Agilysys (AGYS) Q4 Revenue Surge and Margin Gains Signal a Turnaround Play - Buy Now While the Catalysts Build

Agilysys (NASDAQ: AGYS) has delivered a transformative quarter, proving that its shift to a cloud-native software ecosystem is not just a strategy—it’s a revenue and margin machine. Q4 2025 earnings revealed a 19.4% year-over-year revenue jump to $74.3 million, crushing analyst estimates of $71.6 million. This beat underscores a critical inflection point: Agilysys is no longer just a legacy hospitality tech player but a subscription-driven growth engine with margin resilience and cash flow sustainability. Here’s why this is a buy now opportunity.

The Revenue Surprise: A Signal of Structural Growth in Hospitality Tech

The 19.4% revenue growth isn’t a fluke. Subscription revenue surged 42.7% YoY to $29.8 million in Q4, now accounting for 62.2% of total revenue—a stark contrast to just 58.1% in fiscal 2024. This recurring revenue flywheel is Agilysys’s secret weapon. Hotels and resorts are moving away from one-time software purchases and toward predictable SaaS models, and Agilysys is capitalizing.

The market isn’t pricing this in yet. Despite the beat, shares dropped 3.5% post-earnings—a contrarian buying opportunity. The disconnect? Investors are overlooking the durability of this growth. Agilysys’s backlog is at record levels, and its cloud-native platform (now unified and modernized) is reducing implementation bottlenecks that once plagued sales. The company’s salesforce expansion and Marriott PMS project (set to deliver in 2026) are hidden catalysts that will amplify this trajectory.

Margin Resilience: Proof of Operational Mastery

Agilysys’s gross margin dipped slightly to 60.7% in Q4 from 61.5% in Q4 2024, but the Adjusted EBITDA margin jumped to 19.5% of revenue, up from 15.6% in fiscal 2024. This isn’t just a margin recovery—it’s a strategic win. The company slashed operating expenses to 41% of revenue, down from 43.9% a year ago, by optimizing its cloud infrastructure and sales teams.

Critics will point to the gross margin dip, but this was self-inflicted. Agilysys prioritized accelerating the shift to higher-margin subscription models over squeezing near-term hardware margins. The result? A recurring revenue mix that’s now 61.7% of total annual revenue in 2025, up from 58.1% in 2024. This is a textbook example of sacrificing short-term margin for long-term leverage.

Cash Flow Sustainability: A Foundation for Growth

While Q4 2025 free cash flow dipped slightly to $26.5 million from $29.3 million in Q4 2024, the full-year free cash flow jumped 30% to $52.3 million. The dip was a one-off, driven by a $100M acquisition and debt repayments. The ending cash balance of $73 million is ample to fund the $308–$312 million revenue target for 2026—without dilution.

Importantly, the company’s fiscal 2026 guidance assumes no upside from the Marriott PMS project—a $50–$100M revenue generator once operational. This is a conservative stance, meaning even if the project is delayed, Agilysys’s core business is now firing on all cylinders.

Why the Market Misses the Buy Case

Analysts and investors are still underweight AGYS for two reasons:
1. Legacy tech skepticism: Agilysys was once synonymous with on-premise POS systems. Today, it’s a cloud-first SaaS leader, with subscription revenue growing at 25%+ annually.
2. Short-term noise: The stock has dropped 30% in six months due to macro fears and sector rotation. But Agilysys’s backlog and recurring revenue are immune to short-term economic cycles—hotels will still need software to run.

The Bottom Line: A Buy Now at $83 with 100% Upside

Agilysys is at a critical inflection point—its subscription model is scaling, margins are expanding, and cash flow is robust. With a 2026 EBITDA target of 20% of revenue and a $308M+ top line, even conservative estimates imply a $160+ price target (current: $83).

The risks? Sure—hotel sector slowdowns or tech competition. But Agilysys’s cloud-native ecosystem (as CEO Ramesh Srinivasan noted, “not easily duplicated”) and its #1 position in hospitality SaaS make it a defensive growth stock.

Action: Buy AGYS at $83. Set a $100 target for the next 12 months, with upside to $178 as the market catches up to its recurring revenue flywheel. The catalysts are in place—don’t wait for the crowd to realize it.

Disclosure: This analysis is for informational purposes only and not financial advice.