Five9 (FIVN) Q4 2025: Enterprise AI Revenue Surpasses $100M, Fueling Backlog and Margin Expansion
Five9 delivered a record Q4 with enterprise AI annual run-rate revenue crossing $100 million and AI bookings more than doubling year-over-year, driving a step-change in backlog and free cash flow. The company’s platform-centric approach and deepening Google Cloud partnership are positioning Five9 to capitalize on a multi-year AI-driven transformation in customer experience. With a new CEO at the helm, execution focus and product innovation are set to define Five9’s next phase, as management guides to a return to double-digit growth in the second half of 2026.
Summary
- AI Momentum Accelerates: Enterprise AI bookings and revenue growth outpaced core CCaaS, solidifying AI as the primary growth engine.
- Backlog and Profitability Inflect: Record bookings and disciplined cost structure drove all-time high free cash flow and margin expansion.
- Strategic Platform Leverage: End-to-end data orchestration and partner ecosystem, especially with Google Cloud, create durable competitive moats.
Performance Analysis
Five9’s Q4 performance underscored a decisive pivot towards AI-powered growth, with enterprise AI annual run-rate revenue surpassing $100 million and accelerating 50% year-over-year. Total revenue reached $300 million, with subscription revenue now representing 82% of the mix, up from 79% a year ago. The company’s core CCaaS (Contact Center as a Service) business also saw a modest acceleration, but AI revenue growth is now the dominant force, making up 12% of enterprise subscription revenue. Notably, AI bookings more than doubled year-over-year, feeding a robust backlog that underpins management’s confidence in future growth.
Profitability levers were evident as adjusted EBITDA margin climbed to 26% and free cash flow margin more than doubled to 22% for the quarter. Revenue per employee increased 14% year-over-year, highlighting operational leverage and productivity gains. The enterprise segment, which accounts for 91% of total revenue, continued to outpace the smaller commercial segment, while telecom usage and professional services declined as a share of total revenue, reflecting the ongoing shift to higher-margin, recurring subscription streams.
- AI Revenue Mix Shift: AI now comprises a meaningful share of subscription revenue, with growth rates far exceeding legacy CCaaS.
- Backlog Drives Visibility: Record bookings and a strong backlog cover the majority of incremental 2026 revenue, reducing reliance on new logo wins.
- Margin Expansion: Cost discipline and a higher mix of high-margin AI solutions contributed to a step-up in profitability and cash generation.
While seasonality in healthcare and consumer verticals was less pronounced than prior years, overall sequential growth in subscription revenue outperformed expectations, supporting the company’s outlook for accelerating growth in the second half of 2026.
Executive Commentary
"We had an exceptional bookings quarter, achieving a Q4 record, highlighted by enterprise AI bookings more than doubling year over year, contributing to healthy increases in backlog. Our enterprise AI annual run rate revenue surpassed $100 million in the fourth quarter."
Mike Berkley, Chairman & outgoing CEO
"Subscription revenue growth accelerated to 12% year-over-year in the fourth quarter, primarily driven by, first, enterprise AI revenue growth accelerating to 50% year-over-year, now making up 12% of enterprise subscription revenue."
Brian, CFO
Strategic Positioning
1. End-to-End Platform and Data Flywheel
Five9’s strategic edge lies in its end-to-end CX platform, which captures and orchestrates every customer interaction—human or AI—across voice and digital channels. This creates a compounding data advantage, enabling increasingly personalized and contextual experiences. The company’s platform acts as a “system of engagement,” distinct from CRM “systems of record,” giving Five9 front-line proximity to customer-brand interactions and a defensible moat built on conversational data and orchestration capabilities.
2. AI-Led Product Innovation
Recent launches—including the AQM (agentic quality management), Genius Routing Engine, OneView analytics, and no-code digital engagement—demonstrate a commitment to AI-powered CX (customer experience) transformation. AI agents and agent assist solutions are leading adoption, with workflow automation and other GenAI-enabled modules gaining traction. This innovation pipeline is driving both new logo wins and deeper expansion within the installed base.
3. Partner Ecosystem and Google Cloud Alliance
Five9’s “partner first” strategy is maturing, with over 80% of business now partner-influenced and the number of certified partners doubling year-over-year. The expanded Google Cloud partnership, combining Five9’s platform with Google’s Gemini AI, is already yielding large enterprise wins and accelerates time-to-value for customers. This alliance enhances Five9’s AI credibility and expands its reach into complex, regulated verticals like healthcare and financial services.
4. Consumption-Based AI Monetization
Enterprise AI revenue is fully consumption or capacity-based, with customers committing to usage blocks (minutes, gigabytes, etc.) and paying overages as they scale. This model aligns Five9’s revenue growth with customer adoption and expansion of AI-driven use cases, supporting margin expansion as AI becomes a larger share of the mix.
5. Leadership Transition and Execution Focus
New CEO Amit Mathur brings a product and AI-centric background, signaling a focus on operational excellence and innovation. His early emphasis on transparency, platform leverage, and expanding the total addressable market through new AI-powered experiences sets the tone for Five9’s next growth phase.
Key Considerations
The quarter marks a clear inflection point for Five9, as AI adoption moves from pilot to production and the company’s platform and partner strategy gain strategic weight. Investors should weigh the following:
Key Considerations:
- AI Revenue Trajectory: Sustained acceleration in AI bookings and revenue is critical for maintaining backlog-driven growth and margin expansion.
- Backlog Conversion: Management’s guidance is highly reliant on timely ramp and conversion of existing backlog, especially in the second half of 2026.
- Partner-Led Expansion: The maturing partner ecosystem is a force multiplier, but also introduces execution risk if partner certifications and enablement lag demand.
- Vertical Penetration: Healthcare, financial services, and retail are leading AI adoption, but regulatory and integration complexity may slow rollout in some segments.
Risks
Key risks include potential delays in backlog conversion, execution missteps during the leadership transition, and competitive threats from LLM-native platforms or customers building in-house AI solutions. While Five9’s orchestration and data advantages are clear, rapid advances in foundational AI models or new entrants could pressure pricing and differentiation. Macroeconomic uncertainty, especially in consumer and healthcare verticals, may also impact usage and renewal rates.
Forward Outlook
For Q1 2026, Five9 guided to:
- Revenue midpoint of $299.5 million (flat sequentially, reflecting muted seasonality)
- Non-GAAP EPS midpoint of $0.68
For full-year 2026, management raised guidance:
- Revenue midpoint of $1.254 billion
- Non-GAAP EPS midpoint of $3.18
- Adjusted EBITDA margin of at least 24%
- Free cash flow of approximately $175 million
Management highlighted several factors that underpin the outlook:
- Backlog Visibility: Two-thirds of incremental 2026 revenue covered by existing backlog and retention dynamics.
- AI Growth Leverage: Consumption-based AI revenue is expected to remain the fastest-growing portfolio segment.
Takeaways
Five9’s Q4 results mark a structural shift toward AI-driven growth, with platform and partner leverage creating durable competitive advantages.
- AI-Led Growth: Five9’s ability to monetize AI across both new and existing customers is driving record bookings and backlog, supporting a credible return to double-digit growth in the second half of 2026.
- Operational Discipline: Margin expansion and rising free cash flow reflect a scalable business model, as the company shifts mix toward high-margin, recurring AI subscription revenue.
- Execution Watchpoint: Investors should monitor the pace of backlog conversion, partner enablement, and the impact of leadership transition as Five9 pursues its multi-year platform strategy.
Conclusion
Five9’s strong Q4 validates its AI-first strategy and platform-centric model, with record AI bookings and revenue setting the stage for sustained growth and profitability. As the company enters a new chapter under fresh leadership, disciplined execution and continued product innovation will be key to realizing its expanding opportunity in AI-powered customer experience.
Industry Read-Through
Five9’s results highlight a secular shift in the contact center industry, as enterprises move from legacy on-premise systems to cloud-based, AI-powered platforms. The rapid growth in consumption-based AI revenue and the centrality of data orchestration suggest that vendors with end-to-end platforms and deep partner ecosystems will increasingly dominate. The Google Cloud partnership signals that hyperscaler alliances are becoming critical for credibility and reach in regulated verticals. For peers, the message is clear: AI is moving from proof-of-concept to production, and the winners will be those who can deliver measurable outcomes, seamless integration, and continuous innovation at scale.