BILL (BILL)

Financial automation platform BILL (NYSE:BILL) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 14.4% year on year to $414.7 million. Guidance for next quarter’s revenue was better than expected at $402.5 million at the midpoint, 1.8% above analysts’ estimates. Its non-GAAP profit of $0.64 per share was 14.2% above analysts’ consensus estimates.

Company Overview

Transforming the messy back-office financial operations that plague small business owners, BILL (NYSE:BILL) provides a cloud-based platform that automates accounts payable, accounts receivable, and expense management for small and midsize businesses.

Finance and accounting software benefits from dual trends around costs savings and ease of use. First is the SaaS-ification of businesses, large and small, who much prefer the flexibility of cloud-based, web-browser delivered software paid for on a subscription basis than the hassle and expense of purchasing and managing on-premise enterprise software. Second is the consumerization of business software, whereby multiple standalone processes like supply chain and tax management are aggregated into a single, easy to use platforms.

BILL competes with financial software providers like Intuit (NASDAQ:INTU), Oracle NetSuite (NYSE:ORCL), and Sage Group (LON:SGE), payment processors including PayPal (NASDAQ:PYPL) and Stripe (private), and expense management platforms such as SAP Concur (NYSE:SAP) and Expensify (NASDAQ:EXFY).

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, BILL’s 53.3% annualized revenue growth over the last five years was incredible. Its growth beat the average software company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. BILL’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 14.1% over the last two years was well below its five-year trend.

This quarter, BILL reported year-on-year revenue growth of 14.4%, and its $414.7 million of revenue exceeded Wall Street’s estimates by 3.7%. Company management is currently guiding for a 12.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 10% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

BILL’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between BILL’s products and its peers.

For software companies like BILL, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

BILL’s gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an elite 82.6% gross margin over the last year. Said differently, roughly $82.63 was left to spend on selling, marketing, and R&D for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. BILL has seen gross margins decline by 3 percentage points over the last 2 year, which is among the worst in the software space.

This quarter, BILL’s gross profit margin was 79.8%, down 4.7 percentage points year on year. BILL’s full-year margin has also been trending down over the past 12 months, decreasing by 2.4 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

BILL’s expensive cost structure has contributed to an average operating margin of negative 5.8% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if BILL reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Analyzing the trend in its profitability, BILL’s operating margin might fluctuated slightly but has generally stayed the same over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, BILL generated a negative 4.4% operating margin.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

BILL has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 21.4% over the last year, better than the broader software sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

BILL’s free cash flow clocked in at $91.13 million in Q4, equivalent to a 22% margin. This result was good as its margin was 2.1 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts’ consensus estimates show they’re expecting BILL’s free cash flow margin of 21.4% for the last 12 months to remain the same.

We were impressed by BILL’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 12.2% to $40.05 immediately following the results.

Updated: February 5, 2026 at 5:02 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

BILL falls short of our quality standards. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its operating margin hasn't moved over the last year. And while the company’s admirable gross margin indicates excellent unit economics, the downside is its customer acquisition is less efficient than many comparable companies.

BILL’s price-to-sales ratio based on the next 12 months is 2.1x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $61.14 on the company (compared to the current share price of $40.05).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.