NICE Ltd. (NICE) Earnings

Management highlights

- Market Position & Demand Trends * NICE holds a leading position in the enterprise CX AI market, with strong underlying demand momentum. Customers are increasingly consolidating customer engagement onto a single unified CX AI platform, moving away from fragmented point solutions. * Q2 2026 delivered record new cloud ACV bookings and a record quarter for AI bookings; nearly all new CX1 enterprise deals now include AI. AI ARR grew 52% YoY, and agentic AI solutions are growing even faster. * International revenue grew 22% YoY, with international cloud revenue growing 34% YoY on a constant currency basis, driven by cloud migrations, expanding partner ecosystems, and growing demand for sovereign cloud deployments (particularly in Europe). - Product & Innovation Updates * Cognigy is now fully natively integrated into the CX1 platform ahead of schedule, creating a single application, shared data layer, and unified deployment experience that lets customers activate AI faster and eliminate integration complexity. * New innovations launched include Cognigy Analytics (which identifies automation opportunities across the platform) and the Cognigy Engagement Plane built for hybrid workforces. NICE Labs, a dedicated AI research lab, was launched to close the gap between AI potential and production-ready deployments. * The NICE platform remains model-agnostic, allowing customers to use proprietary, open-weight, and future AI models without vendor lock-in, protecting customer flexibility and cost efficiency. - Key Business Wins * NICE secured an eight-digit ACV / nine-digit TCV deal with HMRC (UK tax authority), the largest CX1 and Cognigy deal in company history, delivered in partnership with Capgemini. * An additional eight-digit ACV win was secured with a large U.S. healthcare organization, delivered in partnership with Accenture. Standalone Cognigy won competitive deals against AI-native point solutions at a large multinational utility and a large insurance company. - Partnership Ecosystem Expansion * ACV booked through GSI partners was multiples higher than the prior year, driven by investments in partner training, certification, and joint go-to-market programs. * The long-standing partnership with RingCentral was expanded: NICE will now offer RingCentral's UCaaS solution, while RingCentral continues to offer the NICE CX1 platform, giving customers integrated UCaaS/CCaaS deployment flexibility. * A new integration with EPIC was launched to embed patient engagement into clinical workflows, positioning NICE for stronger growth in the healthcare vertical.

Guidance

- For full year 2026, NICE reiterates its total revenue guidance of $3.17 billion to $3.19 billion, representing 8% year-over-year growth at the midpoint. Cloud revenue growth is expected to remain in the range of 13% to 15%, consistent with prior guidance. - NICE raises its 2026 fully diluted non-GAAP EPS guidance to a range of $11.06 to $11.26, reflecting an expected operating margin at the higher end of the prior 25% to 26% target range. - Full year 2026 free cash flow margin is expected to land at the higher end of the prior 18% to 19% target range. - For Q3 2026, total revenue is guided to $780 million to $790 million (7% year-over-year growth at the midpoint), with fully diluted EPS expected between $2.73 and $2.83. Q3 cloud growth is expected to be similar to Q2 levels. - The company reaffirms its medium-term $3.5 billion 2028 top-line guidance and all other targets laid out at the November 2025 Analyst Day.

Segment performance

Customer Engagement Segment: Total revenue of $645 million, representing 82% of total company revenue, with 8% year-over-year growth. Growth was driven by double-digit cloud revenue expansion from both the large installed base and new customer logos, which offset an expected decline in legacy maintenance revenue. Financial Crime and Compliance Segment: Total revenue of $137 million, representing 18% of total company revenue, with 6% year-over-year growth, driven by continued customer demand for the company's financial crime prevention solutions. By revenue stream: - Cloud: $609 million (78% of total revenue), 12.6% year-over-year growth. CX AI/self-service ARR within cloud reached $362 million (52% YoY growth), representing 15% of total cloud revenue. Cloud backlog grew 19% YoY (excluding the HMRC deal; including the deal, AI backlog growth accelerated above Q1 levels), and cloud net revenue retention was 106%. - Services: $125 million (16% of total revenue), 11% year-over-year decline, driven by ongoing customer migration from on-premise to cloud deployments. - Product: $49 million (6% of total revenue), 7% year-over-year growth, primarily driven by stronger-than-expected term renewals in non-CX businesses. By geography: - Americas: 82% of total revenue, 5% year-over-year growth - EMEA: 13% of total revenue, 30% year-over-year growth (28% constant currency) - APAC: 5% of total revenue, 8% year-over-year growth (5% constant currency)

Risks & headwinds

- Large enterprise AI deployments require customers to prepare data, governance frameworks, and operating models before full scaling, which creates a lag between strong bookings growth and revenue recognition, creating quarterly variability in reported results. - The CX AI market is highly competitive, with competition from both existing CCaaS peers and standalone AI-native vendors, which could pressure pricing and win rates. - The timing of customer migrations from legacy on-premise solutions to cloud can create unexpected shifts in revenue mix that affect near-term top-line performance. - Working capital timing and prepayment of certain expenses can create quarterly variability in operating cash flow and free cash flow.

Analyst Q&A

• Q: The analyst asked if targeted legacy product discounting for multi-year customer commitments would continue in the second half, and what confidence management has for second half cloud growth. /

  A: Management noted the discounting strategy was targeted at a small number of strategic customers to accelerate AI adoption and secure long-term commitments, not a broad market strategy, and all planned renewals under this strategy were completed as expected in Q2 with no underlying deterioration in demand. Record bookings and backlog (including AI) give strong confidence in long-term cloud growth, but large complex enterprise AI deployments require a measured ramp as customers prepare infrastructure, leading to near-term timing lags that do not impact long-term revenue security.

• Q: The analyst asked about NICE's philosophy toward competing or partnering with standalone AI-native vendors in the fragmented CX AI market. /

  A: Management stated NICE takes an open, interoperable approach: the platform integrates with third-party AI solutions and supports multiple LLMs, and standalone Cognigy works well with other CCaaS and enterprise workflow platforms. NICE's core competitive advantage is its unified platform that orchestrates hybrid workforces (AI + human agents) across all channels at mission-critical scale, with native access to decades of customer interaction data that AI-native vendors lack. NICE is open to collaboration while backing its differentiated unified offering.

• Q: The analyst asked if the medium-term organic cloud growth acceleration targets laid out at the November 2025 Analyst Day are still on track, after Q2 results and shifts in customer buying behavior. /

  A: Management confirmed that all key strategic investments (including the full native integration of Cognigy into CX1) are complete ahead of schedule. The company has delivered on planned priorities including international expansion and GSI partner ecosystem growth, and record first half bookings and large recent deal wins give the company full confidence that it remains on track to meet medium-term targets, with the key near-term priority being converting the strong backlog into recognized revenue.

• Q: The analyst asked who NICE competes against in large eight-figure enterprise deals, and reaffirmed that management confirm the $3.5 billion 2028 revenue target. /

  A: Management noted NICE competes with a range of vendors including existing CCaaS peers, standalone AI-native providers, and large enterprise software players. NICE outperforms when customers prioritize the benefits of a unified platform that avoids costly integration of disjointed point solutions. CFO Beth Gaspich confirmed that the $3.5 billion 2028 revenue guidance and all other prior medium-term targets remain fully in place.