The bear case on subscription software in 2026 has been simple and largely unexamined: AI will make these platforms obsolete, so pay less for them.
There is a clean way to test that claim. If AI were genuinely displacing a platform, customers would leave. Gross retention would fall. It is the one metric that cannot be dressed up, because it measures whether customers who could walk away chose to.
This company just reported gross retention of 97.3%, unchanged from a year earlier. Net retention of 110.5%. Multi-solution customers now generate 76% of subscription revenue, up from 71% a year ago and 62% three years ago. Customers spending over $300,000 a year grew 34%.
Customers are not leaving. They are consolidating more of their work onto the platform.
Meanwhile the stock is down roughly 34% this year, and it fell another 8% after a quarter that beat on revenue, beat adjusted earnings by 21%, and came with raised full-year margin and earnings guidance.
📈 Q2 revenue: $255.3M - up 18.6%, beat the high end of guidance
💰 Adjusted EPS: $0.77 - versus $0.63 expected, a 21.3% beat
📊 Non-GAAP operating margin: 16.8% - up 1,300 basis points year over year
🔒 Gross retention: 97.3% - unchanged despite the AI narrative
🔁 Net retention: 110.5% - above the company’s own target
🧩 Multi-solution customers: 76% of subscription revenue - up from 71%
💵 Free cash flow: $78M - FCF margin 30.5% in the quarter
🏦 Cash: $815M - and $172.7M of stock repurchased in the first half
Mini traffic light:
Retention 🟢 - 97.3% gross retention is the direct refutation of the disruption thesis; net retention 110.5% and rising multi-solution attach
Margin inflection 🟢 - Non-GAAP operating margin from 3.8% to 16.8% in twelve months, with full-year guidance raised to roughly 18%
Valuation 🟢 - Roughly 14 to 15 times raised full-year adjusted EPS for a business growing 19% with 97% gross retention
Growth deceleration 🟡 - Q3 revenue guidance implies 16.4% growth against 18.6% delivered; the direction is down and that is why the stock fell
Convertible debt 🟡 - $702 million of 2028 notes outstanding against $815 million of cash; manageable, but it is real leverage in a business only recently profitable
👉 Inside the Paid Tile: full company reveal, what the platform actually does and why finance teams cannot leave it, the agentic-first pivot, condensed 10x checklist, valuation table, Bull/Base/Bear scenarios with EV math, weighted expected return, KPIs to watch.
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