Descartes Q2 Earnings Miss Estimates Despite 10% Revenue Growth

Descartes Systems (DSGX) reported Q2 FY26 non-GAAP EPS of 43 cents, lagging the Zacks Consensus Estimate by 12.2%. Revenues totaled $179.8 million, up 10% YoY and 7% sequentially. The growth was driven by synergies from acquisitions and strong momentum in global trade intelligence, customs, and regulatory compliance, and transportation management solutions. DSGX has acquired PackageRoute Holdco and Finale to bolster its logistics and supply chain software portfolio. Despite global supply chain pressures, the company's Global Logistics Network continues to drive recurring revenues and customer reliance.

Descartes Systems (DSGX), a provider of logistics and supply chain software solutions, reported its second-quarter fiscal 2026 (FY26) non-GAAP earnings per share (EPS) of 43 cents, falling short of the Zacks Consensus Estimate by 12.2%. Despite this earnings miss, the company's revenue grew 10% year-over-year (YoY) and 7% sequentially, totaling $179.8 million [1].

The growth was driven by synergies from recent acquisitions and strong momentum in global trade intelligence, customs and regulatory compliance, and transportation management solutions. Descartes Systems acquired PackageRoute Holdco and Finale to bolster its logistics and supply chain software portfolio [1].

Revenue growth was supported by a 14% increase in services revenues, which contributed 93% of total revenues. License revenues, accounting for less than 1% of total revenues, were $0.2 million. Professional services and other revenues, which comprised 7% of total revenues, fell 19% YoY to $12.8 million [2].

Despite global supply chain pressures, the company's Global Logistics Network continues to drive recurring revenues and customer reliance. The gross margin for the quarter was 77%, up from 75% the previous year, driven by lower-margin GroundCloud hardware sales. Adjusted EBITDA grew 14% to a record $80.2 million, and adjusted EBITDA margin increased to 44.6% [2].

Cash generated from operating activities amounted to $63.3 million, up 82% year-over-year and 18% quarter-over-quarter. As of July 31, 2025, the company had $240.6 million in cash, up from $176.4 million as of April 30, 2025. DSGX expects strong cash flow conversion, with operating cash flow projected at 80-90% of adjusted [2].

The stock's immediate price movement will depend on management's commentary on the earnings call. The current consensus EPS estimate is $0.51 for the coming quarter and $1.94 for the current fiscal year [1].

References:
[1] https://www.nasdaq.com/articles/descartes-systems-dsgx-lags-q2-earnings-estimates
[2] https://seekingalpha.com/news/4492098-descartes-systems-gaap-eps-of-043-in-line-revenue-of-1798m-beats-by-35m