Five9 FIVN is scheduled to report fourth-quarter 2024 results on Thursday.

The company expects fourth-quarter revenues in the range of $267-$268 million. For the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $267.49 million, suggesting an 11.89% rise from the year-ago quarter’s reported figure.

Non-GAAP net income per share is expected in the range of 69-71 cents. The Zacks Consensus Estimate for earnings is pinned at 70 cents per share, indicating an increase of 14.75% from the prior-year quarter’s reported figure. The figure has remained unchanged over the past 30 days.

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Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

Five9 has a positive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 15.52%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 22.46%.

Earnings Whispers for FIVN

Our proven model does not conclusively predict an earnings beat for Five9 this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

FIVN has an Earnings ESP of 0.00% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Note for FIVN Ahead of Q4 Results

Five9 appears well-positioned heading into its fourth-quarter 2024 earnings, with several tailwinds supporting a BUY recommendation. The company's expanding artificial intelligence (AI) capabilities and strong subscription revenue growth trajectory suggest continued momentum. In third-quarter 2024, Five9 demonstrated accelerating growth with subscription revenues increasing 20% year over year, up from 17% in the previous quarter. This acceleration in the company's core revenue stream indicates strong underlying business fundamentals. The fourth-quarter guidance of $267-$268 million in revenues appears achievable given the company's recent performance and execution.

The company's AI initiatives have gained significant traction, with AI products comprising more than 20% of enterprise new logo Annual Contract Value bookings in the third quarter. Notably, deals, including AI components, were approximately 5x larger than those without AI, and AI was included in 100% of deals exceeding $1 million in ARR. This trend is likely to have continued in the to-be-reported quarter, supported by the launch of new AI capabilities and growing enterprise adoption.

Five9's recent acquisition of Acqueon, while contributing less than 1% to third-quarter revenues, should begin showing a more meaningful impact in the fourth quarter as integration progresses. The addition strengthens Five9's omnichannel capabilities and expands its addressable market, particularly in healthcare through Epic integration. Enterprise customer momentum remains strong, with the company achieving record enterprise new logo turnups in the third quarter. The $1 million-plus ARR customer segment, representing approximately 56% of subscription revenues, grew 29% year over year. This enterprise traction is likely to have persisted in the fourth quarter, driven by ongoing cloud migration trends and AI adoption.

The company's adjusted EBITDA margin reached 20% in the third quarter, with management expecting continued margin expansion. Strong operating cash flow of $41 million (16% of revenue) in the third quarter demonstrates improving operational efficiency. This trend is expected to have continued in the fourth quarter. However, the CCaaS market is becoming increasingly competitive, with both established players and new entrants investing heavily in AI capabilities. This intensifying competition from major CCaaS providers like Twilio TWLO, RingCentral RNG and Zoom ZM Contact Center might have pressured growth rates and margins in the quarter under review.

While macroeconomic uncertainties and competition persist, Five9's strategic positioning in the contact center cloud transition, growing AI capabilities, and improving profitability metrics make it an attractive investment heading into fourth-quarter earnings.

FIVN Price Performance & Stock Valuation

Five9 shares have plunged 44.8% in the past year, underperforming the Zacks Computer and Technology sector and the S&P 500 index’s return of 26.2% and 23.3%, respectively.

1-Year FIVN Stock Price Performance

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While Five9's trailing 12-month EV/EBITDA ratio of 34.63x appears elevated compared to the Zacks Internet - Software industry average of 8.41x, there are several compelling factors that justify the premium valuation and support a buy recommendation. The higher multiple reflects Five9's strong market position in the rapidly growing cloud contact center market and its successful execution in monetizing AI capabilities.

FIVN’s EV/EBITDA Ratio Depicts Stretched Valuation

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Investment Thesis for Five9

Five9 presents a compelling investment opportunity ahead of its fourth-quarter 2024 results, driven by its strong positioning in the rapidly evolving contact center-as-a-service (CCaaS) market. The company's robust AI momentum, with AI products contributing more than 20% of enterprise new logo bookings and deals, including AI components being 5x larger, demonstrates its technological leadership.

The accelerating subscription revenue growth of 20% year over year, expanding EBITDA margins at 20%, and strong enterprise customer traction make Five9 an attractive investment. With its recent Acqueon acquisition enhancing omnichannel capabilities and the continued shift toward cloud-based contact centers, Five9 is well-positioned for sustained growth.

Conclusion

Five9 stands out as a compelling investment opportunity ahead of fourth-quarter 2024 earnings, driven by accelerating subscription revenue growth, expanding AI adoption, and robust enterprise momentum. With strengthening margins, strategic Acqueon integration, and leadership in the CCaaS market transformation, the company is well-positioned to deliver continued growth. Investors should consider adding FIVN to their portfolios at current levels.

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