Five9

We are discontinuing analyst coverage of Five9.

We will discontinue analyst coverage of Five9 on or about Sept. 11. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Our fair value estimate for Five9 is $27 per share, implying a 2026 enterprise value/sales multiple of 2 times.

We estimate revenue grows at a compound annual growth rate of 9% over the five years to fiscal 2030, underpinned by steady seat expansion, large customer wins, and a growing mix shift toward subscription revenue. We expect Five9 to win its fair share of seats within the contact center software market by offering AI-powered modules such as interactive virtual agents and agent-assist technologies to enhance the platform's appeal to potential clients. Increased adoption of these modules is expected to drive high-single-digit revenue growth during our forecast period. However, we also think AI could be particularly disruptive to the call center space, with virtual agents already accepted within the industry. Therefore, more advanced virtual agents and greater adoption may pressure seat growth over time.

Over the same period, we expect non-GAAP operating margins to improve to the low-20% area, from 19% (actual) in 2025. We anticipate a shift away from low-margin professional services revenue to improve the firm’s profitability over time. We expect this will be underpinned by improving operating leverage as Five9 continues to scale the business and moves upmarket. However, the firm must maintain high spending on product innovation and marketing to stay competitive, limiting margin gains.

We assign Five9 a no-moat rating. Although the company benefits from high customer switching costs, we believe Five9 faces strong competition for new customer wins and has historically generated uneven returns on invested capital, leaving us with low confidence regarding the firm’s ability to generate excess returns on invested capital over the course of the next decade. If Five9 can effectively fend off competitors, leverage new products to win sticky enterprise customers, and rapidly scale operations in the coming years, we could see the company eventually earning a narrow moat rating based on switching costs.

We believe CCaaS providers like Five9 typically benefit from high customer switching costs due to the mission-critical nature of customer service operations and deep integrations with business applications. Software, in general, benefits from high switching costs as software system installations are time-consuming, meticulous processes that generally require upfront verification, have many touchpoints throughout an organization, and often have new processes built upon them. Alongside monetary costs, switching CCaaS providers can lead to operational disruptions and inefficiencies, including employee retraining, reintegration with existing software, and the potential loss of customer data. Together, these disruptions may lead to subpar customer experiences and risk Five9’s replacement within an existing customer. We believe the relatively slow industry transition to more cost-effective, functionality-rich cloud alternatives reflects the complexity of contact center operations and the associated switching costs.

The core Intelligent CX platform enables customer service agents to interact efficiently with inbound and outbound communications across various voice and digital channels by leveraging interactive voice response, analytics, agent-assistance modules, and more. The firm’s customer base, spanning over 3,000 customers, primarily consists of midmarket companies, with both small-business and true enterprise customers in the mix, as well. While Five9 does not report gross client retention, the firm experiences dollar-based net retention, or DBNR, of nearly 110% in recent years, driven by year-on-year seat growth per client and greater module attachment from its momentum upmarket. We expect both DBNR and client retention to improve over time as Five9 continues to skew toward sticky enterprise customers and improves its seat monetization, fueled by the ongoing transition to cloud solutions, although AI remains a wild card.

However, Five9 faces increasing competition for new client wins from other cloud CCaaS providers and tech titans seeking a share of the contact center cloud transition opportunity. The primary cloud CCaaS competitors include Nice with its CXOne platform, Genesys (privately owned) with its Cloud CX platform, and an emerging contact center offering from Zoom. Nice CXOne and Genesys Cloud CX have been market leaders in the CCaaS space for several years and occupy roughly midteens market share, with Five9 following behind with 8%-9% of the market share. Five9 competes with build-it-yourself CCaaS toolkit solutions, UCaaS solutions like Twilio Flex and Amazon Connect, on-premises providers like Cisco and Avaya, and contact center solutions offered by CRM platforms such as Salesforce and Zendesk.

While we anticipate multiple providers benefiting from the contact center cloud transition, we expect Five9 will need to continue investing aggressively in product innovation and go-to-market efforts to remain competitive and achieve meaningful scale, which will weigh on near-term profitability upside. In recent years, Five9’s efforts to expand product functionality through acquisitions of AI, automation, and workforce optimization technologies, alongside investments in scaling and performance improvements to accelerate enterprise customer wins, have reduced returns on invested capital to below our estimated weighted average cost of capital. We also believe the rise of AI agents and their impact on seat-license sales in the CCaaS industry remains in purgatory and can materially lower future returns, creating further uncertainty around the firm’s growth prospects.

Still, we expect the ongoing push for new AI capabilities and workflow-enhancing modules to attract new, sticky enterprise clients, and the firm’s investments in new technological capabilities to eventually bear fruit as it achieves meaningful scale-based leverage. Nonetheless, given intensifying competition for new clients, comparable product functionality among peers, and inconsistent growth, we lack the confidence to grant Five9 a narrow moat rating.

As with CCaaS peers, Five9 is well-placed to benefit from the substantial contact center cloud transition opportunity, with less than half of global contact center agents having moved to the cloud as of 2025.

Five9 is executing well on a land-and-expand strategy, particularly with large companies, and enjoys solid wallet retention in recent years.

Five9 will continue to leverage recent investments in AI and automation to attract new clients, bundle offerings, and drive higher average revenue per seat.

Five9 faces intensifying competition from on-premises providers, other cloud-native CCaaS solutions, and larger companies with sizable cloud-based communications installed bases, including Amazon, Zoom, and Salesforce.

We expect AI and automation capabilities to become commoditized amid rising competition, possibly weighing on average revenue per seat and profitability upside for Five9.

Greater automation of customer service operations could lead to a gradual decline in global contact center agent seats, partly offsetting higher revenue per seat upside.