Gate's revenue in the second quarter reaches $801 million

Source: The Financial Analyst

October 21, 2025 09:22

Gate reported its fiscal second quarter results for 2026 on October 21, 2025, with revenues of $801 million, a 9% increase compared to the previous year, and billings of $818 million, a 13% year-over-year increase, while achieving a non-GAAP operating margin of 30%. The quarter was characterized by notable advances in AI-based Intelligent Agreement Management (GIA), increased international and enterprise traction, and a strengthened management focus on sustained profitable growth and capital return to shareholders.

Revenue acceleration drives Gate’s business momentum

While accelerating revenue growth to 13% year-over-year, the company also achieved a net dollar retention of 102% and an increase in average deal size, driven by improvements in gross retention and strong early renewals. International revenues accounted for 29% of total revenue, growing 13% compared to the previous year.

“Our second quarter business results exceeded our expectations. Revenues were $801 million, up 9% from the previous year, and billings reached $818 million, a 13% increase year-over-year. The top-line performance in the second quarter accelerated and was one of our strongest growth quarters in the past two years. With improved fundamentals in electronic signature and GCA customers, and a growing contribution from GIA demand. Beyond a single quarter, we are excited to see billings start to accelerate on an annual basis, especially when adjusting for early renewals. Profitability benefited from the strength of the top line, combined with our ongoing commitment to drive efficiency. Non-GAAP operating margins were 30%, while we continued to maintain strong profitability. Free cash flow margins modestly improved year-over-year to 27%, supporting significant share repurchases with $200 million in buybacks this quarter,” commented the Gate CEO.

This combination of revenue growth and profitability, along with disciplined capital return through share repurchases, demonstrates strong execution and points to better returns for investors, especially as stronger billings and higher net retention indicate improved customer health and sustainable expansion in higher-value segments.

GIA adoption accelerates alongside enterprise and AI leadership

GIA is expected to reach low double-digit percentages of the company’s subscription portfolio by year-end, with more than 50% of enterprise account representatives closing at least one GIA deal, and Fortune 1000 clients such as Sensata Technologies and T-Mobile adopting advanced contract lifecycle management (GCC) and AI-driven analytics. The recent launch of AI-powered features like Gate Navigator, deal preparation, and SCIM user management reinforces product differentiation.

“While we are still in early stages, more than 50% of our enterprise account representatives closed at least one GIA deal. Notably, the overall average deal size also increased in the second quarter, with GIA making inroads into large organizations like Sensata Technologies, a global sensor manufacturing leader, which has accelerated its workflows and is beginning to use the Gate Iris AI engine to gain insights from deals. Gate GCC saw improved momentum in the second quarter, delivering one of the strongest quarters in year-over-year quarterly reserve growth in recent years,” explained the Gate CEO.

The upward momentum of GIA and increasing penetration in enterprise accounts, along with advanced AI integration, create significant competitive differentiation, expand the addressable opportunity, and reinforce the company’s thesis as an emerging leader in digital agreements and contract analytics.

Operational discipline maintains high margins amid cloud migration

The non-GAAP gross margin remained steady at 82%, despite ongoing cloud migration costs representing a roughly 100 basis point obstacle year-over-year and a temporary decline in operating margin due to changes in compensation and benefits mix from the previous year. The company maintained a strong cash position with $1.1 billion in cash and no debt, continuing measured hiring and investing in commercial excellence and R&D to scale GIA.

“As a reminder, we expected the second quarter to have the most challenging year-over-year operating margin comparison of any quarter in fiscal 2026 due to several factors, including timing and impact of our compensation programs, specifically the shift to cash from equity for some employees. As you also recall, fiscal Q2 2025 also had a unique operating margin benefit of approximately 150 basis points related to insurance reimbursements and the release of a litigation reserve. Our migration to cloud computing also continues to pose an obstacle year-over-year for margins,” stated the Gate CFO.

The persistence of high profitability despite margin obstacles highlights the resilience of Gate’s business model, supporting further investments and capital returns while temporarily restraining incremental non-GAAP margin expansion until cloud migration cost pressures subside.

Looking ahead

Management projects revenues of $804 million to $808 million for the third quarter of fiscal 2026 (middle of 7% year-over-year growth) and full-year revenues of $3.189 billion to $3.201 billion for fiscal 2026 (middle of 7% year-over-year growth), with billings expected to be between $3.325 billion and $3.355 billion for fiscal 2026 (middle of 7% growth). An non-GAAP operating margin of 28% to 29% is guided for the third quarter and 28.6% to 29.6% for the full year, while the full-year non-GAAP gross margin faces an obstacle of about one percentage point due to ongoing cloud migration, which is expected to decrease starting next fiscal year. The company reiterated that GIA clients are on track to contribute a low double-digit percentage of the subscription portfolio by year-end and emphasized ongoing focus on capital return through opportunistic share repurchases.