Yext, Inc. (NYSE:YEXT) has established a more profitable operating model before restoring consolidated growth. Fiscal second-quarter 2027 revenue declined 1.8% year over year to $111.1 million, while annual recurring revenue, or ARR, decreased approximately 1% to $440.8 million. ARR is a company-reported operating metric representing the annualized recurring amount of contracts executed at period-end.
Company-defined non-GAAP Adjusted EBITDA reached $34.0 million, up 29%, while Adjusted EBITDA margin expanded to 30.6% from 23.3%. Yext, Inc. calculates Adjusted EBITDA from GAAP net income by excluding interest, taxes, depreciation and amortization, stock-based compensation, acquisition-related costs, asset impairments, strategic transaction costs, other income or expense, and payroll-tax contingencies.
The result demonstrates cost discipline. The unresolved question is whether improving enterprise retention can generate enough recurring revenue to offset continuing contraction among smaller customers.
Bull Case
The enterprise business is moving in the right direction. ARR from customers with at least $50,000 of ARR increased 2% to $405.9 million and represented 92% of total ARR. Growth accelerated from approximately 1% in the preceding quarter.
Dollar-based net retention for this cohort improved to 98% from 96% a year earlier, while gross retention increased to 90% from 89%. Yext, Inc. said both improved retention and greater expansion contributed to the change. Including new customers, enterprise ARR increased by $6.6 million over the past year.
The growing importance of accurate brand information across AI-generated answers may strengthen the value of the platform. Yext, Inc. completed the GoShine acquisition to add brand-level AI-search visibility optimization and plans to pilot the technology with enterprise customers. Management does not expect acquired GoShine revenue to contribute materially this fiscal year, making current enterprise momentum less dependent on that acquisition.
Corvo AI could eventually provide a lower-cost route back into the small-business market. The working prototype uses a conversational interface to bring the marketing agents of Yext, Inc. to small-business owners without recreating a resource-intensive sales model.
Profitability also provides flexibility. Trailing 12-month company-defined non-GAAP free cash flow was $53.0 million. Yext, Inc. defines free cash flow as operating cash flow minus capital expenditures, including capitalized software-development costs.
Bear Case
Enterprise improvement has not yet restored companywide growth. Total ARR declined from $444.4 million to $440.8 million. ARR from customers with less than $50,000 of ARR fell 22% to $34.9 million, while net retention for that cohort dropped to 79%.
The $10.1 million of net ARR churn among smaller customers exceeded the $6.6 million increase from enterprise customers. Enterprise net retention of 98% also means the existing cohort still contracted before new customer additions, even though the rate improved.
Some margin expansion coincided with lower absolute investment. Sales and marketing expense declined to $26.3 million from $32.1 million, while research and development expense fell to $19.4 million from $23.4 million. Yext, Inc. must show that these efficiencies do not constrain product adoption or new-customer growth.
Adjusted EBITDA also excludes economically relevant costs. Stock-based compensation alone was $10.0 million during the quarter. Yext, Inc. has not disclosed customer counts, ARR, or revenue contributions for GoShine or Corvo AI.
Hedge Fund Sentiment
The filings available so far reflect positions held before Yext, Inc. reported its fiscal second-quarter 2027 results. Insider Monkey’s database showed 25 hedge funds holding Yext, Inc. at the end of 2Q2026, up from 24 funds three months earlier.
Conclusion
Yext, Inc. has established expense control, but the growth turnaround remains incomplete. Enterprise retention must rise above replacement levels, and new bookings must begin outweighing small-customer runoff. The 31% Adjusted EBITDA margin creates room to pursue that recovery, but consolidated ARR and revenue growth remain the necessary confirmation.
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This article is originally published at Insider Monkey.
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