What Happened?

Shares of call center software provider Five9 (NASDAQ: FIVN) jumped 24.7% in the morning session after the company reported strong third-quarter earnings. Five9 blew past analysts' sales, EBITDA, and EPS expectations. Notably, subscription revenue growth accelerated 20% year-over-year, driven by the strong uptake of its AI solutions, which increased customer acquisition and expanded the average revenue per user​. The company is focused on accelerating subscription revenue, which is mostly recurring, leading to lower customer acquisition costs upon renewal in subsequent years. Consequently, this translates to higher profit margins. 

Looking ahead, full-year EPS guidance exceeded Wall Street's estimates, confirming the business likely anticipates more improvement in profitability. Zooming out, we think this was a solid quarter.

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What The Market Is Telling Us

Five9’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for Five9 and indicate this news significantly impacted the market’s perception of the business.

Five9 is down 51.9% since the beginning of the year, and at $36.47 per share, it is trading 57.3% below its 52-week high of $85.47 from December 2023. Investors who bought $1,000 worth of Five9’s shares 5 years ago would now be looking at an investment worth $601.22.

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