NICETASEThe short version
NICE Ltd.
NICE is a roughly 40-year-old Israeli enterprise-software leader in cloud contact-center and financial-crime software; it reports in US dollars while its shares trade in shekels on the Tel Aviv exchange, with NASDAQ ADRs alongside.
From a $135 March peak the shares fell 40.6% to an $80 June trough on AI-disruption fear, then recovered to $95 — still 29.6% below the high.
$95
Share price (ADR-equiv.)
$6.0B
Market cap
2.9%
Adjusted FCF yield
−40.6%
Peak-to-trough fall
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As reported
A $2.9B software leader, growing but decelerating
FY2022 → FY2025as reported · $
Revenue$2.9B+8%
Gross margin66.4%−0.3pp
Operating margin21.9%+2.0pp
Net income$612M+38%
EPS$9.67+43%
Free cash flow$623M−15%
Open the full statements →Statements as filed in US dollars; the share price trades in shekels.
- Two software franchises. Customer Engagement (CXone) is 84% of revenue; Financial Crime & Compliance (Actimize) the rest. Revenue grew 7.7% in FY2025 to $2,945M, with $612M net income and $623M free cash flow.
- Cloud-first, near net cash. Cloud is 76% of revenue and still compounds double digits. The balance sheet carries no financial debt after the $460M notes were repaid in 2025, against ~$417M of cash and short-term investments.
The fit
Outside the framework's universe (U2 not met); contested: U1, X1, X2, X3, X4, S1
Where NICE sits against the framework
| Test | Reference line | Where NICE sits |
|---|---|---|
| Universe size | > $10B | ~$6.0B — ~40% short |
| Year-10 gate | near-certainty | not met (p 0.61) |
| Adjusted FCF yield | 8–9% bar | 2.9% |
| Diagnosis | temporary? | p 0.61 temporary |
| Confidence | — | low (prior-driven) |
- A size miss, stated plainly. At 63.3M shares and a $95 ADR-equivalent close, equity is worth about $6.0B — roughly 40% below the $10B floor. By the framework's own gate, that ends the screen before any pillar can carry it.
- The one mitigant, in the same breath. The $6.0B follows a ~40% ADR fall; on its pre-drawdown market cap of ~$10.5–11B, NICE would have sat right at the line. Today it does not.
Confidence is low: with the name masked, five screening criteria resolved on different labels — a prior-driven-risk signal — though the size miss holds either way.
The business
Cloud contact-center and financial-crime software
FY2025 revenue by model
Cloud$2.2B76%
Services$0.6B19%
Product$0.1B5%
Cloud is 76% of revenue; legacy services and product are shrinking as customers migrate.
- One dominant engine. Customer Engagement — routing, recording and automating call-center interactions — is 84% of revenue; the smaller Financial Crime & Compliance suite catches money-laundering and fraud for banks. Both are subscription software.
- A leader, not a walled garden. NICE has topped Gartner's CCaaS quadrant for 11 straight years, yet competes with Amazon Connect, Cisco, Five9, Genesys and Salesforce. The moat is scale and switching cost, not a regulator's gate.
The dislocation
A 40.6% fall on a beat-and-raise the market sold
Daily close on the Tel Aviv exchange, Jan to Jul 2026.
- The trigger was forward, not the quarter. The 6-May Q1 report beat on revenue and EPS and management raised full-year EPS guidance — yet the stock fell 18.8% in one session on a soft 5.5% Q2 revenue guide and cloud retention slipping to 107%.
- Capitulation volume, late in the fall. Volume spiked 3.3x over the decline; the heaviest session traded 13.8x its average near the June trough on almost no price change — the washout signature, not the start of the slide.
Estimates vs price
The price fell far more than the numbers were cut
Price move vs forward-estimate revisions
- Forward earnings actually rose. While the price fell 40.6% peak-to-trough, FY2027 revenue consensus slipped only 1.3% and FY2027 EPS was revised up 5.1% to $13.13 — above FY2025's $12.30. The trimming, where any, followed the price.
- Multiple compression, not an earnings collapse. On unchanged FY2025 EPS the ADR-equivalent multiple went from ~11x to ~7.7x — the market repricing NICE's growth trajectory, not the cash flows the sell side forecasts.
Damage math
Value destroyed versus price destroyed
Value destroyed as a share of pre-shock equity
- A one-year, ~10% earnings step-down. FY2026 EPS was guided ~10% below FY2025 while revenue still grows ~8%. A transparent two-scenario NPV puts the damage at ~1.6% of pre-shock value if temporary, 10–18% if permanent.
- The gap is the point. The market erased 29.6% peak-to-current; even the permanent reading leaves a gap of 12–20 points. The residual is a multiple de-rating — the price behaving as if the impairment were permanent and then some.
Temporary or permanent
Independent judges lean temporary, carrying real doubt
61%
P(impairment temporary)
~1.6%
NPV hit if temporary
10–18%
NPV hit if permanent
107%
Cloud net retentionfalling, AI-transition pressure
- The bull mechanism is refill. AI ARR grew 66% to $345M and now sits in every enterprise CXone deal; as seats compress, higher-value AI spend is meant to replace them. Consensus itself models FY2026 as the trough and FY2027 as a new high.
- The bear mechanism is a price reset. Cloud growth decelerated to ~12% ex-Cognigy, retention is 107% and falling, and pricing is shifting from per-seat to consumption, which the filing warns could commoditize the product. The 0.61 leans temporary, not settled.
Yield vs the bar
On the adjusted basis, 2.9% against an 8–9% bar
FCF yield, by adjustment
Reported FCF
10.3%
Less SBC
7.9%
Ex-Cognigy adjusted
5.7%
Fully adjusted
2.9%
- The adjustment does the work. The framework charges stock comp and a five-year average of acquisition spend against FCF, removing ~740 bps: a ~10.3% reported yield becomes ~2.9%, roughly 560 bps short of the bar a net-cash balance sheet selects.
- The charitable read still misses. Treating Cognigy as a one-off lifts the yield to ~5.7% — under the 8–9% line throughout. Only the unadjusted 10.3% clears it, and that is not the basis the framework uses.
Capital returns
Debt-free, buying its own fall
Cash spent on buybacks ($M)
Plus a record $253M in Q1 2026 — about 3.5% of market cap in one quarter.
- The flywheel is intact and executed. Buybacks rose $145M to $489M across 2022–2025, plus a record $253M in Q1 2026, with $460M of notes repaid and zero financial debt behind them. Share count is falling.
- But the net retirement is slow. Stock-based comp of $146–182M a year and the part-stock Cognigy deal hold the reduction to ~1.6% a year — enough to clear the framework's rising-share-count fail, but no faster.
The year-10 gate
The gate asks near-certainty; the moat is switching cost
Year-10 conviction sources
| Source | Applies to NICE? |
|---|---|
| Operating history | Applies — ~39 years |
| Essential product | Partial — category, not vendor |
| Market structure | Partial — contested oligopoly |
| Regulatory barrier | Does not apply |
| Capital intensity | Does not apply — ~3% of revenue |
- The disqualifier is absent. Revenue rose every year for a decade and FCF for seven, so the three-year-decline flag reads false. But only one of five conviction sources applies cleanly, and the gate demands near-certainty on both revenue and cash flow.
- The threat is NICE's own. Its 20-F flags that AI may cut demand for solutions priced on the number of human agents; its largest business is priced per seat. So the gate does not hold — probability 0.61 against, both model families agreeing.
The clock
Dated levers to reprice it, one imminent
Re-rating levers
| Lever | Window |
|---|---|
| Q2 2026 print vs low bar | 5 Aug 2026 — imminent |
| Cloud growth reaccelerates | Q3 2026 → FY2027 |
| EPS growth returns | FY2027 (~May 2027) |
| Buyback shrinks the float | Continuous |
| Actimize divestiture | Live, no close date |
- A low bar, two weeks out. Q2 revenue was guided to just +5.5%; consensus models the growth trough at that print and reacceleration through FY2027. A Q2 that clears the soft guide with retention no longer sliding removes the specific fear.
- The sell side has not capitulated. Zero sell ratings through a 40% fall; every published price target sits at or above spot. The two prior guide-driven drops round-tripped in ~4 months — but this one is roughly double their depth.
The re-rating math
The framework does not open a target here
$6.0B
Market cap — ~40% under $10B
2.9%
Adjusted yield vs 8–9% bar
~9.7 yrs
FCF to retire the float
low
Confidence tier
- Re-rating math is unavailable by construction. With the name outside the universe and no normalized adjusted yield computable, the framework opens no target price. The size miss ends the screen, not a judgment on the business.
- The closest arithmetic points down. To reach even the 8.5% fortress bar, adjusted FCF would have to roughly triple — or the price fall a further ~65% to ~$2.1B — unless the acquisition engine stops. Stated as arithmetic, not advice.
What to watch
A capitulation-grade dislocation in a durable leader — sized below the line
- 01FY2027 EPS/FCF fail to rebound toward FY2025 levels (~$13 EPS / ~$695M FCF), proving 2026 was a permanent step-down rather than a trough.
- 02Full-year 2026 operating margin lands at/below 25% with no H2 recovery, showing the margin reset from ~30% is structural not the guided 'planned, time-bound' investment.
- 03Ex-Cognigy cloud growth falls below high-single-digits for two consecutive quarters or cloud NRR deteriorates materially from 107%.
- 04AI ARR or AI backlog growth decelerates sharply from the verified +66% ARR and +78% backlog markers.
This distills a fixed, five-pillar fit test built tab by tab — not investment advice.
Compiled from the full report · 2026-07-23 · For information, not investment advice.