In the past few weeks, artificial intelligence (AI) has been seen as a significant threat to many software companies. But one executive only told investors, “AI expands our market opportunity.” And based on the company’s most recent earnings and its outlook, I think he’s right. Yet, much of the market still doubts whether AI-powered software will lead to change great (NASDAQ: NICE ).
But Nice is now well-positioned to accelerate growth over the next few years, and its stock looks like an incredible bargain right now.
Will AI create the world’s first trillionaire? Our team just published a report on a little-known company, called “Essential Dependency” that provides critical technology to both Nvidia and Intel. Continue »
Nix’s flagship product is CXone Mpower, its cloud-based contact center-as-a-service platform. CXone handles incoming customer messages via phone, web chat, text, social media, email, and any other channel for business communication. It routes every message to customer service agents, optimizing agent workload and reducing customer wait times.
Customer service is an excellent opportunity to implement productive AI. A large language model with access to the company’s knowledge base, customer data, and best practices can handle a significant number of cases for contact centers. It can be seen as a great threat to a good or important opportunity.
So far, Nice has taken advantage of the opportunity. Its AI-related revenue growth is fast, up 66% last quarter. This will be fueled by the addition of Cognigy in 2026, a conversational AI agent developer. Nice is also increasing its AI spending to around $95 million this year, with increased investment in computing to scale AI agents and a larger R&D budget to improve AI capabilities.
The move should enable Ness to deliver meaningful acceleration in its cloud revenue growth, arguably its most important segment, which has experienced a significant slowdown over the past few years. Management is guiding for cloud revenue growth of 14.5% to 15% for 2026, faster than last year’s 13% growth. This was supported by its backlog, which rose 25% year-over-year in the fourth quarter. Longer term, the company’s AI investment should help accelerate cloud growth over the long term. Management guided for 17% to 19% growth for the segment in 2028 at its investor day last fall.
At the same time, the company returns half of its free cash flow to shareholders through share repurchases. It announced a new authorization of $600 million along with its fourth-quarter earnings. It is a significant part of the $7 billion market cap. With the stock trading at roughly 10 times earnings estimates, it looks like a great use of capital for both the company and potential investors.
