eGain (NASDAQ:EGAN) executives said the company delivered a fiscal 2026 second quarter that exceeded management’s expectations on revenue and profitability, while highlighting accelerating momentum for its AI Knowledge Hub product line and a growing contribution from partners in new customer wins.
Quarterly performance and AI Knowledge Hub momentum
Chief Executive Officer Ashu Roy said the company saw “good business momentum” in the second quarter, with revenue and profitability coming in ahead of both guidance and “street consensus,” alongside strong operating cash flow and “strong bookings,” including multiple Global 1000 logos and expansions.
Customer wins and deal drivers
On bookings, Roy pointed to several customer additions during the quarter. Among the new logos, he said eGain won an “enterprise knowledge mandate” at one of the world’s largest business software providers, with deployment planned across more than 100,000 users and multiple use cases spanning customer experience, employee experience, and AI initiatives. Roy said the win could also create an opportunity to partner with the client to potentially offer eGain’s knowledge solution to the client’s global customers.
Roy also described a win at a U.S.-based kitchen cabinet manufacturer with more than 15 brands and 6,000 employees. The customer selected eGain’s AI Knowledge Hub to centralize product and policy information that had been scattered across the organization, which Roy said made it difficult for service teams to find accurate answers for “long-tail” products.
In insurance, Roy said the company signed new logos including Achmea, which he described as one of Europe’s largest insurance and financial services groups, serving more than 10 million customers. He said Achmea selected eGain as a “knowledge-as-a-service partner” to support its digital insurer strategy, with eGain expected to power 21,000 users across use cases that include contact center and customer service.
Roy added that eGain is seeing momentum with credit unions, citing Oregon Community Credit Union. He said the customer selected eGain to modernize its knowledge system, and that eGain will support enterprise use cases including contact center deployments integrated with the Genesys CCaaS platform.
During Q&A, Roy said eGain is “more cases than not” replacing existing approaches that are either tactical point solutions or larger platforms that are no longer keeping pace with AI expectations. He outlined three common starting points he sees in customer environments:
- Organizations relying on multiple SharePoint repositories and attempting retrieval-augmented generation (RAG) on top of them, but struggling to make it work.
- Knowledge housed in Salesforce where customers “run out of patience” waiting for promised capabilities.
- Tactical knowledge management solutions that have not kept pace with modern AI requirements.
Go-to-market: partners, Composer, and “enterprise buying” convergence
Roy said partner activity is becoming a larger contributor to new customer acquisition. He noted that 25% of new logos in the first half of fiscal 2026 were sourced by partners, which he described as more than doubling partner-sourced new logos year-over-year. He also said partner-sourced leads in the first half increased 80% year-over-year.
When asked about what is driving partner strength, Roy pointed to two areas: boutique knowledge consulting firms looking to refresh platforms for existing clients, and what he called “pure contact center knowledge deals” through TSD-type networks.
Roy also said the company is seeing a “convergence” in buying behavior, with enterprise use cases increasingly bundled alongside customer experience (CX) deals. He attributed this to corporate AI teams taking interest in knowledge as a foundation for AI return on investment, reinforcing the company’s view that centralized, trusted knowledge is needed to scale AI initiatives.
On product initiatives, management reiterated the importance of eGain Composer, a developer-focused offering introduced in October. Roy said Composer is helping drive AI Knowledge Hub sales and attract ecosystem partners, with increasing engagement from enterprise AI groups and smaller partners building bespoke AI solutions. He said the company intends to expand awareness and drive early conversations across use cases beyond customer service and CX.
Roy also noted industry recognition, saying eGain was again placed in the “leader quadrant” of Gartner’s Magic Quadrant for Generative AI Knowledge Apps, and that the company was named a KMWorld Leaders Choice Award winner in November 2025.
Financial results: revenue, margins, cash flow, and customer metrics
Chief Financial Officer Eric Smith reported total revenue of $23 million for the second quarter, up 3% year-over-year and ahead of guidance. SaaS revenue rose 5% year-over-year and represented 95% of total revenue, up from 93% a year earlier. Smith said that excluding an approximately $600,000 per quarter reduction from non-core messaging products that are being sunset during the fiscal year, total revenue would have increased 5% year-over-year and SaaS revenue would have increased 8%.
Non-GAAP gross margin was 74%, up from 71% a year ago. SaaS gross margin was 80%, up from 78%, which Smith attributed primarily to product enhancements that enabled more cost-efficient deployments and operational efficiencies in cloud and customer support.
Professional services revenue was sequentially lower due to the timing of bookings that closed late in the quarter and the impact of a government shutdown, contributing to a negative professional services margin. Smith said the company “right-sized and adjusted” the professional services organization during Q2 and expects margins to return to flat to slightly positive starting in Q3.
Non-GAAP operating costs were $14.2 million, down 3% year-over-year, which Smith attributed to streamlining and realigning operations—investing more in AI product innovation while reducing spending on legacy products.
Non-GAAP net income was $3.0 million, or $0.11 per share on a basic and diluted basis, compared with $1.3 million in the year-ago quarter. Adjusted EBITDA margin was 14%, up from 7%.
The company generated operating cash flow of $10.1 million, representing a 44% margin, compared with $6.4 million and a 29% margin a year earlier. Smith said cash collections are historically front-loaded due to the timing of large deals and renewals. Cash and cash equivalents ended the quarter at $83.1 million, with no debt, up from $62.9 million as of June 30, 2025. The company did not repurchase shares during the quarter and had $19.7 million remaining under its authorized buyback program.
On customer metrics, Smith said SaaS ARR for AI knowledge customers increased 27% year-over-year, compared with 7% growth for all customers. Excluding the messaging products being sunset, SaaS ARR for all customers increased 11% year-over-year. He reported last-twelve-month (LTM) dollar-based SaaS net retention of 116% for AI knowledge customers (up from 99%) and 101% for all customers (up from 89%). LTM net expansion was 119% for AI knowledge customers and 108% for all customers. Total remaining performance obligations (RPO) increased 15% year-over-year, and short-term RPO of $53 million rose 4%.
Guidance, rollout updates, and hiring priorities
For fiscal 2026 third quarter, management guided for total revenue of $22.2 million to $22.7 million. Smith also guided for non-GAAP net income of $1.8 million to $2.3 million, or $0.06 to $0.08 per share, and adjusted EBITDA of $2.6 million to $3.1 million, implying a 12% to 14% margin.
For the full year ending June 30, 2026, eGain reiterated total revenue guidance of $90.5 million to $92.0 million. Smith said the company now expects GAAP net income of $4.5 million to $6.0 million, or $0.16 to $0.21 per share, including approximately $2.9 million in stock-based compensation expense and approximately $1.4 million in warrant expense. Non-GAAP net income is expected to be $8.8 million to $10.3 million, or $0.31 to $0.36 per share, with adjusted EBITDA of $10.9 million to $12.4 million, or a 12% to 13% margin.
In Q&A, Roy said the JPMorgan deployment is about halfway rolled out and is expected to be fully rolled out later this year “as planned.” Smith clarified that 50% of the non-core messaging reduction occurred in Q2, with the balance expected to reduce in the first quarter of fiscal 2027.
Roy also addressed capital allocation, saying eGain’s primary focus remains internal investment to drive top-line growth, while noting the existing share buyback authorization and that the company will continue to evaluate inorganic opportunities opportunistically.
On hiring, Roy said eGain has been investing in product talent in the Bay Area while reducing some distributed teams through automation, describing it as a reallocation toward higher-end engineering, product management, architecture, and AI roles. He added that marketing investment is expected to increase in the second half following the hiring of a new marketing head, and that the company is investing in specialist-led sales motions tied to the Composer proposition, with potential to add broader sales headcount as the effort scales.
About eGain (NASDAQ:EGAN)
eGain Incorporated (NASDAQ: EGAN) is a software company specializing in cloud-based customer engagement solutions. Its platform integrates knowledge management, analytics, and artificial intelligence to help organizations streamline customer service across digital channels. By centralizing information and automating routine interactions, eGain aims to improve agent productivity, reduce response times, and deliver consistent customer experiences.
The company’s product suite includes tools for knowledge authoring and delivery, AI-powered chatbots, case management, and predictive analytics.
