Needham reiterated its Buy rating on Five9, Inc and left its price target at $40.00 after the company reported fourth-quarter results that showed subscription revenue growth picking up pace.
Five9 recorded subscription revenue growth of 12% in the fourth quarter, up from 10% in the third quarter. Needham pointed to subscription revenue as the primary driver of the quarter's revenue beat, with usage revenue contributing less to the outperformance. Over the trailing twelve months, the company’s revenue growth sits at roughly 12%.
The stock traded at $17.18, representing a decline of nearly 59% from its 52-week high of $49.90.
Bookings in the fourth quarter showed continued momentum, particularly on the AI side. AI bookings rose 100% year-over-year, and enterprise AI revenue growth accelerated to 50% in the fourth quarter from 41% in the prior quarter. Needham highlighted the strength in AI-related demand as a favorable element in the company’s positioning heading into fiscal 2026.
Management's fiscal 2026 guidance was in line with prior expectations, according to Needham. The firm noted that the company enters the year with easier year-over-year comparisons and a pipeline of robust AI bookings that could, in Needham’s view, enable further acceleration in subscription revenue growth during the second half of 2026.
InvestingPro analysis, cited in the company update, describes Five9 as appearing undervalued at current levels based on a Fair Value assessment and highlights an attractive PEG ratio of 0.25. The InvestingPro platform also lists 11 additional ProTips for investors following Five9.
The fourth-quarter period coincided with executive transition at the top. Long-time CEO Mike Burkland retired from the CEO role and Amit Mathradas was introduced as the incoming chief executive. The company said Mathradas will assume the CEO role on February 2, 2026, while Burkland will remain as Chairman of the Board until the 2026 annual meeting of stockholders.
On the top-line, Five9 reported total fourth-quarter revenue growth of 7.8% year-over-year. Management noted this performance came despite challenging comparisons driven by a significant healthcare client coming online in the prior period.
Strategically, Five9 expanded its partnership with Google Cloud to deliver a new Enterprise CX AI solution that integrates Five9’s AI platform with Google’s Gemini Enterprise and Vertex AI, a move the company presented as aimed at enhancing customer experiences.
Not all broker reactions were uniformly positive. Evercore ISI cut its price target on Five9 to $24 while maintaining an Outperform rating. Piper Sandler moved to downgrade the stock from Overweight to Neutral and set a $21 price target, citing concerns about growth.
Summary
Needham retained its Buy rating and $40 price target on Five9 after Q4 results showed subscription revenue reacceleration to 12%, strong AI bookings and faster enterprise AI revenue growth. The quarter also included a CEO transition and an expanded Google Cloud partnership. Other analysts adjusted their outlooks and price targets amid mixed reactions.
Key points
- Subscription revenue growth reaccelerated to 12% in Q4 from 10% in Q3, driving revenue outperformance primarily through subscription upside rather than usage revenue.
- AI momentum strengthened: AI bookings rose 100% year-over-year, and enterprise AI revenue growth accelerated to 50% from 41% sequentially.
- Five9 provided fiscal 2026 guidance consistent with prior views; Needham highlighted easier comparisons and robust AI bookings as potential tailwinds for further subscription acceleration in H2 2026.
Risks and uncertainties
- Mixed analyst sentiment and lowered price targets from Evercore ISI and Piper Sandler introduce uncertainty around market expectations and near-term share performance - this affects equity investors and market participants following cloud and SaaS providers.
- Comparability issues related to a large healthcare client coming online in the prior period complicate year-over-year revenue interpretation, posing risk to clear trend assessment for revenue growth - this impacts healthcare-facing CX solutions and customer-concentration analyses.
- Leadership transition at the CEO level introduces execution risk as Amit Mathradas takes over from Mike Burkland, with potential implications for strategy execution and investor confidence - this is relevant to corporate governance watchers and investors in enterprise software.
Note: The article presents the company-reported results, analyst actions, investor platform commentary, corporate governance changes and partnership information exactly as disclosed by the company and referenced analyses. No additional facts have been introduced.