EPS of $0.40 increased by 24.3% from previous year
Gross margin of 73.5%
Net income of 32.78M
""In Q4, our strong AI momentum continued, driving our ARR growth to 5%, ahead of our guidance of 4%. ARR growth accelerated every quarter last year as customers expanded their AI deployments."" - Dan Bodner
Verint Systems Inc (VRNT) QQ4 2025 Earnings Analysis: AI-Driven ARR Momentum, Hybrid Cloud Expansion, and 2026 Outlook
Executive Summary
Verint Systems posted a solid QQ4 2025 with meaningful progress on AI-led ARR growth and a disciplined approach to revenue recognition under its hybrid cloud model. Total ARR rose 5% year over year to $712 million, and management raised the look-forward ARR target to $768 million for Q4 2026, signaling an acceleration in AI adoption and bot-driven usage across large enterprise customers. Management highlighted three growth engines: (1) differentiated AI outcomes that translate into tangible ROI, (2) faster deployment of AI without disruption via hybrid cloud, and (3) seeded AI deployments that should materialize into higher consumption in fiscal 2026. Revenue in the quarter surprised to the downside at $254 million versus guidance of $277 million, driven entirely by unbundled SaaS bookings that did not materialize in Q4; bundled SaaS grew robustly (23% for the year, 30% QoQ in Q4), underscoring the importance of AI-enabled bundles. The company delivered record SaaS ACV bookings of $32 million in Q4 (up 30% YoY), and continued to emphasize ARR as the ratable metric for underlying growth, given the revenue timing challenges from unbundled SaaS. The balance sheet remains healthy, with cash and equivalents of about $216 million and net debt comfortably under 1x LTM EBITDA. The 2026 guidance implies continued double-digit ARR growth beyond 2025’s momentum, supported by notable large deals and an expanding top customer cohort. Investors should monitor: (a) the pacing and mix of unbundled vs bundled SaaS bookings, (b) sustainability of ARR acceleration, (c) execution of buyback and liquidity management, and (d) the ongoing channel contributions and AI deployment velocity across the Fortune 500 base.
Key Performance Indicators
Revenue
253.55M
QoQ: 13.09% | YoY:-4.36%
Gross Profit
186.48M
73.55% margin
QoQ: 17.56% | YoY:-1.28%
Operating Income
46.32M
QoQ: 113.00% | YoY:-17.49%
Net Income
32.78M
QoQ: 14.15% | YoY:14.20%
EPS
0.46
QoQ: 15.00% | YoY:24.32%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $254.0 million in Q4 2025, vs guidance of $277.0 million (shortfall driven entirely by unbundled SaaS bookings not materializing in the quarter). Bundled SaaS revenue demonstrated strong momentum; unbundled SaaS renewals were in line with expectations. YoY revenue change: -4.36%; QoQ revenue change: +13.09% (contextualized within seasonality and unbundled timing).
Net Income: $32.779 million; net margin 12.93% (0.1293). YoY net income change: +14.20%; QoQ: +14.15%.
Financial Highlights
Overview of QQ4 2025 financials and trend context:
- Revenue: $254.0 million in Q4 2025, vs guidance of $277.0 million (shortfall driven entirely by unbundled SaaS bookings not materializing in the quarter). Bundled SaaS revenue demonstrated strong momentum; unbundled SaaS renewals were in line with expectations. YoY revenue change: -4.36%; QoQ revenue change: +13.09% (contextualized within seasonality and unbundled timing).
- Gross Profit: $186.481 million; gross margin 73.55% (0.7355). YoY gross profit change: -1.28%; QoQ change: +17.56%.
- Operating Income: $46.324 million; operating margin 18.27% (0.1827). YoY margin change: -17.49%; QoQ: +113.00% (reflecting a second-half acceleration and mix effects).
- EBITDA: $61.454 million; EBITDA margin 24.24% (0.2424).
- Net Income: $32.779 million; net margin 12.93% (0.1293). YoY net income change: +14.20%; QoQ: +14.15%.
- EPS (GAAP): $0.46; Diluted EPS: $0.40; Weighted average diluted shares: 72.239 million.
- ARR: $712.0 million at year-end 2025, up 5% YoY; Q4 2025 ARR guidance raised to $768.0 million for Q4 2026, implying ~8% YoY ARR growth.
- Cash flow: Net cash provided by operating activities $59.22 million; Free cash flow $52.88 million; Cash at end of period $215.71 million; Net debt well under 1x LTM EBITDA; Total debt $448.43 million; Net debt $232.72 million.
- Capital allocation: Initiated a $200 million stock buyback program; revolver increased to $500 million and extended to 2030.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
253.55M
-4.36%
13.09%
Gross Profit
186.48M
-1.28%
17.56%
Operating Income
46.32M
-17.49%
113.00%
Net Income
32.78M
14.20%
14.15%
EPS
0.46
24.32%
15.00%
Key Financial Ratios
currentRatio
1.12
grossProfitMargin
73.5%
operatingProfitMargin
18.3%
netProfitMargin
12.9%
returnOnAssets
1.43%
returnOnEquity
2.48%
debtEquityRatio
0.34
operatingCashFlowPerShare
$0.95
freeCashFlowPerShare
$0.85
priceToBookRatio
1.19
priceEarningsRatio
12.05
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights and quotes from the QQ4 2025 earnings call:
- ARR momentum and outlook: Dan Bodner, Verint CEO, stated: “In Q4, our strong AI momentum continued, driving our ARR growth to 5%, ahead of our guidance of 4%. ARR growth accelerated every quarter last year as customers expanded their AI deployments.” He also raised the Q4 2026 ARR outlook from $760M to $768M, signaling 8% YoY growth.
- AI outcomes and customer ROI: “A healthcare insurer deployed a Verint Copilot bot and reported around a 30-second reduction in average call time... With 30,000 agents, a 30-second handling time reduction is equivalent to $70 million of agent capacity.” Another example cited a telecom with a 5% increase in agent productivity, equivalent to $45 million in agent capacity. The three growth drivers are differentiated AI outcomes, faster deployments without disruption via hybrid cloud, and seeded deployments accelerating usage.
- Hybrid cloud value proposition: Dan emphasized that Verint’s hybrid cloud enables rapid automation without rip-and-replace projects and allows customers to start small and scale, which reduces perceived risk and accelerates ROI.
- Record SaaS ACV bookings: Grant Highlander noted “In Q4, SaaS ACV bookings from new deals increased 30% year over year to $32 million” and referenced a chained growth trajectory across Q1–Q3. He also highlighted that customer conversions from on-premise to Verint cloud were minimal in 2025 and expected to be minimal in 2026, consistent with hybrid cloud strategy.
- Top customers and cohort strength: Dan highlighted that the top 100 customers grew ARR 17% in Q4, and the top 25 customers grew 24% YoY in Q4, illustrating acceleration in larger customers who are adopting more bots and higher AI consumption.
- Channel strategy and guidance: Dan described a co-sell model with partners and noted ongoing ramp to enable partners to sell more AI-focused bundles, with channel contribution expected to improve over time.
- Guidance transparency and ARR emphasis: Grant reiterated ARR as a ratable metric across bundled and unbundled offerings, and emphasized the non-ARR revenue guidance carries wider variability due to mix, while ARR guidance remains narrow (±1%).
"In Q4, our strong AI momentum continued, driving our ARR growth to 5%, ahead of our guidance of 4%. ARR growth accelerated every quarter last year as customers expanded their AI deployments."
— Dan Bodner
"We are raising our ARR outlook from a prior guidance of $760 million to $768 million, reflecting 8% growth."
— Dan Bodner
Forward Guidance
Verint’s forward-looking view is anchored in two pillars: ratable ARR growth and cash generation metrics, with broader revenue and EPS guidance. For Q4 2026, the company expects ARR to reach $768 million, representing approximately 8% YoY growth (±1%). Cash generation target is $960 million (±1%), with cash contribution of about $245 million at the midpoint. Revenue guidance is $960 million (±3%), with non-GAAP diluted EPS of $2.93 at the midpoint. Gross margin is projected around 73%, with continued operating margin expansion.
Near-term modeling notes:
- ARR growth is expected to accelerate sequentially in 2026 (Q1 ARR growth estimated at 6% YoY), aided by continued AI adoption and new bot deployments.
- Revenue will continue to reflect a mix between bundled and unbundled SaaS, with unbundled deals exhibiting more variability due to timing and long-duration multiyear renewals. Management intends to provide ARR, cash generation, and cash contribution on a ratable basis to better reflect underlying growth.
- Q1 2026 revenue guidance is $190–$200 million, with non-GAAP diluted EPS around $0.13 at the midpoint, reflecting ongoing bundling strength and a lower year-over-year contribution from unbundled SaaS.
Key risks and considerations for investors:
- Unbundled SaaS revenue remains unpredictable quarter-to-quarter due to deal timing; ARR remains the more stable growth metric.
- The mix of bookings (bundled vs unbundled) will influence GAAP revenue and gross margin timing, though not ARR growth.
- Macro dynamics and competition in CX automation (AI) could affect enterprise buying cycles and channel effectiveness. Monitoring the pace of AI ROI realization and customer concentration in top cohorts will be important.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
VRNT Focus
73.55%
18.30%
2.48%
12.05%
CSGS
51.30%
13.40%
12.20%
10.36%
EVTC
51.90%
22.20%
8.48%
13.71%
CGNT
70.90%
0.74%
-0.62%
-137.24%
VRNS
83.60%
-11.10%
-2.85%
-96.16%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Verint remains positioned as a category leader in CX automation through its AI-first approach, hybrid cloud deployment, and a seed-and-expand strategy that translates early bot deployments into substantial incremental ARR. The QQ4 2025 results reinforce an investment thesis built on: (1) durable ARR growth anchored by AI-driven value, (2) scale benefits from large enterprise deployments, and (3) a flexible capital-allocation framework (buybacks, debt management, and liquidity). While near-term revenue timing is affected by unbundled SaaS bookings, the ARR trajectory and record Q4 2025 ACV bookings suggest meaningful upside as customers scale AI consumption in fiscal 2026 and beyond. Key factors for investors to monitor include the pace of unbundled vs bundled bookings, the durability of AI ROI across top cohorts, channel partner contributions, and the progression of 2026 guidance against evolving macro conditions.
Key Investment Factors
Growth Potential
AI-driven CX automation is expanding rapidly, with ARR accelerating through 2025 and the company guiding to an 8% ARR growth in fiscal 2026 to $768M. Large deals and multi-bot deployments with hybrid cloud deployment underpin the upside, as evidenced by Q4 2025 records: $32M in SaaS ACV bookings and top-100 customer ARR growth of 17% YoY.
Profitability Risk
Revenue timing risk due to unbundled SaaS revenue recognition and deal timing (606 impact), potential volatility in unbundled bookings, dependence on large enterprise adoption of AI (top customers drive a disproportionate share of growth), and competitive dynamics in the CX automation space. Additionally, macro uncertainty could pressure non-core capex that supports CX automation projects.
Financial Position
Strong liquidity with ~$215.7M cash and equivalents and net debt of ~$232.7M (well under 1x LTM EBITDA). Cash generation outpaced guidance by $8M in 2025, with cash contribution $228M (+2% YoY). A $200M buyback program and an upgraded $500M revolver provide flexibility for capital allocation and potential acceleration of the AI adoption cycle.
SWOT Analysis
Strengths
Leading CX automation platform with a differentiated AI value proposition and hybrid cloud model
Strong ARR momentum and record new SaaS ACV bookings in Q4 2025
Large, entrenched customer base with notable Fortune 500 uptake (over 90 Fortune 500 brands using Verint AI bots)
Robust top-customer cohort growth (top 25 ARR up 24% in Q4; top 100 ARR up 17% in Q4)
Financial flexibility: healthy balance sheet, strong FCF, and buyback program
Weaknesses
Revenue timing sensitivity due to unbundled SaaS bookings and 606 accounting, which can distort quarterly revenue signals
Near-term profitability may be impacted by mix shifts and reinvestment in sales/channel expansion
Heavy reliance on AI adoption pace and successful scaling of AI bot deployments
Opportunities
Double-digit ARR growth potential as more Fortune 500 brands scale Verint AI across multiple business units
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