Company Reports

We are discontinuing analyst coverage of Five9.

Five9 reported second-quarter revenue of $312 million, up 10% year over year, driven by growing enterprise adoption of artificial intelligence. Adjusted operating margin came in at 16.4%, and while guidance was nuanced, it was generally as expected.

Five9 is a leading provider of cloud-based contact center as a service, or CCaaS, software that supports channel-agnostic customer engagement across all digital channels (email, SMS, voice, social media, and others) to improve customer service workflows. While we think the tailwinds from the industry transition to cloud and movement upmarket provide growth opportunities, uneven returns and intense competition underpin our no-moat rating for Five9.

Five9 reported first-quarter revenue of $305 million, up 9% year over year, driven by growing enterprise adoption of artificial intelligence. Adjusted EBITDA margin was 24.4%, up 560 basis points year over year, driven by operational efficiencies and strict cost discipline.

Five9 reported fourth-quarter revenue of $300 million, up 8% year over year, driven by growing enterprise adoption of artificial intelligence. Adjusted EBITDA margin came in at 25.7%, up 270 basis points year over year, driven by operational efficiencies and strict cost discipline.

Five9 is a leading provider of cloud contact center as a service, or CCaaS, software that supports channel-agnostic customer engagement across all digital channels (email, SMS, voice, social media, and others) to improve customer service workflows. While we think the tailwinds from the industry transition to cloud and movement upmarket provide growth opportunities, uneven returns and intense competition underpin our no-moat rating for Five9.

We take a fresh look at Five9, a leading cloud-native contact center as a service, or CCaaS, vendor that enables digital-first customer engagement through analytics and automation solutions.

Five9 is a leading provider of cloud contact center as a service, or CCaaS, software that supports channel-agnostic customer engagement across all digital channels (email, SMS, voice, social media, and others) to improve customer service workflows. While we think the tailwinds from the industry transition to cloud and movement upmarket provide growth opportunities, uneven returns and intense competition underpin our no-moat rating for Five9.

Five9 is squarely positioned to benefit from industry tailwinds, including the transition of contact center operations to the cloud and a shift toward digital-first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces strong competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the substantial opportunity arising from the contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside, which in turn informs our no-moat rating.

Five9 reported third-quarter revenue of $286 million, up 8% year over year, owing to strength in enterprise artificial intelligence revenue. Adjusted EBITDA margin came in at 25.1%, up 530 basis points year over year due to strict cost discipline and growing operating leverage.

Five9 reported second-quarter revenue of $283 million, up 12% year over year due to strength in enterprise AI subscriptions. Adjusted EBITDA margin increased 740 basis points year over year to 24% largely due to strict cost discipline and growing operating leverage.

Five9 is squarely positioned to benefit from industry tailwinds including the transition of contact center operations to the cloud, and a shift toward digital first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces strong competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the substantial opportunity arising from contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside, which in turn informs our no-moat rating.

Five9 is squarely positioned to benefit from industry tailwinds including the transition of contact center operations to the cloud, and a shift toward digital first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces strong competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the substantial opportunity arising from contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside, which in turn informs our no-moat rating.

No-moat Five9 reported solid first-quarter results that beat consensus revenue and profitability estimates. Resilient artificial intelligence demand within Five9’s pipeline more than offset headwinds from lengthening sales cycles and tighter enterprise budgets, resulting in robust top-line growth for the quarter. Management acknowledged the ongoing macroeconomic uncertainty and, as a result, issued cautious guidance for the second quarter. However, the company remains upbeat about a recovery in the second half of the year and raised parts of its full-year outlook. We are less optimistic about the longer-term and lowered our relatively aggressive growth estimates throughout our forecast. As a result, we are lowering our fair value estimate to $45 from $62 previously. We see upside to our new fair value, but prefer the moatier names within our coverage.

Five9 is squarely positioned to benefit from industry tailwinds including the transition of contact center operations to the cloud, and a shift toward digital first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces strong competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the substantial opportunity arising from contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside, which in turn informs our no-moat rating.

We raise our fair value estimate for no-moat Five9 to $62 per share from $58 following the release of robust fourth-quarter results that exceeded our revenue and profitability estimates. Strong artificial intelligence demand and improved sales execution propelled the firm’s revenue during the quarter. Management laid out 2025 targets that surpassed our bottom-line expectations but fell short of our top-line estimates. Based on these results and guidance, we adjusted our intermediate forecasts to reflect our optimism about Five9’s ability to capitalize on its AI investments to drive seat expansion. The strong performance sent shares up 15% in the aftermarket. The market inches closer to our valuation, but we prefer moatier names within our coverage.

No-moat Five9 reported strong third-quarter results, exceeding our revenue and profitability expectations, while providing guidance that also came in better than anticipated. Management is bullish on a healthy subscription pipeline and increasing demand for artificial intelligence-driven solutions. Based on these results and updated guidance, we have slightly lifted our near-term estimates but are awaiting 2025 guidance before making any meaningful model changes; we are therefore maintaining our $58 fair value estimate target. We acknowledge the market view around potential pressure on seat licenses from virtual agents, but we think over the next five years Five9’s seat count continues to grow and that the firm will be able to capitalize on its own AI investments. Still, we prefer the moatier names within our software coverage.

Five9 is squarely positioned to benefit from industry tailwinds including the transition of contact center operations to the cloud, and a shift toward digital first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces strong competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the substantial opportunity arising from contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside, which in turn informs our no-moat rating.

Five9 is squarely positioned to benefit from industry tailwinds including the transition of contact center operations to the cloud, and a shift toward digital first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces strong competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the substantial opportunity arising from contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside, which in turn informs our no-moat rating.

We lower our fair value estimate for no-moat Five9 to $58 per share, from $63, following the release of sound second-quarter results but disappointing near-term guidance. Second-quarter top-line growth and profitability exceeded our expectations. However, Five9 reported weak new business bookings amid softening macroeconomic conditions, elevated budget scrutiny, and sales execution issues, which together point to a weaker second half than we previously anticipated. Accordingly, we have trimmed our near-term seat growth assumptions, partly offset by an accelerated path to GAAP profitability relative to our prior forecasts. Despite these headwinds, we believe Five9 has an attractive growth profile buoyed by the ongoing contact center cloud transition, and we continue to view shares as undervalued on a risk-adjusted basis.