Nice lays off 5% of workforce as AI revenue surges and profits fall
The company’s latest results show AI annual recurring revenue climbing 46% to $392 million, while operating income, net profit and margins declined.
Nice is reporting rapid growth in its artificial intelligence business, but the expansion is coming alongside falling profits, shrinking margins and another round of job cuts. The Israeli-founded software company said Wednesday that AI annual recurring revenue rose 46% year over year to $392 million in the third quarter, while announcing plans to reduce its global workforce by approximately 5%.
The company raised its full-year earnings forecast, but GAAP operating income fell 25% from a year earlier, net income declined 34%, and gross margin contracted by 4.4 percentage points. Nice also confirmed plans to cut approximately 5% of its global workforce, accounting for around 500 employees, as it restructures its operations and seeks to use AI to improve efficiency.
Nice reported third-quarter revenue of $790.7 million, up 8% from $732 million a year earlier, exceeding the company's guidance. Cloud revenue rose 10.6% to $622.7 million. The company said revenue growth would have been 9.4% overall and 12.2% in cloud had it not issued an atypical $10 million customer credit during the quarter.
The strongest growth came from its AI business. Annual recurring revenue from AI products reached $392 million, up 46% year over year and equivalent to 16% of cloud revenue. International markets also performed strongly, with revenue increasing 33%.
But the growth came alongside a significant decline in profitability. Nice's GAAP gross margin fell to 62.4%, from 66.8% a year earlier. Operating income dropped to $120.6 million from $160.8 million, while operating margin contracted to 15.3% from 22%. Net income fell to $95.1 million, compared with $144.9 million in the third quarter of 2025. Diluted earnings per share declined to $1.60 from $2.29.
The picture was less severe on a non-GAAP basis, which excludes items including share-based compensation and amortization of acquired intangible assets. Adjusted operating income declined 7.4% to $213.8 million, while non-GAAP operating margin fell to 27%, from 31.5%. Non-GAAP diluted earnings per share decreased to $2.84 from $3.18.
Nice said it exceeded the upper end of its guidance ranges for both revenue and non-GAAP earnings per share. It reiterated its full-year revenue forecast of $3.17 billion to $3.19 billion, representing 8% growth at the midpoint, while raising its non-GAAP EPS guidance to between $11.12 and $11.32. The company expects cloud revenue to grow approximately 12% this year.
AI push brings another round of job cuts
Alongside the results, Nice announced plans to reduce its global workforce by approximately 5% as part of a broader effort to streamline its operating model. The company said it would reduce management layers, simplify decision-making and strengthen its partner-led sales and delivery operations.
The cuts are intended to improve efficiency while allowing Nice to continue investing in areas it considers strategic priorities, particularly AI innovation, customer delivery and go-to-market capabilities. The company expects to record restructuring charges of $15 million to $20 million, primarily in the fourth quarter. Those costs will be excluded from its non-GAAP results.
The announcement adds to the workforce reductions and organizational changes that have accompanied Nice's push to reposition itself around AI. The company has been seeking to move beyond its traditional customer experience software business as AI tools increasingly automate customer interactions and support functions.
CEO Scott Russell said the company was responding to a potentially dramatic expansion in the scale of customer interactions as personal AI agents become more widely used.
“Personal AI agents have the potential to multiply customer interactions at an unprecedented scale, increasing the importance of a unified CX AI platform that can orchestrate every experience across human and AI,” Russell said. He added that Nice had the platform, strategy and customer relationships to lead the next phase of the market.
The company is betting that businesses will need platforms capable of coordinating interactions between human employees and AI agents, rather than relying on separate tools for each channel. That opportunity is reflected in the rapid growth of its AI recurring revenue, although AI products still account for a relatively small portion of the company's overall cloud business.
Nice ended September with $350.9 million in cash, cash equivalents and short-term investments and no outstanding debt. Operating cash flow was $97.7 million during the quarter, down from $190.5 million a year earlier. The company also spent $72.2 million on share repurchases.
