Daily Disruptor: $ALKT, the bank software the market thinks is fading

The 30 second version

• Alkami sells cloud digital banking, account opening and marketing data software to US community banks and credit unions, billed per registered user and per module.
• The product is in Flight: banks and credit unions now leave their core vendor’s front end at a steady pace, about nine launches a quarter, and renewals arrive at roughly 70% gross margin.
• Evidence: recurring revenue of $533 million, up 19%; 2.8 million more users in a year; adjusted EBITDA margin up 530 basis points; $32.4 million of free cash flow in nine months.
• Next test: fourth quarter results and the first 2027 guide, expected late February 2027. Year end ARR of $560 million or more and a 16% growth guide confirm the case.
• It breaks on year end ARR growth below 15%, a 2027 guide under 13%, or new customer signings that stay weak now the sale talk is over.

Alkami’s customers have signed contracts worth about $1.7 billion that the company has not yet recognised as revenue. At a share price near $12.40, the whole business, debt included, is valued at roughly $1.6 billion.

That is a company priced as though its best years are behind it. Over the past three years it has lost less than 1% of its digital banking recurring revenue annually, and mostly because a client merged into someone else.

The setup this morning is quiet. The quarterly filing landed last week, the sale process is over, and the company is in its heaviest launch stretch of the year. Each launch feeds the year end recurring revenue figure due in February, the number that settles the argument.

What just happened

On October 28 Alkami reported third quarter revenue of $134.9 million, up 19.4% from a year earlier and above the top of its own guidance. Adjusted EBITDA came in at $26.3 million against $16.0 million a year ago. Full year revenue guidance went up again, to $530.5 to $532.0 million, from the $525.5 to $530.5 million range it set in February.

The disappointment was the fourth quarter. Management guided to $139.7 to $141.2 million, growth of 15.6% to 16.9%, and the finance chief said plainly that this sat a little below where some had modelled it. About $800,000 of work tied to clients switching core systems finished in September rather than December, and a richer mix of resold partner products is pressing on gross margin.

The bigger story is a month older. On September 23 the board ended a review of strategic options and decided to stay independent, and the shares slipped on the news. On the call, chief executive Alex Shootman said the months of sale speculation had cost the company new customers: 16 new digital banking logos so far this year, against an average of 21 through the third quarter since the company listed. A bank signing a contract of up to seven years wants to know who will own its vendor.

The business

Alkami runs one cloud platform that a bank or credit union uses as its digital front door: the app and website account holders log into, the account opening flow it bought with MANTL in 2025, and a data and marketing layer that tells the institution whom to sell what. It targets community banks with $500 million to $10 billion of assets and credit unions of similar scale. There are 323 live digital banking clients and 24.4 million registered users.

The bill is simple. Most contracts charge a monthly minimum for each licensed module, set by registered users, with extra fees once a client passes its contracted user count. Revenue per registered user was $21.88 in the third quarter, up 5%. Average recurring revenue per client is about $1.7 million, and 56 clients now pay $2 million or more a year, up from 18 at the end of 2021.

A detail from the quarterly filing tells you where the profit sits. Alkami says it generally earns about 70% gross margin on a client at renewal, against 63.1% for the company as a whole, because the setup cost is behind it. It completed nine renewals in the quarter and 20 this year. The drag is that about a third of revenue comes from roughly 35 partner products resold through the platform, which carry the supplier’s cost with every extra unit.

Competitors are the core processors, who bundle their own front ends, and a handful of independents such as Q2. Each institution sets about 4,000 policy rules across some 25 connected systems on Alkami’s single code base, and if agents start moving money, someone must hold the permissions, limits and audit trail. A much better base model makes screens cheaper to build; it does not replace that plumbing. Roughly 10% of revenue already comes from AI products such as fraud tools.

Where it sits on our curve

Our Disruption Map has digital banking infrastructure and core modernisation in its commercial ramp: replacing the core ledger itself is still early and slow, while modern front ends that sit on top of old cores are further along. That distinction matters now because Alkami is selling the part that moves first. We put its digital banking platform at Flight. The binding constraint was never whether the software works. It was the risk of a weekend cutover going wrong in front of every account holder. As Shootman put it, “what changes an institution’s mind is confidence that the migration will work.”

The evidence says that risk keeps falling. Alkami brought 36 clients live in the last twelve months, 229 since 2020, and recently put four live in a single day, with nine scheduled across twelve business days. It completed a record seven core conversions this year for existing clients, including six of its largest, and expects nearly twice as many next year. Existing clients added 1.5 million users on their own: expansion, with cash behind it.

The strongest alternative is that this is the tail of a modernisation wave, boosted by selling MANTL into the base, and that consolidation among small banks plus pricing pressure from core vendors will grind it down. The observation that separates the two is revenue per user. If it keeps rising 5% or more from existing clients, the cross sale is real. If it drops below 3% while launches slip under eight a quarter, the alternative wins.

The numbers

Headline growth slowed from the 30s to the high teens, mostly because MANTL dropped out of the comparison. Revenue ran $113.0 million, $120.8 million, $126.1 million, $129.8 million and $134.9 million across the last five quarters. Recurring revenue climbed from $449 million to $533 million, and the amount added each quarter this year rose: $13 million, then $18 million, then $21 million. Growth on that measure eased from 22% to 19%, which is the honest version of the trend.

Profit is moving faster than revenue. Adjusted EBITDA margin went from 14.2% a year ago to 19.5%, and the fourth quarter guide implies 21.7%. Operating costs fell to 44% of revenue from about 50%. Gross margin on the adjusted basis dipped to 63.1% from 63.7% on partner product mix. One caution: stock pay is guided below 14% of revenue and is excluded from adjusted EBITDA, so the business is less profitable than that margin suggests.

Cash is the better check. Operating cash flow for nine months was $39.1 million, and after $6.7 million of equipment and capitalised software, free cash flow was $32.4 million, against $19.9 million a year earlier. Cash and securities stand at $85.2 million, the $15 million revolver drawing is repaid, and the only debt is $345 million of 1.5% convertible notes due March 2030, convertible near $32.82 a share. Weighted shares rose 2.2% in a year, and $20 million of buybacks this year are slowing that.

Management has not guided 2027, but says the plan rests on 19% recurring revenue growth, a signed but not yet live backlog of about $56 million of recurring revenue across 31 clients, most of it due within twelve months, and continued growth in revenue per user. Its longer target is a Rule of 45 by 2030, with gross margin near 70% and adjusted EBITDA margin rising about three points a year.

What the price already requires

Our reference price of $12.40 comes from our own screen, not a source we can cite, so check the live quote. At that price and 107.0 million shares, the equity is worth about $1.33 billion. Add the convertible notes and subtract cash and the enterprise value is near $1.59 billion. That is about 3.0 times this year’s revenue guide, 3.0 times recurring revenue and 16 times this year’s adjusted EBITDA of roughly $98.5 million. Annualise the fourth quarter guide and the multiple falls to about 13.

The price is satisfied by 2027 revenue growth of about 10%, to $585 million, at a 20% margin, valued at roughly 13.5 times. Our downside case uses those inputs at 11 times and gives about $9.60 a share. Our central case, 16% growth to $616 million at a 22% margin and 14 times, gives about $15.30. The upside, 19% growth at 24% margin and 17 times, gives about $21.70.

Here is the gap. The $56 million backlog is already signed and equals about 10.5% of today’s recurring revenue, before a single new contract, before another 5% from existing clients buying more, and before the users those clients add on their own. Churn runs under 1%. The price asks for growth that is largely contracted already, and treats the slow new logo year as permanent rather than as the cost of a sale process that has now ended.

What breaks it

Written now, before the February report: the thesis breaks if fourth quarter revenue lands below $139.7 million, if year end recurring revenue grows less than 15% (below about $552 million against $480.3 million a year earlier), or if the 2027 revenue guide is under 13%. Any of those would say launches are thinning faster than the backlog suggests, and we would sell.

The next most likely failure is slower and quieter. If new logo signings stay near this year’s pace once the sale overhang is gone, the backlog that props up 2027 shrinks for 2028. Management turnover adds to that risk: the technology chief, the chief accounting officer and MANTL’s customer chief all left around the third quarter. Financing is not the problem. The company funds itself, has a $225 million credit line with nothing drawn, and the notes do not fall due until 2030.

What we are watching

• Late February 2027, fourth quarter report: year end recurring revenue of $560 million or more (about 16.6% growth) strengthens the case; below $552 million (15%) breaks it.
• Same report, 2027 guide: revenue growth of 16% or more with adjusted EBITDA margin of at least 22% strengthens; a revenue guide below 13% breaks.
• Same report, new logos: five or more new digital banking clients in the quarter, taking 2026 back to the 21 average, says the sale overhang was temporary. Two or fewer says it did lasting damage to the 2028 pipeline.
• Late April or early May 2027, first quarter report: revenue per user up 5% or more with adjusted gross margin back above 63.5% supports durable cross selling; growth under 3% supports the alternative.

Not financial advice.

References

1. Alkami Technology, Inc. Form 10-Q for the quarterly period ended September 30, 2026. US Securities and Exchange Commission. Published October 2026. Accessed November 2, 2026. https://www.sec.gov/Archives/edgar/data/0001529274/000152927426000062/alk-20260930.htm
2. Motley Fool Transcribing. Alkami (ALKT) Q3 2026 Earnings Call Transcript. The Motley Fool. Published October 29, 2026. Accessed November 2, 2026. https://www.fool.com/earnings/call-transcripts/2026/10/29/alkami-alkt-q3-2026-earnings-call-transcript/
3. Alkami Technology, Inc. Alkami Announces Third Quarter 2026 Financial Results (Form 8-K, Exhibit 99.1). US Securities and Exchange Commission. Published October 28, 2026. Accessed November 2, 2026. https://www.sec.gov/Archives/edgar/data/0001529274/000152927426000060/exhibit991-earningsrelease.htm
4. Alkami Technology, Inc. Alkami Announces Fourth Quarter 2025 Financial Results, including 2026 outlook (Form 8-K, Exhibit 99.1). US Securities and Exchange Commission. Published February 25, 2026. Accessed November 2, 2026. https://www.sec.gov/Archives/edgar/data/1529274/000152927426000005/exhibit991-earningsrelease.htm
5. Alkami Technology, Inc. Alkami Announces Conclusion of Strategic Opportunities Review. Published September 23, 2026. Accessed November 2, 2026. https://investors.alkami.com/2026-09-23-Alkami-Announces-Conclusion-of-Strategic-Opportunities-Review,1
6. Reuters. Brief: Alkami Announces Conclusion Of Strategic Opportunities Review, via Stockopedia. Published September 23, 2026. Accessed November 2, 2026. https://www.stockopedia.com/share-prices/alkami-technology-NSQ:ALKT/news/brief-alkami-announces-conclusion-of-strategic-opportunities-review-01a0ce91-a8e9-7594-80d5-79779a769661/
7. Alkami Technology, Inc. Alkami Announces Third Quarter 2025 Financial Results (Form 8-K, Exhibit 99.1). US Securities and Exchange Commission. Published October 30, 2025. Accessed November 2, 2026. https://www.sec.gov/Archives/edgar/data/1529274/000152927425000159/exhibit991-earningsrelease.htm
8. Alkami Technology, Inc. Alkami Announces Fourth Quarter 2025 Financial Results. PR Newswire via Morningstar. Published February 25, 2026. Accessed November 2, 2026. https://www.morningstar.com/news/pr-newswire/20260225da95790/alkami-announces-fourth-quarter-2025-financial-results
9. Alkami Technology, Inc. Alkami Announces First Quarter 2026 Financial Results (Form 8-K, Exhibit 99.1). US Securities and Exchange Commission. Published April 2026. Accessed November 2, 2026. https://www.sec.gov/Archives/edgar/data/0001529274/000152927426000028/exhibit991-earningsrelease.htm
10. Alkami Technology, Inc. Alkami Announces Second Quarter 2026 Financial Results (Form 8-K, Exhibit 99.1). US Securities and Exchange Commission. Published July 29, 2026. Accessed November 2, 2026. https://www.sec.gov/Archives/edgar/data/0001529274/000152927426000049/exhibit991-earningsrelease.htm