Vtex (VTEX) Earnings

Management highlights

- Core Strategic Growth Drivers • Global expansion: The U.S. market has seen improved pipeline quality, with broader industry penetration and a growing share of large B2B opportunities in total expected contract value. VTEX has shifted to a more scalable go-to-market model focused on partnerships with global system integrators (including EY and Accenture), and hosted its first North American SI partner training bootcamp that generated new qualified opportunities. In Europe, VTEX is concentrating resources on high-demand markets, and renewed its long-term partnership with reference customer OBI in Germany. AI capabilities are now a prerequisite for most enterprise RFPs, and VTEX increasingly bundles its CX platform into strategic proposals to drive differentiation and future upsell. • B2B: VTEX’s core value proposition is channel-agnostic digitalization that supports diverse B2B buyer workflows natively, which is a key competitive advantage in complex B2B environments. The company is currently investing to add AI-powered tools for field sales and account teams that provide real-time customer activity visibility and predictive opportunity intelligence. When combined with VTEX’s existing CX platform and self-service capabilities, this will create a unified AI-native B2B commercial workflow stack. Recent key wins include B2B expansion for Whirlpool (Brazil) and a new B2B launch for Electrolux (Chile). • Ads (retail media): VTEX’s ad platform gained new AI capabilities in Q2 including AI-driven campaign creation, automated budget management, improved attribution, and AI-generated creative assets, bringing it closer to the capability level of top global retail media platforms. Commercially, VTEX expanded its international sales team, built relationships with major global agency groups (WPP, Publicis, Omnicom), and strengthened its ecosystem via partnerships (including Magnite). The company is seeing strong new demand from pharmaceutical advertisers for prescription portal and health platform inventory, a differentiated vertical opportunity not available on generalist retail media networks. Recent customer expansions to the ad platform include Olympica and Whirlpool. • AI: VTEX’s AI transformation has two core tracks: the already revenue-generating VTEX CX platform, and the upcoming AI Workspace that will unify the entire platform. The VTEX CX platform reached over 200 trial activations following VTEX Day, cutting average sales cycles by more than 50% (from 90 days to ~40 days) and implementation time from 30 days to one week, driven by native integration with VTEX’s core commerce platform. CX platform AI agents maintain 92%+ conversation containment rates and 80%+ problem resolution rates, and directly drive improvements in GMV, prepayment recovery, abandoned cart rescue, and cross-selling. The platform expanded to B2B use cases, new regions, and signed its first European customers. The AI Workspace, which adds native AI capabilities across merchandising, content, fulfillment, and analytics, has over 100 enterprise customers on its waitlist, and VTEX is running a small pioneer program to refine the product with customer input. Adoption of VTEX’s AI developer toolkits is also growing, reducing implementation time and increasing partner productivity. - Financial and Operational Discipline • Non-GAAP subscription gross margin reached 81.8% (up 2 percentage points YoY), driven by AI-powered customer support automation and disciplined cost management. Total Non-GAAP gross margin (including services) reached 80.4% (up 3 percentage points YoY), supported by the shift to lower-margin services being increasingly handled by VTEX’s global partner ecosystem. • Total Non-GAAP operating expenses were $38.0 million, flat sequentially and growing slower than revenue, with headcount declining ~4% sequentially. VTEX maintains discipline on sales & marketing and G&A to prioritize incremental R&D investment in AI-native transformation and core growth driver product expansion. • Non-GAAP operating income reached $13.8 million (up 62% YoY) with an operating margin of 21.4% (up 7 percentage points YoY). Free cash flow was $12.7 million (up 79% YoY) with a 19.8% free cash flow margin. • VTEX repurchased 6.2 million Class A common shares for $23.2 million in Q2, which is immediately accretive to free cash flow per share after cancellation.

Guidance

- For Q3 2026: VTEX targets approximately flat FX-neutral subscription revenue growth, low single-digit FX-neutral gross profit growth, and both non-GAAP operating margin and free cash flow margin in the low 20s. If FX rates hold at July 2026 average levels, reported U.S. dollar subscription revenue growth will be approximately 7 percentage points higher than the FX-neutral guidance. - For full-year 2026: VTEX revised its guidance downward to low single-digit FX-neutral subscription revenue growth, mid single-digit FX-neutral gross profit growth, with both non-GAAP operating margin and free cash flow margin in the low 20s. If FX rates hold at July 2026 average levels, reported U.S. dollar subscription revenue growth will be approximately 8.1 percentage points higher than the FX-neutral guidance. - Management expects modest improvement in FX-neutral subscription revenue growth in Q4 2026, driven by easier year-over-year comparisons and increasing contribution from the four growth drivers.

Segment performance

VTEX divides its subscription revenue into two core segments: its four strategic growth drivers (global expansion, B2B, ads, and AI) and the legacy established business (predominantly B2C commerce in Brazil and the rest of Latin America). In Q2 2026, the growth driver segment represented 18% of total VTEX subscription revenue, and grew 20% on an FX-neutral basis. The legacy established business segment, which accounts for the remaining 82% of subscription revenue, experienced a modest 2% FX-neutral decline in the quarter. Overall company Q2 2026 subscription revenue reached $63.8 million, growing 11% in U.S. dollar terms and 1.3% on an FX-neutral basis.

Risks & headwinds

- Challenging macroeconomic conditions: High global interest rates, a promotional competitive marketplace environment in Brazil, softer consumer demand in Argentina, and extended enterprise sales decision cycles are pressuring near-term revenue growth. - Weakening consumption in Brazil: Consumption trends weakened further in June and July 2026, leading to downward revised guidance for the second half of the year, and the challenging environment is not expected to resolve quickly. There is elevated risk of increased bankruptcy and financial distress among small and medium-sized retail and manufacturing customers in Brazil. - Mix shift impact on near-term revenue: The faster-than-expected deliberate shift to larger enterprise customers, which have lower take rates than smaller and mid-sized customers, has reduced near-term subscription revenue growth even as it improves long-term churn and lifetime value metrics. - Competitive AI announcements: While VTEX has not seen competitive AI announcements from legacy platform vendors impact its commercial performance to date, most competing AI offerings are incremental features layered on legacy architectures, which VTEX views as inferior to its full AI-native rebuild.

Analyst Q&A

• Q: If revenue reaccelerates in the future, what cost categories will face pressure, and which will continue to scale efficiently? /

  A: VTEX's gross margin gains over the past three years are durable: early gains came from hosting optimizations, and recent gains have come from AI-powered support automation. Three full percentage points of gross margin improvement are expected to hold even with reacceleration. G&A has scaled very effectively, falling from 20% of revenue post-IPO to ~10% of revenue today, and will remain scalable. R&D investment is increasing marginally as a share of revenue to accelerate AI transformation, but the increase is modest. Sales and marketing would see incremental investment only if ROI holds, so overall margins are expected to remain healthy even with reacceleration.

• Q: How have competitive dynamics with marketplaces evolved, and are AI-related discussions delaying customer decision cycles for new business in 2027? /

  A: The commerce landscape is becoming more fragmented across channels and emerging interfaces, making the core orchestration and record-keeping layer VTEX provides increasingly valuable. High interest rates and promotional competition from large marketplaces are pressuring retailer profitability globally, and this headwind is expected to remain for the next several months. Most competing AI announcements are just incremental features added to legacy architectures, and VTEX has not seen any impact on its win rates, churn, or overall commercial performance. Customer decision cycles are longer due to macro conditions, not AI-related uncertainty, and VTEX's full AI-native architecture gives it a strong long-term competitive advantage.

• Q: What share of total revenue do the 20% YoY growing growth drivers represent, and can the core legacy business reaccelerate in the short-to-medium term? What is the breakdown of revenue deceleration between existing customer softness, churn, and lower new customer adds? /

  A: The four growth drivers represent ~18% of total subscription revenue, so the legacy core business had a modest ~2% FX-neutral decline in Q2. Revenue deceleration comes entirely from two dynamics impacting the existing customer base: weaker consumption hit small and mid-sized customers harder than larger customers, and the deliberate shift to lower-take-rate larger accounts happened faster than expected, with consumption weakening further in June and July. There have been no material changes to new customer acquisition, churn, or win rates, so headwinds are macro and mix-related, not competitive. The growth drivers continue to outperform the core business significantly, with deepening upsell and cross sell penetration at existing customers.

• Q: Is there elevated financial distress or bankruptcy among VTEX's small and medium-sized Brazilian customers, and what is VTEX's updated B2B go-to-market strategy? /

  A: VTEX is not seeing unusually high rates of bankruptcy or financial distress among its Brazilian small and medium customers so far, but the environment is very tough and the risk of increased distress remains. For B2B, VTEX's core competitive advantage is its unified channel-agnostic platform that supports all types of buyer workflows. B2B now represents a meaningful share of VTEX's enterprise pipeline globally, especially in North America and Europe. VTEX's near-term product priority is launching AI-powered sales tools for field teams, which will create a fully unified AI-native B2B stack covering the entire commercial workflow, and this work is on a near-term (not multi-year) roadmap.