Alkami (ALKT) Q3 2026 earnings review
Alkami's operating profit jumps, but its contracted backlog shrinks again
Alkami, which builds online banking software for US banks and credit unions, grew sales faster and widened its operating profit margin while its multi-year backlog shrank. Revenue rose 19% from a year ago as chief executive Alex Shootman highlighted 10 new client launches, and finance chief Cassandra Hudson lifted the full-year outlook after operating profit beat the company's plan. By our math, the updated plan has revenue growth slowing to 16% in the fourth quarter.
| Revenue | $134.9M +19.4% from a year ago |
|---|---|
| Adjusted EBITDA margin | 19.5% +5.3 percentage points from a year ago |
| Contracted backlog (RPO) | $1,731M +7.6% from a year ago (down $13M from Q2) |
| Full-year outlook | Raised Revenue +$1.75M, adjusted EBITDA +$1.5M at the middle |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because strong cost discipline and steady client launches were offset by a second straight drop in contracted backlog and a flat gross margin. Operating expenses fell as a share of sales across every department, lifting the adjusted EBITDA margin to nearly 20%. The bad news: contracted backlog fell $13 million from last quarter by our math, and gross margin excluding one-offs stayed stuck at 63% on partner and database costs.
The question now is whether live subscription growthNear 19% or backlog growth below 8% is the truer signal for 2027 sales. Either usage fees and upcoming renewals will refill the backlog, or slower multi-year bookings will pull revenue growth down toward the low teens. Fourth-quarter backlog during the peak renewal season will tell.
🐂 Bull Case
Lower Operating Costs Drove Record Operating Profit
Alkami aims to expand its adjusted EBITDA margin — operating profit before interest, taxes, depreciation and stock pay — by about 3 percentage points a year through 2030. Finance chief Cassandra Hudson said the third-quarter margin reached 19.5%, "more than 530 basis points of expansion compared to the year-ago quarter". The software maker attributed the gain to "continued scale and efficiencies across R&D, S&M and G&A".
- General and administrative cost, excluding one-offs: 12.2% of revenue, down 2.3 percentage points from a year ago by our math
- Sales and marketing cost, excluding one-offs: 12.0% of revenue, down 2.0 percentage points by our math
- Research and development cost, excluding one-offs: 19.8% of revenue, down 1.7 percentage points by our math
This cost discipline matters because it more than offset a dip in gross margin and beat the company's own profit outlook by 10%. Management also raised its full-year profit target and set a fourth-quarter plan that points to a 21.7% margin at the middle of the range, by our math.
What to watch: fourth-quarter operating expenses as a share of revenue. Holding sales, research and overhead costs near 44% of sales would show these savings are permanent rather than timing.
Steady Client Launches Lifted Revenue Growth
Alkami sells a bundled offering called the Digital Sales and Service Platform (DSSP), which combines online banking, data marketing and MANTL, its account-opening software. Chief executive Alex Shootman said the team "continued to drive AI product adoption and operational improvements while implementing an additional 10 clients in the third quarter". That stepped up from 8 client launches in the second quarter.
Those launches lifted revenue growth to 19.4% from 15.9% last quarter, while annual recurring revenue (ARR) — the yearly value of live subscriptions — rose 18.7% to $533.2 million. Alkami also signed 5 new online banking clients and 14 MANTL clients, with 5 buying the full DSSP bundle, leaving 31 institutions in the waiting line to launch.
What to watch: client launches in the fourth quarter against the 31-client waiting line. A steady launch pace is needed to clear the harder fourth-quarter comparison from last year's record implementations.
🐻 Bear Case
Contracted Backlog Shrank for a Second Quarter
While live subscription revenue grows nearly 19%, the total value of signed customer contracts not yet recognized as revenue — remaining performance obligations (RPO) — is barely moving. Alkami reported $1,731 million of RPO at the end of September, up 7.6% from a year ago. By our math, that contracted backlog fell by $13 million from the second quarter, after slipping $6 million the quarter before.
- Third-quarter net new ARR: +$21.5 million by our math, compared with +$25.3 million a year ago
- Third-quarter net change in RPO: -$13 million by our math, compared with +$29 million a year ago
- Backlog coverage: RPO equals 3.2 times live ARR, down from 3.4 times last quarter and 3.6 times a year ago
This gap matters because RPO measures multi-year contract commitments, whereas ARR only measures the current monthly billing rate. Two straight quarters of shrinking backlog alongside a smaller waiting line of unlaunched clients (1.0 million users, down from 1.3 million in June) indicate that new contract signings are not keeping pace with revenue recognition.
What to watch: fourth-quarter RPO, which typically benefits from year-end contract renewals. A third straight decline would point to slower revenue growth in 2027.
Database and Partner Costs Still Weigh on Gross Margin
Alkami has a long-term goal of lifting its gross margin excluding one-offs toward 70% by 2030, and earlier this year it targeted roughly 65% for 2026. In the third quarter, that margin was 63.1%, down 0.6 percentage points from 63.7% a year ago and flat with the second quarter's 63.0%. In its presentation, Alkami blamed the drop on "increased third party costs and temporary database costs".
Those database costs have weighed on results since late 2025, and the expected second-half recovery did not show up in the third quarter. Through nine months, gross margin excluding one-offs sits at 63.5%, so reaching 65% for the full year would require 69.3% in the fourth quarter by our math.
What to watch: fourth-quarter gross margin excluding one-offs. A reading still stuck near 63% would show that partner software resale fees, not just temporary database bills, are capping profitability.
One-Off Stockholder and Lease Costs Kept Rising
Earlier this year Alkami authorized a $100 million share buyback to offset employee stock pay and return cash, while also recording unexplained legal and advisory bills for stockholder matters. In the third quarter, it spent another $10 million on buybacks, bringing the nine-month total to $25 million by our math. At the same time, those stockholder expenses nearly doubled from last quarter to $2.1 million ($5.4 million over nine months).
The company also added back a new $2.1 million charge for lease assignment expenses. Together, stockholder, lease and acquisition charges added $5.0 million back to third-quarter adjusted EBITDA, or 3.7% of revenue, while the release gave no explanation of what the stockholder dispute involves.
What to watch: the footnote disclosures in the upcoming quarterly filing. Investors need to see whether the stockholder expenses have ended or whether outside pressure is driving capital decisions.
Risks this quarter didn't answer
Several standing questions from prior quarters received no updated numbers in the third-quarter release or presentation.
- Bank versus credit union wins: the presentation omitted the 12-month split between bank and credit union signings that stood at 15 banks out of 37 wins last quarter.
- Existing-client user growth: total users rose 2.8 million over the past year, but the split between new client launches and organic growth at existing institutions awaits the quarterly filing.
- MANTL standalone performance: standalone recurring revenue and the launch schedule for MANTL's loan origination product were not disclosed.
- Convertible debt and bank mergers: $337.7 million of convertible notes remain on the balance sheet against $85.2 million of cash and securities, and the release gave no update on client merger churn.
💲 Other KPIs
Registered users on the online banking platform rose 13.0% from a year ago to 24.4 million, adding about 774,000 users in the quarter by our math. Average revenue per user (RPU) reached $21.88, up 5.0% from a year ago. Pricing growth has slowed as Alkami lapped last year's MANTL acquisition: RPU rose 19% in 25Q3, 7% in 26Q2, and 5% this quarter.
Nine-month free cash flow — operating cash flow minus equipment purchases and capitalized software costs — rose to $32.4 million from $19.9 million a year ago. By our math, the software provider generated $20.0 million of free cash flow in the third quarter alone, or 14.9% of revenue, after generating $12.4 million across the entire first half.
Unpaid customer bills (accounts receivable) rose 21.4% from a year ago to $61.5 million, roughly matching the 19.4% rise in sales. Total deferred revenue — cash collected from clients for services not yet delivered — stood at $61.0 million by our math, up 8.8% from a year ago and up $1.4 million from June.
🔮 Guidance
Raised. The fourth-quarter outlook sits $0.4 million above what the prior full-year plan implied three months ago. At the middle of the range, it points to 16.3% growth from a year ago and 4.1% from the third quarter, by our math. Growth steps down from 19.4% this quarter because Q4 laps last year's heavy implementation wave. If the four-quarter average beat of 0.8% holds, Q4 revenue would reach $141.6 million by our math.
Raised. Alkami lifted the middle of its full-year sales plan by $1.75 million to $531.25 million, or 19.8% growth from 2025 by our math. That raise is larger than the $1.46 million third-quarter beat. It is the third raise this year: +$1.0M in Q1, +$0.5M in Q2, and +$1.75M in Q3.
Cut against prior implied math. While first issued as an explicit range, the $30.5 million middle of the range sits $0.9 million below what the full-year plan implied at Q2, by our math, as some savings arrived early in Q3. It still calls for a 21.7% margin at the middle of the range, up from 19.5% in Q3. If the 8.7% average beat holds, Q4 adjusted EBITDA would reach $33.2 million by our math.
Raised. Management lifted the middle of its full-year profit target by $1.5 million to $98.5 million, or 66.7% growth from 2025 by our math. Because the third quarter beat its plan by $2.38 million, the company passed through part of the beat and trimmed the implied fourth-quarter hurdle. It is the third raise this year: +$0.9M, +$0.6M, and +$1.5M.
❓ Key Questions
Why did contracted backlog shrink for a second straight quarter?
Remaining performance obligations fell $13 million to $1,731 million after a $6 million drop in Q2, and yearly backlog growth slowed to 7.6% while recurring revenue grew 18.7%. Management has not explained whether shorter contract terms or slower renewals caused the gap.
When will temporary database costs roll off the gross margin?
Gross margin excluding one-offs stayed flat at 63.1% and fell 0.6 percentage points from a year ago. With nine-month margin at 63.5%, the company's earlier 65% full-year expectation looks out of reach without a major fourth-quarter step-up.
What is driving the $5.4 million in stockholder matters expenses?
Alkami recorded another $2.1 million for stockholder matters in Q3, nearly double the Q2 charge, and excluded it from adjusted EBITDA. Investors still do not know which stockholder is involved or what demands are on the table.
How many new clients signed this quarter were banks?
Winning regional banks is a core growth pillar, and last quarter's presentation showed 15 banks among 37 signings over 12 months. The Q3 presentation dropped that breakdown and did not report standalone figures for MANTL.