10-Q: Blackbaud Reports Q2 2026 Results, Revenue and Profit Up

Blackbaud, Inc. announced its second quarter 2026 financial results, showing an increase in revenue and income from operations, driven by recurring revenue growth and operational efficiencies.

Summary

• Blackbaud reported revenue of $290.6 million for the three months ended June 30, 2026, an increase of 3.0% compared to the same period in 2025.
• For the six months ended June 30, 2026, revenue was $571.7 million, up 3.6% year-over-year.
• Income from operations for the quarter was $62.0 million, an increase of $4.7 million compared to Q2 2025.
• Net income for the quarter was $35.4 million, or $0.79 per diluted share, compared to $26.5 million, or $0.55 per diluted share, in Q2 2025.
• The company highlighted continued investment in AI initiatives and the expansion of AI-enabled capabilities across its product portfolio.
• Gross dollar retention for the twelve months ended June 30, 2026, was approximately 91%, though expected to face temporary pressure due to a larger renewal cohort in 2026.
• Cash from operations significantly increased to $142.5 million for the first six months of 2026, up from $68.3 million in the prior year period.
• The company repurchased approximately $28.0 million of its common stock during the second quarter of 2026.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report with solid revenue and profit growth, strong operational cash flow, and strategic investments in AI, though some temporary pressure on retention metrics is noted.

Positives

• Revenue increased by 3.0% to $290.6 million for the three months ended June 30, 2026, and by 3.6% to $571.7 million for the six months ended June 30, 2026.
• Income from operations increased by $4.7 million to $62.0 million for the quarter.
• Diluted earnings per share rose to $0.79 in Q2 2026 from $0.55 in Q2 2025.
• Gross margin improved to 61.3% for the quarter and 60.3% for the six months, up from 59.7% and 58.6% respectively.
• Operating cash flow more than doubled to $142.5 million for the first six months of 2026.
• The company continues to invest in AI, launching its first agentic AI solution, the Blackbaud fundraising development agent.
• Gross dollar retention remained strong at approximately 91% for the twelve months ended June 30, 2026.
• The company maintained compliance with its debt covenants under the 2024 Credit Facilities.

Negatives

• Gross dollar retention is expected to face temporary pressure in 2026 due to a larger renewal cohort.
• The company anticipates a material impact from future phases of OBBBA in fiscal years 2026 and 2027, which may offset some cash tax reductions.
• The company has a significant amount of debt, with a total carrying value of $1.15 billion as of June 30, 2026.
• The company's stock repurchase program has restrictions tied to its net leverage ratio.

Risks

• Cybersecurity and data protection risks and related liabilities.
• Current or potential legal proceedings involving the company.
• The effect of foreign currency exchange rate and interest rate fluctuations on financial results.
• The ability to successfully integrate developed and acquired businesses and technologies, including artificial intelligence.
• The impact of expensing stock-based compensation.
• Sufficiency of capital resources to meet ongoing debt and obligations.
• The potential for unfavorable resolution of legal proceedings.
• The evolving nature of U.S. state OBBBA conformity considerations.

Future Outlook

The company expects to continue making critical investments in innovation, AI, cybersecurity, and cloud infrastructure migration. They plan to simplify and rationalize their portfolio through product sunsets and divestitures of non-core businesses. Stock repurchases are expected to remain an important component of capital allocation, with at least 50% of free cash flow from 2026 to 2030 anticipated for repurchases. Interest expense for the full year 2026 is projected to be approximately $62 million to $66 million.

Management Comments

• Delivered another quarter of solid execution against our operating plan, with continued focus on operational efficiency and product innovation.
• AI initiatives remain an important area of emphasis—both in the capabilities we are delivering to customers and in the way we operate the business.
• We expect this offering [fundraising development agent] to be marketed both to existing customers as an incremental subscription and to prospective new customers as part of our broader product portfolio.
• We are continuing to make critical investments in the business in areas such as innovation, AI, cybersecurity, and our continued shift of cloud infrastructure to leading public cloud service providers.
• Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy.

Industry Context

StockSavvy.ai notes that Blackbaud's focus on AI-powered solutions for social impact aligns with a broader industry trend of leveraging technology to enhance efficiency and effectiveness in the nonprofit and education sectors. The company's strategic investments in AI and cloud infrastructure position it to capitalize on the growing demand for intelligent solutions in its target markets.

Comparison to Industry Standards

• Blackbaud's reported gross dollar retention of 91% for the twelve months ended June 30, 2026, is a key metric for SaaS companies. While strong, it is noted as being lower than the prior period, with temporary pressure expected due to a larger renewal cohort in 2026. Industry benchmarks for gross dollar retention in mature SaaS companies often range from 90% to over 100% (including expansion revenue).
• The company's non-GAAP adjusted EBITDA margin of 38.0% for the quarter and 36.6% for the six months, and a Rule of 40 score of 41.0% and 40.2% respectively, are competitive within the enterprise software sector, indicating a healthy balance between growth and profitability.
• The company's revenue growth of 3.0% (quarterly) and 3.6% (six months) is moderate for the software industry, where growth rates can vary significantly by sub-sector and company maturity. Companies focused on emerging technologies like AI might expect higher growth, while established players in stable markets may see slower, more consistent growth.

Legal Proceedings

• The company is subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and investigations. However, as of June 30, 2026, no provision for liability nor disclosure was deemed required for any pending or anticipated legal proceeding or claim.

Stakeholder Impact

• Shareholders: Continued stock repurchases and potential for improved profitability may benefit shareholders. The company's focus on AI and innovation could drive long-term value.
• Employees: Investments in AI and global capability centers may lead to shifts in workforce composition and skill requirements. Stock-based compensation remains a significant expense.
• Customers: Continued development of AI-enabled features and cloud solutions aims to enhance customer capacity, productivity, and mission advancement. Pricing initiatives may impact costs.
• Creditors: The company's compliance with debt covenants and its net leverage ratio suggest a stable relationship with creditors.

Next Steps

• Continue to expand AI-enabled capabilities and commercialize new AI solutions.
• Optimize the solution portfolio through product sunsets and divestitures.
• Utilize at least 50% of free cash flow from 2026 to 2030 for stock repurchases.
• Monitor and manage foreign currency exchange rate and interest rate risks.
• Continue to invest in cybersecurity programs and tools.

Key Dates

Recommendation

The company demonstrates consistent revenue growth and improved profitability, alongside strategic investments in AI. However, the expected temporary pressure on gross dollar retention and the significant debt load warrant a cautious approach. A 'hold' recommendation reflects the balance between positive operational performance and ongoing strategic execution risks.

Keywords

AI solutions, social impact, fundraising, nonprofit software, cloud solutions, financial management, education solutions, corporate social responsibility