Nice Ltd. (NASDAQ:NICE) topped Wall Street’s third-quarter expectations and nudged its full-year profit forecast higher, even as the customer-experience software maker disclosed a fresh round of layoffs tied to its artificial intelligence buildout.
Adjusted earnings came in at $2.84 a share, ahead of the $2.78 consensus, while revenue of $790.7 million edged past the $785.75 million analysts had modeled, according to Investing.com. Total sales rose 8.0% from $732.0 million a year earlier, and cloud revenue climbed 10.6% to $622.7 million. The company said that without an atypical $10 million customer credit issued during the quarter, total revenue would have grown 9.4% and cloud revenue 12.2%.
“In the third quarter, we delivered total revenue and non-GAAP EPS above the high end of our guidance ranges, while continuing to advance our position in the rapidly evolving CX AI market,” Chief Executive Scott Russell said in the release.
The headline growth number was artificial intelligence. Annual recurring revenue from AI products reached $392 million, up 46% year over year and equal to 16% of cloud revenue. International markets were the other bright spot, with revenue up 33%.
Profitability moved in the opposite direction. GAAP gross margin slipped to 62.4% from 66.8%, operating income fell to $120.6 million from $160.8 million, and net income dropped to $95.1 million from $144.9 million. Diluted earnings per share on a GAAP basis came to $1.60, down from $2.29. On a non-GAAP basis, which strips out share-based compensation and amortization of acquired intangibles, operating income declined 7.4% to $213.8 million and the operating margin narrowed to 27.0% from 31.5%. Non-GAAP diluted EPS fell to $2.84 from $3.18.
The company also confirmed it will cut roughly 5% of its global workforce, or about 500 employees, as it trims management layers, simplifies decision-making and leans harder on partner-led sales and delivery. Nice expects restructuring charges of $15 million to $20 million, mostly in the fourth quarter, which will be excluded from non-GAAP results.
| Metric | Q3 2026 | Q3 2025 |
|---|---|---|
| Total revenue | $790.7M | $732.0M |
| Cloud revenue | $622.7M | $563.0M |
| GAAP gross margin | 62.4% | 66.8% |
| GAAP operating income | $120.6M | $160.8M |
| GAAP net income | $95.1M | $144.9M |
| GAAP diluted EPS | $1.60 | $2.29 |
| Non-GAAP operating margin | 27.0% | 31.5% |
| Non-GAAP diluted EPS | $2.84 | $3.18 |
Note: Cloud revenue for the prior-year quarter is derived from the reported 10.6% growth rate.
For the full year, Nice kept its revenue target at $3.17 billion to $3.19 billion, a midpoint implying about 8% growth, and lifted non-GAAP EPS guidance to $11.12 to $11.32 from a prior range. The new midpoint of $11.22 sits just above the $11.17 consensus. Management still expects cloud revenue to expand roughly 12% this year.
The cuts land as Nice tries to reposition itself beyond traditional contact-center software, where AI tools are increasingly automating the interactions its products were built to manage. Russell argued that the spread of personal AI agents could multiply customer interactions at an unprecedented scale, raising the value of a single platform that can coordinate experiences across both human staff and machines. He said the company has the platform, strategy and customer relationships to lead the next phase of the market.
That thesis is gaining traction but remains a small slice of the business: AI recurring revenue, though growing quickly, still represents less than a fifth of cloud sales. The margin compression also suggests the transition is not cost-free, with AI investment and a heavier mix of cloud delivery weighing on profitability even as the top line holds up.
Nice closed September with $350.9 million in cash, cash equivalents and short-term investments and no outstanding debt. Operating cash flow was $97.7 million, down from $190.5 million a year earlier, and the company spent $72.2 million buying back shares.
For investors, the quarter offers a split verdict: demand for AI-enabled customer experience tools is real and accelerating, but the earnings power of the legacy franchise is eroding. The raised profit outlook and the in-line revenue guide suggest management expects the restructuring to help stabilize margins into next year, while the $15 million to $20 million charge will land mostly in the fourth quarter. Shares will likely trade on whether the AI revenue ramp can outpace the drag from declining GAAP profitability.