Coveo Powers Record Quarter on AI Demand, Eyes Government Deals

In a clear sign that enterprises are prioritizing secure and governed AI implementations, Coveo Solutions Inc. (TSE:CVO) announced record-breaking results for its third quarter of fiscal 2026. The AI-powered relevance platform provider reported its strongest new bookings performance to date, with revenue exceeding management's guidance, driven by balanced growth from new client acquisitions and expansions within its existing base.

"This quarter wasn't just about meeting targets; it was about setting a new benchmark for our company," said Executive Chairman Louis Têtu during the earnings call. He highlighted "new records in both subscription bookings and net bookings," attributing the success to the market's shift towards practical, secure AI. Total revenue and SaaS revenue both came in above expectations, leading the company to reaffirm its full-year outlook, now anticipating results at the high end of its projected range.

The quarter's momentum was notably balanced. Alongside securing major new contracts with brands like GE and Liberty Mutual, Coveo landed its largest-ever new customer deal: a seven-figure agreement with a Fortune 500 industrial leader. Equally important was expansion activity, with over 80 subscription and deployment upgrades with stalwarts such as Deloitte, United Airlines, and Thomson Reuters.

Commerce solutions were a standout contributor, with Têtu citing "exceptional growth." A significant expansion with healthcare giant Cardinal Health, supporting over $220 billion in distribution, underscored the platform's critical role in high-stakes digital commerce.

Throughout the call, executives positioned Coveo as a vital "relevance layer" for the emerging agentic AI landscape. They emphasized offerings like "RAG as a Service" and a "Coveo-hosted MCP Server," tools designed to let enterprises ground generative AI and digital agents in permission-aware, company-specific data. Recent launches, including a dedicated app for OpenAI's ChatGPT Enterprise and availability for AWS Agentic Services, aim to embed secure relevance directly into natural language workflows.

"The market is moving from confusion to clarity," stated CEO Laurent Simoneau. "Customers are now laser-focused on operationalizing AI against their own data to achieve measurable outcomes. Our strategy of interoperability and providing a common relevance layer is meeting that need."

A potentially significant future growth vector emerged with the announcement of a Memorandum of Understanding (MOU) with the Government of Canada to explore modernizing digital services using Coveo AI. Têtu clarified the MOU is akin to a letter of intent, with discussions ongoing for potential large-scale deployments across agencies, spanning both citizen services and internal civil servant tools. Coveo already provides similar solutions for the governments of Australia and New Zealand.

On the financial front, incoming Interim CFO Karine Hamel reported SaaS subscription revenue of $36.6 million, a 13% year-over-year increase. Total revenue reached $38.0 million, up 12%. The company completed the deprecation of its legacy Qubit platform and deployed $4.7 million to repurchase approximately 1.1 million shares. Adjusted EBITDA and operating cash flow figures included a one-time $1.4 million severance expense related to workforce optimization.

For Q4, Coveo guided for SaaS subscription revenue between $35.6 million and $36.1 million, noting the sequential comparison is impacted by two fewer calendar days. The company expects to be approximately break-even on adjusted EBITDA for both Q4 and the full year, while generating positive operating cash flow for fiscal 2026.

Market Voices:

"This is the validation we've been waiting for," said Anya Sharma, a technology portfolio manager at Horizon Capital. "Coveo's results show that the 'AI platform play' is consolidating. Companies don't just want raw AI models; they want the governance and relevance layer Coveo provides. The Canadian government MOU, while preliminary, opens a massive public sector vertical."

"The numbers are solid, no doubt," commented David Chen, a senior analyst at FinTech Insights. "The focus on RAG and agentic AI infrastructure is perfectly timed. However, I'm watching the CFO transition closely. Brandon Nussey's departure right after a record quarter is unusual. The market will want clarity on the permanent CFO search and whether this signals any strategic shift."

"Let's not get carried away," argued Marcus Thorne, an independent investor and frequent market commentator. "A 'record' quarter on just $38M in revenue? The hype around government deals is just that—hype—until a real contract is signed. They beat guidance by a hair and are still barely breaking even on EBITDA. This feels like a narrative built for momentum traders, not value investors. Show me sustained profitability, not just buzzword-compliant partnerships."

"The expansion deals with giants like Cardinal Health are the real story here," noted Priya Desai, a consultant specializing in digital transformation. "It proves retention and upselling in a competitive space. When your existing customers, who know your product best, choose to significantly expand their commitment, it's a powerful testament to ROI. That's more telling than any new logo."