12% ARR growth holds steady, but first-half cash flow retreats

The quarter landed inside the existing 2026 framework, not above it. The prior full-year outlook called for 10.5%-12.5% constant-currency ARR growth, 11%-13% subscriptions-revenue growth, $495-$510 million of AOI less Operating SBC, and $500-$570 million of free cash flow; management said profitability remained in line with expectations and did not raise that outlook.

Underlying growth was solid but broadly expected. Constant-currency ARR growth was 12% and constant-currency subscriptions growth was 13%, both consistent with the company’s prior outlook rather than an acceleration. Reported revenue rose 12.8% and subscriptions revenue rose 13.5%, while GAAP operating income grew only 4.9%; adjusted operating income rose 10.7% to $137.8 million, with the margin slipping to about 33.6% from 34.2% (Revenue and Income Statement; Adjusted operating income reconciliation).

The weaker part of the report is first-half cash generation. Q2 free cash flow improved 12% year over year to $63.8 million, but six-month free cash flow fell 7.9% to $251.7 million because operating cash flow declined to $264.9 million from $280.5 million, while capitalized software and equipment spending increased (Free Cash Flow table; Cash Flow statement). Management’s claimed 15% last-twelve-month free-cash-flow growth is better than the first-half comparison, but the filing provides no full LTM bridge, so the cash picture is less clean than the growth headline.

Capital allocation was more aggressive while leverage remained manageable. The company repurchased $125.1 million of Class B shares in the first half versus $50.0 million a year earlier and completed a $550 million term loan while repaying $677.8 million of convertible notes; quarter-end net debt leverage was stated at 1.9 times (Cash Flow statement; Balance Sheet; CFO commentary). That supports continued buybacks and acquisitions, but it also leaves higher interest expense—$17.3 million in the first half versus $7.3 million—and makes future cash conversion more important.

Net read: dependable execution, but no clear upside surprise. Growth and adjusted earnings were healthy and consistent with expectations, while the lack of a guidance increase and lower year-to-date free cash flow offset the favorable operating trends. The filing reinforces the existing investment case rather than materially improving it, with AI still described as an opportunity to monetize later rather than a current financial contributor (CEO commentary).