Verint Reports 33% EPS Drop in Fiscal Q2

Key Points

• Non-GAAP diluted EPS fell 32.7% year-over-year to $0.33 from $0.49.

• Subscription Annual Recurring Revenue (ARR) rose 6.4% to $728 million, driven by strong 21.2% growth in AI ARR.

• No financial outlook provided due to the pending Thoma Bravo acquisition, limiting forward visibility.

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Verint Systems (NASDAQ:VRNT), a software company best known for its work in automating customer experience (CX) operations with artificial intelligence, reported earnings on September 2, 2025. The key news in this release was that GAAP revenue fell 1.0% year over year to $208 million, but marked a continued downward trend from the prior year. Profitability, as measured by Non-GAAP diluted earnings per share (EPS), dropped to $0.33 from $0.49. Management withheld any financial guidance this quarter due to its pending acquisition by Thoma Bravo. Overall, the quarter was marked by solid recurring revenue from AI-powered offerings but was offset by margin pressure.

About Verint Systems and Its Business Focus

Verint Systems is a technology firm that develops software for automating customer service operations, using artificial intelligence to help organizations handle customer interactions efficiently. Its core platform, Verint Open Platform, allows brands to deploy AI-powered bots to manage common customer needs, analyze conversations, and reduce manual effort. The software supports major industries, including financial services, healthcare, and technology, and claims adoption among more than 80 Fortune 100 companies.

In recent years, Verint has focused its strategy on two main areas: AI-driven automation and a subscription-based revenue model. By shifting customers to its cloud subscription services and enhancing its products with artificial intelligence -- such as AI-powered bots and automated analytics -- Verint aims to provide ongoing efficiency gains and reduce customer costs. Success in this space depends on Verint’s ability to maintain technological leadership, grow recurring revenue, and keep an edge in a competitive market.

Quarter Review: Key Results, Trends, and Drivers

In the quarter, recurring subscription revenue remained the backbone of the business. Subscription Annual Recurring Revenue (ARR), the company's primary metric for ongoing software contracts, rose 6.4% to $728 million. AI ARR was up 21.2% to $372 million.

Despite this growth in high-value subscriptions, topline revenue (GAAP) declined 1.0% compared to the previous year, mainly due to continued declines in legacy and non-AI business lines. The company’s non-AI subscription ARR dropped 5.6%, and revenues from nonrecurring items, such as perpetual software licenses and professional services, also fell. This indicates that while new AI-powered products are gaining traction, older revenue streams are shrinking faster than total subscription growth can offset.

Operating margins moved sharply lower, with the non-GAAP operating margin falling to 14.0%, down from 21.1% in Q2 FY2025. R&D expenses rose to 17.3 % of revenue, compared to 14.6 % a year previously, reflecting ongoing investment in innovation. At the same time, GAAP profits swung to a loss; the diluted loss per share was $(0.09) versus diluted earnings of $0.02 a year ago. On a Non-GAAP basis, diluted EPS also fell significantly.

One positive development was free cash flow, which turned positive at $13.5 million (non-GAAP). This is a notable turnaround from the same quarter last year when the company reported negative free cash flow. Net debt increased to $239.6 million as cash reserves declined.

Verint’s product portfolio revolves around its cloud-based Verint Open Platform and AI-powered bots, which automate various tasks in the customer experience lifecycle. The company continues to grow its set of prebuilt bots and integrations, aiming to offer faster return on investment for customers. Notably, the company indicated that its bundled SaaS (Software-as-a-Service) revenue segment grew while unbundled SaaS and support revenues declined, signaling a shift in how customers prefer to consume its offerings.

There were no major one-time events or significant changes in the overall segment structure, aside from Verint’s acquisition talks.

Looking Ahead: Guidance and Investor Focus

No financial guidance was offered for the coming quarters or full year. Management suspended its usual practice of providing guidance due to the pending acquisition by Thoma Bravo, a private equity firm. The company also did not hold an earnings call to discuss results or address future expectations.

For investors tracking Verint, the absence of forward-looking statements makes it challenging to assess near-term prospects. Key areas to monitor in future quarters include ongoing AI ARR growth, continued margin trends as investment in R&D remains high, and any further updates on the completion of the acquisition.

VRNT does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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