 Highlights:
- Revenue: $195.1 million vs analyst estimates of $193.6 million (12.9% year-on-year growth, 0.8% beat)
- EPS (GAAP): $0.18 vs analyst estimates of $0.10 (8c beat)
- Adjusted Operating Income: $37.76 million vs analyst estimates of $33.34 million (19.3% margin, 13.3% beat)
- The company slightly lifted its revenue guidance for the full year to $785.5 million at the midpoint from $779.5 million
- EBITDA guidance for the full year is $179 million at the midpoint, above analyst estimates of $173.5 million
- Operating Margin: 5%, up from -7.9% in the same quarter last year
- Free Cash Flow Margin: 21.4%, up from 19.9% in the previous quarter
- Market Capitalization: $5.63 billion
Company Overview
Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their clients.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Q2 Holdings grew its sales at a 11.7% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Q2 Holdings reported year-on-year revenue growth of 12.9%, and its $195.1 million of revenue exceeded Wall Street’s estimates by 0.8%. Company management is currently guiding for a 13.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 10.5% over the next 12 months, similar to its three-year rate. Still, this projection is above the sector average and implies the market is forecasting some success for its newer products and services.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Q2 Holdings is efficient at acquiring new customers, and its CAC payback period checked in at 36.3 months this quarter. The company’s relatively fast recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
Key Takeaways from Q2 Holdings’s Q2 Results
We were impressed by Q2 Holdings’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also glad its full-year EBITDA guidance trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $91 immediately after reporting.
Q2 Holdings had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.