Executive Summary
Verint Systems posted a solid start to fiscal 2026 with Q1 2026 revenue of $208.1 million and an operating margin of 2.44%, reflecting ongoing investments in AI-enabled CX automation and the company’s hybrid cloud strategy. Management framed ARR as the principal growth metric, reporting ARR of approximately $720 million in Q2 and an expected exit-year ARR of roughly $768 million, representing ~8% year-over-year growth. AI-driven ARR momentum remained the key driver, with AI ARR surging 24% year over year to $354 million and now comprising about 50% of subscription ARR. The company also highlighted two notable long-duration deals (TCV of $13 million in insurance and $14 million in healthcare) and a pipeline that has grown more than 30% year over year for SaaS. Free cash flow guidance was lifted to a double-digit percentage increase for the year, aided by a cash-contribution margin expansion. On the profitability front, GAAP revenue and non-GAAP EPS exceeded guidance in Q1, but trailing twelve-month results show transitionary dynamics as Verint shifts toward AI-centric growth. Management emphasized a hedged approach to unbundled SaaS revenue volatility via a cash-generation model and a P&L model, signaling discipline in guiding both top-line expansion and cash flow to shareholders.
Key Performance Indicators
QoQ: -17.93% | YoY:-5.96%
QoQ: -25.51% | YoY:-10.07%
QoQ: -89.05% | YoY:-78.85%
QoQ: -95.05% | YoY:-89.36%
QoQ: -108.35% | YoY:-124.00%
Key Insights
Revenue: $208.1M (YoY -5.96%; QoQ -17.93%) | Gross Profit: $138.9M (YoY -10.07%; QoQ -25.51%) | Operating Income: $5.07M (YoY -78.85%; QoQ -89.05%) | Net Income: $1.62M (YoY -89.36%; QoQ -95.05%) | EPS (Diluted): -$0.038 | Gross Margin: 66.75% | Operating Margin: 2.44% | AI ARR: $354M (YoY +24%); AI ARR ≈ 50% of subscription ARR | ARR Guidance: Q2 ARR ≈ $720M; Year-end ARR ≈ $768M (+/−1%); Free Cash Flow ≈ $145M (≈ +12%)...
Financial Highlights
Revenue: $208.1M (YoY -5.96%; QoQ -17.93%) | Gross Profit: $138.9M (YoY -10.07%; QoQ -25.51%) | Operating Income: $5.07M (YoY -78.85%; QoQ -89.05%) | Net Income: $1.62M (YoY -89.36%; QoQ -95.05%) | EPS (Diluted): -$0.038 | Gross Margin: 66.75% | Operating Margin: 2.44% | AI ARR: $354M (YoY +24%); AI ARR ≈ 50% of subscription ARR | ARR Guidance: Q2 ARR ≈ $720M; Year-end ARR ≈ $768M (+/−1%); Free Cash Flow ≈ $145M (≈ +12%)
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
208.10M |
-5.96% |
-17.93% |
| Gross Profit |
138.90M |
-10.07% |
-25.51% |
| Operating Income |
5.07M |
-78.85% |
-89.05% |
| Net Income |
1.62M |
-89.36% |
-95.05% |
| EPS |
-0.04 |
-124.00% |
-108.35% |
Management Commentary
- AI Momentum and Differentiation: Verint’s Q1 ARR growth accelerated to 6% YoY, driven by AI momentum and the deployment of a hybrid cloud model that layers AI bots on existing environments. The company emphasizes proven AI outcomes and a hybrid approach as differentiators.
- Adoption Path and Value Selling: Management notes customers want ROI within six months and favors value-based discussions over long, multi-year cloud migrations. They are promoting a value framework with defined metrics to track post-deployment value.
- Large Deals and AI Adoption: Two eight-figure deals were highlighted (insurance: $13M TCV; healthcare: $14M TCV), with AI-driven consumption expanding to $13M ARR for an healthcare customer over the past year, illustrating the hybrid-cloud acceleration in AI adoption.
- AI ARR and Platform Differentiation: AI ARR now represents close to 50% of subscription ARR, and AI ARR growth is expected to exceed 20% for the year as customers increase bot usage. The platform’s openness (DaVinci AI) and multi-bot orchestration underpin differentiation vs. point-solutions.
- Guidance and Pipeline Confidence: The management reiterated ARR targets and the expectation of robust downstream bookings given a SaaS pipeline up more than 30% year over year, with Q2 revenue around $200M and full-year revenue of $960M (±3%).
ARR growth accelerated to 6% year over year, reflecting our continued AI momentum.
— Dan Bodner
AI ARR now represents close to 50% of our subscription ARR.
— Grant Highlander
Forward Guidance
Key guidance points include: (i) ARR to exit the year near $768 million, up 8% YoY, (ii) free cash flow to grow double-digits, approximately $145 million for the full year, (iii) AI ARR to grow >20% for the year with AI ARR comprising about half of subscription ARR, (iv) Q2 revenue around $200 million and Q2 diluted EPS around $0.26, (v) rolling SaaS pipeline up >30% YoY, indicating healthy demand for AI-enabled CX automation. The company introduced a cash-generation model (ARR -> Free Cash Flow) to de-emphasize volatility from unbundled SaaS revenue and stated that adjusted revenue and non-GAAP EPS guidance are still achievable. Our take: the targets seem attainable given the strong AI-driven ARR momentum, the expanding SaaS pipeline, and the hybrid cloud adoption that reduces the need for complete rip-and-replace, though execution risk remains tied to macro conditions and enterprise-scale deployment timelines. Investors should monitor ARR progression, AI adoption velocity in large accounts, renewal/upsell rates within AI-enabled deployments, and the health of the SaaS pipeline in H2 2026.