eGain reports strong Q2 fiscal 2026 earnings with impressive revenue growth and strategic initiatives in AI knowledge solutions. Explore the future outlook.
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eGain Reports Strong Q2 Fiscal 2026 Earnings: Key Takeaways and Future Outlook
In its recent earnings call for the second quarter of fiscal 2026, eGain showcased impressive financial performance, exceeding both its guidance and market expectations. The company reported strong revenue growth, increased profitability, and significant advancements in its strategic initiatives, particularly in artificial intelligence (AI) solutions. As eGain continues to gain momentum in the market, investors are keen to understand its future outlook and strategic direction.
Financial Performance
eGain delivered a robust financial performance in Q2, with total revenue reaching $23 million, marking a 3% increase year-over-year. Notably, the company’s SaaS revenue grew by 5% year-over-year, accounting for 95% of total revenue, up from 93% in the same quarter last year. This growth is particularly impressive when considering the impact of reducing non-core messaging products, which are being phased out this fiscal year. Adjusting for this, total revenue would have increased by 5%, while SaaS revenue would have risen by 8%.
On the profitability front, eGain reported a non-GAAP net income of $3 million, or $0.11 per share, compared to $1.3 million, or $0.05 per share, in the same quarter last year. The adjusted EBITDA margin improved to 14%, up from 7% year-over-year, highlighting the operational efficiencies gained. The company's gross margin also saw a positive trajectory, with total gross margins reaching 74%, up 300 basis points from the previous year.
With strong operating cash flow of $10.1 million, representing a 44% margin, the company has solidified its financial foundation. Total cash and cash equivalents at the end of the quarter were $83.1 million, a notable increase from $62.9 million at the end of the previous fiscal year.
Strategic Initiatives
eGain's growth is further fueled by strategic initiatives focused on AI knowledge solutions. The company reported a 27% year-over-year increase in annual recurring revenue (ARR) from AI knowledge customers, which now represents 64% of total SaaS ARR. This growth is indicative of the rising demand for AI-driven solutions across various sectors.
Key highlights from the quarter include:
- New Partnerships: eGain has seen a significant uptick in partner-sourced new logos, with 25% of new logos in the first half of fiscal 2026 coming from partnerships—more than double the previous year. This demonstrates the effectiveness of the company’s partner development strategy.
- Notable Wins: eGain secured a major contract with one of the largest business software providers globally, which will deploy the Knowledge platform across 100,000 users. Additionally, the company partnered with Acmea, one of Europe's largest insurance groups, to enhance their digital insurance journey for over 21,000 users.
- Product Development: The launch of the eGain Composer has attracted new ecosystem partners and developers, further expanding eGain’s product offerings. This developer-focused platform is designed to simplify the creation of custom AI solutions, indicating a strategic pivot towards enhancing product-led growth.
Future Outlook
eGain’s management remains optimistic about the future, providing guidance for the upcoming quarters. For Q3 of fiscal 2026, the company expects total revenue between $22.2 million and $22.7 million, which factors in the fewer number of days in the quarter that could impact revenue by approximately $400,000. Despite this, the company anticipates a return to revenue growth for the full fiscal year, projecting total revenue to be between $90.5 million and $92 million.
Management also expects a GAAP net income of $1 million to $1.5 million for Q3, with non-GAAP net income ranging from $1.8 million to $2.3 million. As the company focuses on scaling its AI initiatives and driving operational efficiencies, investor confidence remains high.
In terms of market positioning, eGain’s strategic focus on providing a centralized knowledge foundation for AI applications positions it favorably against competitors. The company aims to leverage its growing brand awareness and increasing inbound interest to capture market leadership in AI-driven knowledge automation.
Conclusion
In conclusion, eGain’s second quarter earnings reflect a strong business momentum, characterized by impressive revenue growth, enhanced profitability, and strategic advancements in AI solutions. With a solid financial foundation and a clear focus on operational efficiency and product innovation, the company is well-positioned to drive sustainable growth in the evolving landscape of AI-driven customer experience solutions. As eGain continues to execute its strategies effectively, investors can look forward to a promising future ahead.