Digital banking software provider Q2 Holdings (NYSE: QTWO) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 15.2% year on year to $201.7 million. Guidance for next quarter’s revenue was better than expected at $204.4 million at the midpoint, 0.5% above analysts’ estimates. Its GAAP profit of $0.23 per share was 64.3% above analysts’ consensus estimates.

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Company Overview

With a platform powering digital services for approximately 25 million account holders across America, Q2 Holdings (NYSE: QTWO) provides cloud-based digital solutions that help financial institutions, fintechs, and alternative finance companies deliver modern banking experiences to their customers.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Q2 Holdings grew its sales at a 15% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Q2 Holdings’s recent performance shows its demand has slowed as its annualized revenue growth of 12.4% over the last two years was below its five-year trend.

This quarter, Q2 Holdings reported year-on-year revenue growth of 15.2%, and its $201.7 million of revenue exceeded Wall Street’s estimates by 2%. Company management is currently guiding for a 11.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 10% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

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Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Q2 Holdings is very efficient at acquiring new customers, and its CAC payback period checked in at 22.9 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

Key Takeaways from Q2 Holdings’s Q3 Results

We enjoyed seeing Q2 Holdings beat analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 5.3% to $64.31 immediately after reporting.

Sure, Q2 Holdings had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.