Coveo (TBBK) Q3 2025: Generative AI Solutions Drive 150% Customer and Revenue Growth

October 31, 2025 | By EarningsIQ Research

Coveo’s generative AI solutions posted 150% YoY customer and revenue expansion, propelling overall platform growth and reinforcing the company’s positioning as a critical infrastructure provider for enterprise AI search and commerce. While a one-off Salesforce contract reset dampened net expansion rate, underlying momentum in commerce and agentic AI remains robust. Management’s disciplined capital allocation and focus on high-return growth levers position Coveo to capitalize as enterprises shift from AI experimentation to measurable ROI.

Summary

• Generative AI Solutions Surpass Adoption Milestone: Customer and revenue growth in generative AI offerings accelerated, validating Coveo’s platform relevance.
• Commerce Bookings Momentum Accelerates: Nearly half of new business originated from commerce, with B2B complexity and SAP partnership driving differentiation.
• Strategic Focus on Measured Outcomes: Enterprises increasingly demand tangible AI ROI, favoring Coveo’s proven, production-ready approach.

Performance Analysis

Coveo’s core platform revenue climbed 17% YoY, outpacing overall total revenue growth of 14%, as generative AI and commerce use cases powered new bookings. Generative AI solutions delivered approximately 150% YoY growth in both customer count and revenue, with net expansion rates exceeding 150%—a clear signal of successful adoption and expansion within the existing base. Commerce remained the fastest-growing segment, contributing nearly 50% of new bookings, buoyed by complex B2B implementations and deepening SAP integration.

Despite strong underlying demand, a renegotiated Salesforce contract trimmed net expansion rate (NER) to 105% (down from 108% prior quarter), with the impact isolated to a single customer representing about 3% of ARR. Excluding this, churn reached a seven-quarter low. Some large deals shifted into Q3 due to increased stakeholder approvals, reflecting Coveo’s growing strategic footprint within customers. Gross margin remained robust at 79%, and adjusted EBITDA was slightly above guidance, underscoring operational discipline amid a dynamic demand environment.

• Generative AI Expansion: Adoption and revenue growth in generative AI solutions far outpaced legacy offerings, with customers such as SAP and Illumio validating ROI.
• Commerce Use Case Strength: B2B commerce complexity and the convergence of commerce with knowledge management drove new wins and expansion, highlighted by Cardinal Health and Bunnings Warehouse.
• Sales Cycle Elongation: Larger deal sizes and increased strategic relevance led to longer sales cycles, but these were not competitive losses.

Cash flow from operations was negative due to working capital timing, but the company ended with $108 million in cash and no debt. Coveo expects to exit the year with mid-teens ARR growth, even as top-line guidance was trimmed to reflect the Salesforce event and cautious second-half bookings assumptions.

Executive Commentary

Strategic Positioning

1. Generative AI as a Platform Differentiator

Coveo’s long-standing investment in AI-powered search and personalization is paying off as enterprises prioritize production-grade, measurable AI outcomes. The company’s platform, designed for secure, high-relevance enterprise data grounding, is delivering real-world savings—SAP reported more than 100 million euros in annual support cost reductions and 1.6 million fewer cases. Coveo’s agentic AI and conversational capabilities are being validated by blue-chip customers and are increasingly embedded into mission-critical workflows.

2. Commerce Momentum and B2B Complexity

Commerce use cases, especially in B2B, have become Coveo’s fastest-growing segment, accounting for nearly half of new bookings. The platform’s ability to handle vast SKU catalogs and complex pricing structures (as with Cardinal Health) sets it apart. The convergence of commerce and knowledge management—where product discovery and support blend into unified experiences—creates a defensible moat and positions Coveo for continued expansion as customer expectations evolve.

3. Strategic Partnerships and Ecosystem Leverage

Deepening partnerships with SAP and Salesforce anchor Coveo’s enterprise relevance. SAP’s adoption of Coveo across multiple domains, including the SAP for Me portal and future integration with Juul (SAP’s agentic AI front end), demonstrates the company’s role as foundational AI infrastructure. While a Salesforce contract renegotiation was a setback, Coveo remains a strategic partner, endorsed by Salesforce leadership and integrated into new agentic initiatives.

4. Pragmatic AI Model Strategy

Coveo’s approach blends proprietary AI models with best-of-breed external large language models (LLMs), maintaining flexibility to optimize for cost, performance, and customer requirements. This pragmatic stance ensures Coveo can deliver relevance at scale while managing cost and interoperability for diverse enterprise environments.

5. Disciplined Capital Allocation

Management is proactively adjusting go-to-market investments to target the highest-return opportunities, particularly in commerce and generative AI. The addition of a new CMO with enterprise SaaS pedigree signals a renewed focus on market awareness and pipeline expansion. Despite revenue guidance adjustments, Coveo maintains a break-even EBITDA target and positive operating cash flow for the year.

Key Considerations

This quarter’s results underscore Coveo’s shift from AI experimentation to scaled enterprise deployment, but also reveal the operational and market realities of selling high-value, strategic software into large organizations.

Key Considerations:

• Salesforce Contract Reset: The 3% ARR reduction is isolated, but highlights risks of customer consolidation and internalization at large platform vendors.
• Deal Complexity and Elongation: As Coveo’s solutions become more strategic, deal cycles lengthen due to increased stakeholder involvement and larger deal sizes, impacting near-term bookings timing.
• Commerce Segment Durability: B2B and commerce convergence create a multi-year growth runway, but require continued innovation to stay ahead of evolving customer needs.
• Generative AI Expansion: Near-perfect retention in generative AI solutions signals product-market fit and future expansion opportunity as enterprises seek measurable ROI.
• Capital Efficiency Discipline: Ongoing optimization of go-to-market spend and resource allocation is critical to maintaining margin and funding innovation.

Risks

Customer concentration and platform vendor consolidation pose structural risks, as seen with Salesforce’s internalization. Prolonged sales cycles and delayed deal closures could pressure near-term growth, especially if macro or enterprise IT budgets tighten. While commerce and generative AI segments are expanding, competitive intensity and rapid technology shifts require Coveo to maintain both innovation velocity and operational resilience.

Forward Outlook

For Q3, Coveo guided to:

• SaaS subscription revenue of $35.7 to $36.2 million
• Total revenue of $37.1 to $37.6 million

For full-year 2026, management adjusted guidance:

• SaaS subscription revenue of $141.5 to $142.5 million
• Total revenue of $147.5 to $148.5 million

Management cited the Salesforce contract impact and prudent second-half bookings assumptions as drivers for lowering the top end of guidance, but reaffirmed commitment to break-even EBITDA and positive operating cash flow. Key factors include ongoing commerce and generative AI momentum, as well as proactive investment realignment to support the highest-return segments.

• Continued expansion of agentic AI and commerce use cases
• Measured pipeline conversion as deal complexity rises

Takeaways

Coveo’s quarter demonstrates the company’s transition to a critical infrastructure provider for enterprise AI, with generative AI and commerce use cases providing durable growth levers despite near-term headwinds.

• Generative AI and Commerce Drive Growth: Rapid adoption and expansion in these segments validate Coveo’s platform strategy and underpin future bookings visibility.
• Salesforce Event Isolated, Not Systemic: While the Salesforce contract reset is a setback, underlying customer momentum and retention remain robust, especially outside this event.
• Watch for Pipeline Conversion and Margin Discipline: Investors should monitor deal cycle velocity, expansion rates in commerce and generative AI, and Coveo’s ability to sustain margin while funding innovation and go-to-market initiatives.

Conclusion

Coveo’s Q3 showcased accelerating adoption of generative AI and commerce solutions, offset by an isolated Salesforce contract reset and elongated enterprise sales cycles. Strategic focus, operational discipline, and strong customer validation position Coveo to capture long-term share as enterprises demand measurable AI ROI.

Industry Read-Through

Coveo’s results reinforce several industry-wide signals: Enterprises are moving from AI experimentation to scaled deployment, demanding platforms that deliver measurable ROI and operational resilience. Vendors that can ground AI in secure, heterogeneous enterprise data and deliver production-ready solutions will gain share, while those reliant on a single ecosystem face consolidation risks. The convergence of commerce and knowledge management points to a broader trend toward unified, AI-powered customer experience platforms. Competitors and partners alike should note the rising importance of B2B complexity, agentic AI, and the need for transparent, value-based pricing models.

TBBK Technology Enterprise Software AI Generative AI Commerce SaaS Expansion