Five9's AI sales nearly doubled, but its customers are still adding human agents

Customer service is often named as one of the first jobs AI will automate. Five9, which sells cloud software that runs the call centers of more than 4,000 companies, just offered one of the clearest public readings of how that is going. The short answer, according to the company: AI spending is rising fast, and so is spending on human agents.

That matters for a large group of software companies. Five9 and its rivals mostly charge per agent "seat," a license for each human worker. Investors have worried that every AI agent a customer deploys means fewer seats to sell. Five9's third-quarter numbers, released November 5, suggest that has not happened yet. The stock fell sharply anyway, for other reasons.

What Five9 reported

Five9 said AI products brought in about $45 million in the quarter, up 91% from a year earlier. That is 17% of its subscription revenue, up from 10% a year ago. AI growth sped up from 78% in the second quarter, and the company raised its full-year AI growth forecast to at least 75%, from at least 60%.

Total revenue rose 13% to $323.3 million, slightly ahead of Wall Street estimates. Subscription revenue grew 16%. The core call-center software business, which still makes up most of the company, grew 8%, a bit faster than the prior quarter's 7%.

The key detail for the automation debate came on the earnings call, according to published summaries of it. Chief financial officer Bryan Lee said the number of agent seats in use grew roughly in line with that 8% core revenue growth, and that he expects the same in the fourth quarter. Chief executive Amit Mathradas said some customers in regulated industries are keeping or adding human agents while expanding their use of AI.

Mathradas put it as a sales pitch: "AI is going to drive more interactions for this business, not less." His argument is that AI handles routine steps, such as verifying a caller's identity, and passes harder cases to people. Buyers should note he has every reason to say this, since his seat business depends on it. Five9 gave no seat figures in its results, so outsiders cannot check the trend directly.

Why investors sold anyway

Shares lost roughly a fifth of their value after the report, falling from about $34 to around $28. Two things outweighed the AI growth.

First, Five9 cut its full-year adjusted profit forecast to $3.19 a share at the midpoint, from $3.26. Its fourth-quarter profit guidance of $0.88 to $0.92 a share came in well below the roughly $0.99 analysts expected. The company blamed mostly the timing of planned changes to its organization, plus a higher share count. Gross margin also slipped.

Second, Five9 agreed to pay $325 million in cash for Level AI, a startup that sells call-center AI tools. Level AI had about $20 million in annual recurring revenue at the end of October, growing about 50% a year. That puts the price at about 16 times Level AI's current recurring revenue, or about 11 times its expected revenue over the next 12 months, the multiple Five9 itself cited. The cash equals close to half of the roughly $698 million in cash and short-term investments Five9 held at the end of September.

Analysts were unconvinced on price. DA Davidson cut its target to $30 and said the deal "ultimately stole the show," adding that the price left it more cautious on the return. Barclays, Truist and Wells Fargo also lowered their targets. Five9 expects the deal to trim about one point off its 2027 adjusted profit margin before adding to margins in 2028.

What it means for companies buying call-center AI

Five9's purchase is part of a fast consolidation. Three days earlier, Salesforce agreed to buy Cresta, a maker of voice AI agents used by Marriott, Comcast and Alaska Airlines. The Information reported a price of about $2.7 billion, which Salesforce did not confirm. Earlier this year Salesforce also bought Fin, the AI support agent formerly known as Intercom, for about $3.6 billion.

For buyers, that shifts the risk. Five9 says it will keep selling Level AI tools to call centers that run on rival platforms, including one Fortune 100 insurer's in-house system. But nothing in the public terms commits it to keep those connections equally strong. Customers using Level AI on another vendor's call-center platform would be wise to check change-of-control, data-use and pricing clauses before the deal closes.

Other vendors reporting the same week showed AI growth is not guaranteed to lift the whole business. Knowledge-software maker eGain said annual recurring revenue from its AI customers rose 11% to $54.5 million, yet its total subscription recurring revenue fell 4%, which it blamed on older customers leaving. Voice AI firm SoundHound grew revenue 48%, helped by its LivePerson purchase, but its adjusted EBITDA loss, a common measure of operating losses, widened to $20.7 million from $14.5 million. SoundHound's chief executive described its AI as working alongside human staff and saving experts for cases that need human judgment.

The takeaway for executives: in customer service, AI is so far adding a new line of spending rather than cutting the old one. That may change. Research firm Gartner predicted last year that by 2029 AI agents will resolve 80% of common customer service issues without human help. For now, Five9's own numbers suggest companies are paying for both.