Expensify (EXFY) Q3 2026 earnings review
Expensify raises its cash outlook, but total sales still shrink
Expensify's newer expense app and travel tool are growing fast, yet losses in its older software still pull total sales down. Total revenue fell 6% from a year ago as paid members dipped to 630,000, while direct service costs pushed gross margin down to 45% by our math. Founder and chief executive David Barrett raised the full-year free cash flow outlook after third-quarter cash generation beat what the prior plan pointed to.
| Revenue | $33.0M -5.8% from a year ago |
|---|---|
| Paid members | 630,000 -1.9% from a year ago |
| Gross margin | 45.2% -4.4 percentage points from a year ago |
| Full-year free cash flow outlook | Raised $1.5M middle of the range: $14.5M |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because New Expensify's growth still does not cover customer departures and lower prices in the older Classic base. Raising the cash outlook shows that tight overhead spending can protect cash flow, and travel bookings hit a record alongside a European card launch. The bad news: subscription revenue per member dropped 6% from a year ago by our math, gross margin fell another 3 percentage points from last quarter, and management raised its estimates for future employee stock grants.
The question now is when new customer additions on New Expensify will finally overtake the shrinking Classic customer base. Either the 30% quarterly growth on the new platform lifts total revenue within the next few quarters, or pricing pressure and member losses keep the overall business shrinking. Sequential revenue growth and paid member counts in the fourth quarter will show if the gap is closing.
🐂 Bull Case
New Expensify Grows Fast Without Dollar Figures
New Expensify is the software maker's newer chat-based expense platform, built to replace its original product. Chief executive David Barrett said that "Revenue from New Expensify increased 30% from Q2, and is up 212% y/y." He credited "micro-optimizations along the conversion pipeline", which lifted the share of signups becoming paying users by 67% from a year ago.
Last quarter the company reported that annual recurring revenue (ARR, the yearly value of subscription contracts) from customers starting on New Expensify passed $10 million. A 30% quarterly increase puts that figure near $13 million by our math, adding about $3 million in three months. However, Expensify did not print the exact dollar figure or customer count in this release.
What to watch: the exact dollar recurring revenue for New Expensify in the full annual report. That figure will show whether quarterly additions are large enough to overtake losses in the older product.
Travel Hits a Record and Card Enters Europe
Expensify earns money outside software subscriptions in two ways: interchange fees when customers swipe its corporate Expensify Card, and fees from booking trips on Expensify Travel. Both lines expanded this quarter as the San Francisco company pushed into new markets and added payment features.
- Expensify Card interchange revenue: $5.8 million, up 8% from a year ago
- Expensify Travel bookings: trips rose 40% from a year ago and 13% from last quarter, setting a quarterly record
- Geographic reach: launched the Expensify Card in the UK and 12 European Union countries
The company also signed a referral agreement with Visa and introduced consolidated travel billing "so companies can pay for all business travel on a single invoice". Barrett said this billing setup brings "substantially more revenue to Expensify from each travel booking". Even so, card interchange growth slowed from 12% last quarter to 8% in this one.
What to watch: interchange revenue growth in the fourth quarter as European card usage begins. A rebound above 10% would show the European launch and Visa referrals are bringing in new card spend.
AI Assistants and Custom Agents Gain Users
Expensify wants customers to manage expenses through artificial intelligence tools, both inside its own app and through outside chat services. The company connects to external AI tools using MCP, a standard link that lets outside assistants read and act on expense data.
Barrett said new MCP connections doubled last month, helped by Expensify joining the Claude for Small Business software bundle. Inside its own platform, thousands of customers adopted its custom AI agent in beta testing. Based on a late-October sample, the company said the agent handled over 96% of real-world requests. Management has not yet tied these tools to direct revenue.
What to watch: paid member additions in the fourth quarter. If inclusion in the Claude bundle and agent adoption attract small businesses, total paid members should stop shrinking.
🐻 Bear Case
Older Product Losses Still Outweigh New Signups
"Expensify Classic is a stable cash-flow engine whose customer base naturally declines over time, while New Expensify is our growth engine," Barrett wrote. Classic is the original expense service, which is now closed to new signups. For the company as a whole to grow, new customer additions must outpace Classic departures and pricing pressure.
- Total revenue: $33.0 million, down 5.8% from a year ago and down 2.5% from last quarter
- Paid members: 630,000, down 1.9% from a year ago and down 10,000 from last quarter
- Subscription and other revenue: $27.2 million by our math, down 8.2% from a year ago
- Subscription revenue per paid member: $43.21 by our math, down 6.5% from $46.21 a year ago
The numbers cut against the claim of a stable base. Total sales fell $0.8 million from the second quarter even as New Expensify grew 30%. Furthermore, subscription revenue is falling much faster than member counts because average revenue per member dropped 6.5% by our math, squeezed by lower-priced plans and card-first rivals.
What to watch: quarter-over-quarter total revenue in the fourth quarter. A sequential increase is the first proof that New Expensify additions have finally caught up with Classic customer losses.
Higher Service Costs Pushed Gross Margin Down
Gross margin measures the share of sales left after paying the direct cost of running the software and processing payments. While Expensify highlights its cash generation, its gross margin has dropped for three straight quarters.
In the third quarter, gross margin fell 4.4 percentage points from a year ago to 45.2%, down from 48.2% in the second quarter by our math. Cost of revenue — the direct cost of delivering the service — climbed from 50.4% of sales a year ago to 54.8% ($18.1 million). Because direct costs rose while sales shrank, GAAP operating loss widened from $2.3 million to $2.7 million despite lower overhead and marketing spend.
What to watch: cost of revenue and payment processing details in the quarterly filing. If software amortization and card cashback rewards keep rising against shrinking subscription sales, gross margin will stay under 46%.
Stock Grants Keep Eating Up Share Buybacks
Expensify uses its cash flow to buy back stock, which management frames as a direct return to owners. In the third quarter the company spent $1.3 million to repurchase 722,121 shares, bringing nine-month buybacks to $10.5 million. That helped trim the weighted average share count by 1.1% from a year ago to 91.5 million.
However, employee stock-based compensation remains much larger than the buybacks, running at $6.4 million this quarter, or 19.5% of revenue by our math. In addition, the company raised its quarterly stock-compensation estimates for the next three quarters by $0.6 million each. Ongoing stock grants and employee stock-matching programmes continue to replace most of the shares the company retires.
What to watch: weighted average diluted shares in the fourth quarter. It will show whether smaller open-market buybacks can keep the share count falling against $5.8–7.8 million of planned quarterly stock grants.
Risks this quarter didn't answer
Several standing concerns around customer migration, market coverage and economic sensitivity received no new data in the third-quarter release.
- Migrating larger Control customers: management previously held back moving its largest customers onto New Expensify to improve software speed, and the release gave no update on when that hold lifts or what share of total revenue has moved.
- Small-business economic sensitivity: management gave no commentary on how tariffs or economic slowdowns are affecting small-business travel and hiring.
- Thin analyst coverage: only one or two brokerage firms have joined recent earnings calls, and the call transcript is not yet available to see participation.
💲 Other KPIs
Free cash flow — operating cash after capital spending, software development costs, and customer settlement timing — rose 170% from a year ago ($1.23 million), when working capital hurt results. It stepped down from $6.45 million in the second quarter, representing 10.0% of revenue. Nine-month free cash flow reached $12.21 million.
Operating profit before stock-based pay, depreciation, taxes, and other income slipped 6.6% from $6.50 million a year ago and 7.8% from $6.59 million last quarter. As a share of revenue, it held steady at 18.4% compared with 18.5% a year ago, as lower general overhead and marketing spend offset the drop in gross margin.
Unrestricted cash on the balance sheet edged down 3.1% from $65.76 million in June by our math, but remains up slightly from $63.08 million at the end of 2025. Expensify used $1.3 million for share buybacks during the quarter and carries no long-term debt outside office leases.
🔮 Guidance
Raised. The expense software provider lifted its full-year cash target by $1.5 million, though the $14.5 million middle of the range still sits 27% below last year's $19.9 million result by our math. With $12.2 million already generated in the first nine months, the plan leaves just $2.3 million for the fourth quarter by our math, down from $3.3 million in the third quarter. This is the second raise this year (+$0M, +$5.5M, +$1.5M).
Raised. Management lifted its quarterly stock-compensation estimate by $0.6 million for each of the next three quarters and issued a $5.4–7.4 million target for the third quarter of 2027. For the fourth quarter, the $6.8 million middle of the range is up 5.5% from the third quarter's $6.45 million actual expense and up 36% from a year ago by our math.
❓ Key Questions
What is New Expensify's exact dollar recurring revenue now?
Last quarter management disclosed that New Expensify passed $10 million in annual recurring revenue from new customers. This quarter it gave only a 30% growth rate, leaving investors to estimate the dollar additions against the shrinking older product.
Why did gross margin drop to 45.2% this quarter?
Direct cost of revenue rose to 54.8% of sales even though revenue fell. Investors need to know how much of the 4.4-point margin drop came from card cashback rewards, lower Visa incentives, or software amortization.
Why did stock-compensation estimates rise by $0.6 million per quarter?
The company already raised its stock-compensation outlook last quarter after a June executive option grant. Another $0.6 million quarterly step-up across the next three quarters points to additional grants or matching shares that offset buybacks.
Have larger Control customers started moving to New Expensify?
Earlier this year Expensify paused migrating its largest customers while it worked on software speed. Management did not say whether that hold has been lifted or what share of total revenue now sits on the new platform.