Vertex (VERX) Q2 FY26 earnings call: guidance and Q&A

How is Vertex making risk-averse tax accountants comfortable with adopting new AI solutions?

Chris Young explained that Vertex uses a 'forward deployed engineering model' to work with customers, helping them adapt their operational models, not just providing tools. He noted increased adoption of Vertex Intelligence (Copilot equivalent) and sees opportunities to improve customer posture and cross-sell through AI.

“you're not only offering your customers a tool, but you're changing the way they work. They've had a series of processes built up around how they categorize products.”

asked by Christopher Quintero · answered by Christopher Young

What are the drivers behind the slower cloud migrations and the lowered cloud revenue guidance?

John Schwab attributed the slowdown to an overall elongation of decision-making for technology moves requiring capital and deployment. Chris Young added that customers often have mixed environments and prioritize IT projects, but emphasized it's a 'conversion timing issue, not a revenue issue,' and not a loss of customers.

“I think there's just an overall kind of elongation of people making decisions to make technology moves into other areas. Wherever it's going to require capital and further deployment, et cetera, I think people are really pushing and taking a thoughtful view of exactly how fast to move.”

asked by Christopher Quintero · answered by John Schwab

How has the demand environment progressed over the quarter and into Q3, particularly regarding sales cycles?

Chris Young noted a stable demand environment with good cross-sell, upsell, and new logo opportunities. However, he highlighted an elongation in sales cycles, citing a specific 7-figure new logo deal that slipped from June to July due to procurement cycles.

“We did have a new logo 7-figure deal that we were expecting to close in June that immediately came in, in July, but we didn't get it in for this past quarter, as an example. So we are seeing some of that where -- which is different than again as we expected.”

asked by Jared Levine · answered by Christopher Young

Is the cloud revenue guidance now derisked, and should the current conversion activity be considered the new normal?

John Schwab stated they are 'calling what we see' regarding lower conversion ratios, which are built into the guidance. He acknowledged that while they've factored in current trends, the plan isn't 'risk-free' due to ongoing pipeline activity and deal elongation, but it reflects a thoughtful view of the environment.

“From an overall guidance perspective, I think as we look at the back half, there's still a decent amount of pipeline, as Chris said. And again, we are seeing -- there is some activity in the back half of the year around elongation of deals and other things. So I wouldn't say we didn't just set this up and say, all right, this is a risk-free plan by any stretch.”

asked by Samad Samana · answered by John Schwab

How are customers thinking about e-invoicing – as a fragmented market or moving towards consolidation, especially given the global opportunity?

Chris Young explained that mandates are still the primary catalyst for buying. However, as mandates increase, customers with global operations are increasingly seeking consolidation due to sprawl and risk. He noted early examples of customers adding multiple countries, indicating a potential shift towards broader consolidation once initial mandates are met.

“In reality, the catalyst to buy is still based on mandate, right? That's still the #1 reason customers are making decisions. That being said, as the number of mandates increase and therefore, the number of countries that these customers have to cover increases, they're getting to a point where there's a lot of sprawl and complexity.”

asked by Robert Oliver · answered by Christopher Young