Coveo Solutions, Inc. ((TSE:CVO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Coveo Solutions, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. The company showcased significant achievements in revenue growth acceleration, generative AI expansion, and commerce segment success. However, challenges such as Salesforce contract renegotiation, deal delays, and a decline in Qubit platform revenue were also highlighted. Despite these hurdles, Coveo demonstrated resilience by maintaining its adjusted EBITDA guidance.
Revenue Growth Acceleration
Coveo Solutions reported impressive revenue growth, with SaaS revenue, total revenue, and adjusted EBITDA all surpassing guidance. The subscription revenue for the Coveo Core Platform accelerated to 17%, marking the highest growth rate in nearly five quarters. This achievement underscores the company’s robust performance in its core offerings.
Generative AI Expansion
The company experienced a record quarter in its generative AI solutions, with customer and revenue growth soaring by approximately 150% compared to the previous year. The net expansion rate (NER) for these solutions exceeded 150%, highlighting the strong demand and adoption of Coveo’s innovative AI technologies.
Commerce Segment Success
Commerce emerged as the fastest-growing segment for Coveo, accounting for nearly 50% of new business bookings. Significant partnerships, such as those with SAP, influenced 50% of commerce bookings, demonstrating the strategic importance of this segment in Coveo’s growth strategy.
High-Profile Customer Wins
Coveo secured several high-profile customer wins, including Halliburton, Deckers Outdoors, and Intermountain Healthcare. The company also expanded its relationships with industry giants like NVIDIA, Intel, GE, UKG, HP Enterprise, and Freedom Furniture, reinforcing its market position and customer trust.
Salesforce Contract Renegotiation Impact
The renegotiated contract with Salesforce led to a decrease in the net expansion rate from 108% to 105%, impacting approximately 3% of annual recurring revenue (ARR). This adjustment reflects the challenges faced in maintaining previous growth levels amid contract changes.
Deal Delays
Coveo experienced delays in several deals expected to close in Q2, which have now been pushed to Q3 and beyond. These delays, requiring additional stakeholder approvals, affected short-term bookings assumptions and added uncertainty to the company’s immediate financial outlook.
Qubit Platform Revenue Decline
Revenue from the Qubit Platform declined by 24% year-over-year, amounting to $0.9 million. The company anticipates that this revenue will fully churn by the end of the fiscal year, indicating a strategic shift away from this platform.
Forward-Looking Guidance
Looking ahead, Coveo provided forward-looking guidance with a focus on maintaining its growth trajectory. The company adjusted its SaaS subscription revenue guidance to between $141.5 million and $142.5 million, with total revenue expected to range from $147.5 million to $148.5 million for the full fiscal year 2026. Coveo remains committed to achieving a breakeven adjusted EBITDA for both the third quarter and the entire fiscal year, while capitalizing on significant opportunities in generative AI and commerce.
In conclusion, Coveo Solutions, Inc.’s earnings call painted a picture of both achievements and challenges. The company’s strong performance in revenue growth and AI expansion was tempered by contract renegotiations and deal delays. However, Coveo’s resilience in maintaining its financial guidance and strategic focus on high-growth segments positions it well for future success.