Is BILL (NYSE:BILL) a Buy After a Mixed Q2 Earnings Report?

BILL Holdings (BILL) has long been a poster child for high-growth SaaS, but its Q2 2025 earnings report reveals a nuanced story. While the company delivered a 11.5% year-over-year revenue increase to $383.3 million and crushed non-GAAP EPS estimates by 30.4% [1], its Q3 guidance of $390 million at the midpoint fell short of analyst expectations [1]. This mixed performance raises critical questions: Is the stock’s current valuation justified by its growth trajectory, or is it overpriced amid softening guidance?

Growth Sustainability: A Tale of Two Metrics

BILL’s Q2 results highlight its dual engines of growth: transaction volume and customer acquisition. Total payment volume surged 13% YoY to $84 billion, driving 19% transaction revenue growth [1]. Meanwhile, the company added 4,500 net new AP/AR customers, pushing its total to over 160,000 [1]. These metrics underscore a scalable, high-margin model, with non-GAAP operating margins expanding 3 percentage points to 17% [1].

However, the company’s 2026 revenue guidance of $1.59B–$1.63B implies a deceleration to 9–11% growth, down from the 16–17% core revenue growth projected for 2025 [1]. This softening, while not catastrophic, signals a transition from hypergrowth to maturity—a phase that often pressures valuations. Management attributes this to macroeconomic headwinds and transaction volume volatility [1], but investors must weigh whether these risks are priced in.

Valuation: A Contradictory Landscape

BILL’s valuation metrics tell a conflicting story. On one hand, its P/E ratio of 111.5x [2] far exceeds the software industry average of 38.55x [3], suggesting overvaluation. On the other, analysts project a fair value of $60.19, implying the stock is undervalued at its current price [4]. The P/S ratio of 3.06 [4] also sits near its 10-year low, hinting at discounted expectations.

This dichotomy reflects a tug-of-war between backward-looking pessimism and forward-looking optimism. While the company’s recent negative earnings history inflates the P/E ratio [4], its forward P/E of 18.67 [2] and AI-driven monetization initiatives (e.g., financial operations agents launching in 2026 [1]) could justify a premium. The key question is whether these innovations will offset margin pressures as the business matures.

Risks and Opportunities

BILL’s path forward hinges on three factors:
1. AI Adoption: Management’s focus on AI-driven solutions could unlock new revenue streams, but execution risks remain.
2. Margin Resilience: With non-GAAP operating margins at 17% [1], the company must prove it can maintain profitability amid rising costs.
3. Macro Conditions: Transaction volume is sensitive to economic cycles, and a slowdown could pressure growth.

Insider selling activity [4] adds another layer of caution, though it may reflect portfolio diversification rather than bearish sentiment.

Verdict: A Buy for the Long-Term

BILL’s mixed Q2 results reflect the challenges of scaling a mature SaaS business, but its fundamentals remain robust. The company’s sticky customer base, high transaction margins, and AI roadmap position it to outperform in a recovery. While the current P/E ratio appears lofty, the forward-looking metrics and analyst fair value suggest the market is underestimating its potential.

For investors with a 3–5 year horizon, BILL offers a compelling risk-reward profile. However, those seeking short-term gains should monitor macroeconomic signals and insider activity closely.

Source:
[1] Bill.com's Q2 2025 Earnings: A Masterclass in Operational Efficiency and Revenue Scalability [https://www.ainvest.com/news/bill-q2-2025-earnings-masterclass-operational-efficiency-revenue-scalability-2508/]
[2] BILL (BILL Holdings) Forward PE Ratio [https://www.gurufocus.com/term/forward-pe-ratio/BILL]
[3] PE ratio by industry [https://fullratio.com/pe-ratio-by-industry]
[4] BILL Holdings (BILL): Reassessing Valuation as Analyst [https://simplywall.st/stocks/us/software/nyse-bill/bill-holdings/news/bill-holdings-bill-reassessing-valuation-as-analyst-profit-f]