Shares of NICE Ltd (NASDAQ: NICE) experienced a sharp decline of 22.9% on Wednesday, closing at $96.35, after the company issued a revenue forecast for the second quarter that fell short of Wall Street expectations. The stock touched an intraday low of $95.62, as the disappointing outlook overshadowed a solid first-quarter earnings beat and robust growth in artificial intelligence-related sales.
Q1 Performance and AI Momentum
For the first quarter, NICE reported adjusted earnings of $2.64 per share on revenue of $768.62 million, surpassing analyst estimates of $2.52 per share and $760.94 million. Cloud revenue rose 14.6% year-over-year, while annual recurring revenue from AI subscriptions surged 66%. Chief Executive Scott Russell described the quarter as "a solid start to 2026," highlighting that every CXone enterprise deal now includes AI capabilities. The integration of Cognigy, an AI automation firm acquired last year, has progressed faster than anticipated, and international revenue jumped 30%.
Q2 Guidance Disappoints
However, the company's second-quarter revenue projection of $761 million to $771 million—representing midpoint growth of approximately 5.5%—fell short of the $777.38 million consensus estimate. During the earnings call, Mizuho analyst Siti Panigrahi questioned the slowdown from the previous quarter's 9% growth rate. CFO Beth Gaspich attributed the deceleration to "phasing effects" from several large customer renewals, where NICE made strategic commercial moves to secure longer-term AI deals, impacting the timing of revenue recognition.
This guidance shift has raised concerns among investors about whether the strong AI bookings will translate into reported revenue in the near term. NICE reported a cloud net revenue retention rate of 107%, but flagged potential short-term pressure as its product lineup transitions further into AI-centric solutions.
Profitability and Balance Sheet
GAAP net income dropped to $46.8 million from $129.3 million in the same period last year. The company allocated $253.3 million toward share repurchases during the quarter and ended March with $304.1 million in cash, cash equivalents, and short-term investments, carrying no debt.
Competitive Landscape and AI Use Cases
NICE operates in the competitive contact-center software market, facing rivals such as Genesys, Five9, and Verint. According to a 2025 provider report from ISG, NICE, Verint, and Genesys lead in routing, workforce management, and analytics. Russell highlighted real-world AI deployments, including Openreach's rollout of NICE Cognigy agents across 15 million customer journeys and Lufthansa's use of the software to handle nearly 2 million interactions during a strike. "Not a pilot," he emphasized regarding the Lufthansa case.
Portfolio Review and Full-Year Outlook
Management is reportedly conducting a portfolio review, with Russell confirming that NICE has engaged advisers to evaluate options for its non-CX businesses, which include financial crime, compliance, and public-safety units. However, no final decisions have been made. The company reaffirmed its full-year 2026 revenue target of $3.17 billion to $3.19 billion and raised its adjusted EPS guidance to $10.98-$11.18.
The market's reaction underscores the challenge NICE faces in convincing investors that its AI-driven growth can offset pricing changes and legacy revenue declines, especially as the company navigates the transition to a more AI-focused product portfolio.