Welcome to the NICE conference call and thank you all for holding. All participants are at present in a listen-only mode following management's formal presentation. Instructions will be given for the question- and- answer session. As a reminder, this conference is being recorded July 28th, 2025. I would now like to turn the call over to Mr. Marty Cohen, Vice President of Investor Relations at NICE. Please go ahead.
Thank you, operator. Thank you, everybody, for joining us to discuss today's announcement of NICE's acquisition of Cognigy. With me on the call today from NICE are Scott Russell, Chief Executive Officer, Beth Gaspich, Chief Financial Officer, and Barry Cooper, President of CX. From Cognigy, we have Phil Heltewig, Co-Founder and CEO. Following our comments, there will be an opportunity for questions. Before we start, I'd like to point out that some of the statements made on this call will constitute forward-looking statements in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please be advised that the company's actual results could differ materially from these forward-looking statements.
Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in the section entitled Risk Factors in Item 3 of the company's 2024 Annual Report on Form 20-F as filed with the Securities and Exchange Commission on March 19, 2025. Let me remind you that unless otherwise noted on this call, we will be commenting on non-GAAP financial measures, which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for share-based compensation, amortization of acquired intangible assets, acquisition-related and other expenses, amortization of discount on debt, and the tax effect of the non-GAAP adjustments. The information and some of our comments discussed on this call may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. I'll now turn the call over to Scott.
Thank you, Marty, and welcome, everyone. As most of you would have already seen this morning, we are incredibly excited to announce that NICE has entered into an agreement to acquire Cognigy, the global leader in conversational and agentic AI for customer service. We believe this is a landmark transaction and one that will be truly transformational for both companies. It brings together two market leaders. In a few minutes, I'll give you some more specific details on the deal. I first wanted to review with you the merits of bringing together the world's leading customer experience AI platform with the global leader of conversational and agentic AI for customer service. NICE has consistently reshaped the customer experience industry through relentless innovation. The acquisition of Cognigy represents another transformative move for NICE, advancing the leading CX AI platform to accelerate AI-first customer experience.
The combination of NICE's purpose-built CX AI platform together with Cognigy, organizations can now accelerate AI-first adoption in customer experience across the front and back office. This acquisition will help us further eliminate silos, accelerate resolution, and turn disconnected customer journeys into seamless AI-led delightful experiences. As we look at this transaction, the rationale is clear and compelling. First, bringing Cognigy into the NICE portfolio comes at a pivotal moment as we further strengthen our position in the rapidly expanding AI market, projected to reach $330 billion in the coming years. Second, as the recognized leader in agentic and conversational AI with an enterprise-grade CX AI orchestration platform and a premier roster of large enterprise customers, Cognigy further extends our market leadership position. This capability goes far beyond the contact center.
It will accelerate AI-first CX, unlocking new use cases, workflows, and adjacent markets that demand a smarter, more connected approach to customer experience. With the addition of the top AI talent from Cognigy, we are boosting our AI innovation capabilities at a critical time. The companies that secure the best AI minds are the ones that will define the next decade of enterprise tech. We're not just buying superb technology, we're excited to welcome Cognigy's team of highly specialized AI engineers and agentic AI experts. As we highlighted last quarter and reiterated in our interactions at Investor Day, we are experiencing exceptional momentum in our AI and self-service arrangements, which grew 39% year-over-year in Q1 2025.
Backed by our industry-leading distribution engine, including an enterprise-grade direct salesforce and the broadest partner ecosystem in the CX market, NICE is uniquely positioned to sell and cross-sell the largest and broadest CX AI platform to an expanding customer base. This will drive continued growth in the cloud with an expectation of 150- 250 basis point increase annually in cloud revenue growth in the coming years. With the continued strong momentum in our AI and self-service business, this will provide a cumulative and compounding impact and further growth in consumption-based revenue. Finally, Cognigy's strong footprint in Europe and diversified industry verticals will drive further international expansion.
Together these points demonstrate how this transaction advances NICE's leadership in CX AI, enhances our financial profile, and deepens our customer value across the globe, all the while creating a NICE world where every experience feels human, every interaction creates value, and every customer journey is seamless, smart, and personal. With an acquisition as significant and as transformative as this one, it's important, in my view, to share more details about why this transaction comes at such a pivotal moment in a rapidly growing market in which we operate. With cloud penetration in the customer service market still at just 35%, the shift to AI-powered platforms is accelerating not simply as it only is a technology upgrade, but as a catalyst for organizations to completely reimagine customer service.
Although self-service has become the preferred channel across generations, the vast majority of these interactions still fail to reach customer resolution, a challenge we define as the self-service resolution gap. For years, organizations have tried and failed to close this gap with rigid, scripted bots. They simply aren't up to the task. The same is true for generic generative AI. In order to truly delight consumers, it demands purpose-built agentic AI specifically built for CX. By combining Cognigy's advanced CX agentic AI capabilities with our rich data and industry-leading CX AI models, we will bridge this gap, delivering higher resolution self-service experiences through our unified CXone Mpower platform. Behind every contact center interaction, whether handled by humans or AI, there are multiple processes happening in the back office.
Now, with a burgeoning portfolio of agentic AI solutions, we have an amazing opportunity to orchestrate and automate the entire workflow from front office to back office, covering everything from intent to fulfillment and thereby extending CXone Mpower beyond the contact center, whether fully automated, human-led, or human-assisted. Finally, to put our market opportunity into perspective, we're operating in a vast and expanding space as labor spend continues to shift towards technology investments. With a projected $330 billion market opportunity and AI containing and resolving only 5% of customer interactions today, we are just at the beginning of this AI transformation. We truly have a tremendous runway ahead. For those less familiar with Cognigy, it was founded in Düsseldorf, Germany in 2016 and quickly established itself as a pioneer in conversational AI.
Today it is an undisputed leader in delivering enterprise-grade AI agents for customer experience. With its market-leading AI solution, Cognigy.AI , they are enabling enterprises to build, operate, and orchestrate AI agents across every channel, delivering instant, hyper-personalized service that feels human-like with dynamic AI agents that reason and respond in real time. They've already earned the trust of some of the world's leading enterprises, names like Mercedes-Benz, Nestlé, Lufthansa Group, and many others who have partnered with them to transform their customer engagement. Cognigy's position as a world-class innovator is reinforced by the fact that Gartner has ranked its conversational AI solutions number one in all five out of five key use cases, underscoring the depth, flexibility, and measurable impact of their solutions.
This top-tier rating, coupled with consistent recognition as a leader by other industry analysts, validates Cognigy's commitment to delivering best-in-class technology that meets real-world demands and drives meaningful outcomes for customers. This has all been made possible by the dedication and relentless hard work of Cognigy's world-class team who have consistently pushed the boundaries of what's possible in AI. They built a platform that enables companies to build, operate, and orchestrate CX AI agents at scale. This is only the beginning. Joining NICE will allow them to scale these capabilities further, bringing its vision to even more enterprises across the globe and accelerate innovation during a pivotal moment for AI in our industry. This acquisition is a powerful accelerator of our platform strategy and a key part of our winning formula to scale AI adoption across the enterprise.
CXone Mpower was built to maximize the value of AI in customer experience by unifying what others keep fragmented: workflow, orchestration, workforce augmentation, and service automation, all powered by CX AI models and a single source of data and truth. The core value of the platform can be explained in two ways. First, we make consumer engagement simple and intuitive with a single pane of glass that lets our customers manage all interactions across every point of engagement. Second, the platform intelligently orchestrates across agents, automation, and systems of record in real time. By bringing Cognigy onto this platform, we're enhancing both sides of that equation. On the customer engagement side, Cognigy's AI agents will be orchestrated natively within our platform, reasoning and responding in real time to make consumer experiences faster, more human, and more personal.
On the orchestration side, Cognigy becomes part of a fully connected platform, gaining access to richer data, more expansive workflows, and shared knowledge and models. This is an environment where Cognigy's AI will thrive, growing smarter with every interaction. It's a compounding advantage. As more organizations adopt CXone Mpower, both our platform and Cognigy's capabilities grow stronger together. This is the winning formula to scale AI adoption, and it's our shared vision for an AI-first customer experience on one platform. I'll now turn the call over to Beth to share some key metrics and financial details of the transaction.
Thank you, Scott. Cognigy is a fast-growing CX AI company with about 300 employees and $175 million of capital invested to date, including both equity and debt. Their footprint today is strongest in the European market with fast-growing traction in the U.S. This combination gives us the springboard to accelerate our international growth, especially in Europe, and boost our U.S. operations. We expect their 2026 exit ARR to grow over 80% year-over-year to an estimated $85 million, with healthy NRR expected to be accretive to both our cloud revenue and AI and self-service ARR growth. Moving to the transaction details, the transaction value is estimated at $955 million, financed with cash on hand utilizing our strong liquidity position without the need for additional debt or equity.
There is a holdback component of the deal in addition to a wide retention plan that is aligned with our long-standing M&A approach to retain talent to ensure a smooth transition, continuity, and collaboration to drive a future innovation roadmap. We believe this transaction value reflects the strength of Cognigy's market leadership, innovative technology, and high-quality enterprise customer base while remaining disciplined in our capital allocation strategy. We expect our AI and self-service ARR of $208 million reported in the first quarter 2025 to more than double by year-end 2026. Additionally, it is expected to contribute an incremental 150- 250 basis point increase in cloud revenue growth annually in the next few years. We will invest additional resources in this acquisition with a desire to further accelerate the success this business has already demonstrated.
Through the strength of our core business fueled by our acquisition of Cognigy and our proven track record of leveraging acquisitions, we expect this business to be accretive to EPS and free cash flow within 18 months. Our robust balance sheet and strong operating cash generation enable us to continue to enhance our offering to extend our market leadership. Our capital allocation strategy and management are committed to maintaining a strong balance sheet with approximately $400 million in liquidity estimated at the close of this transaction, coupled with a healthy debt- to- equity ratio. Given our balance sheet strength and financial flexibility, NICE has ongoing access to the capital markets as well. The recent announcement of our $500 million share buyback program remains firmly intact. Finally, we expect this deal to close in the fourth quarter of this year, subject to German and U.S. regulatory approvals.
Overall, we are confident this acquisition positions NICE to capture the significant AI market opportunity ahead while maintaining financial strength and flexibility to continue to execute our strategic priorities. We will provide an updated financial impact for full year 2025 post the closing of this transaction. I'll now hand it back to the operator to open it up for Q& A. Operator.
Thank you. We will now begin the question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, again, press star one. Your first question comes from Meta Marshall with Morgan Stanley. Please go ahead.
Great, thanks and congrats on the acquisition. Just a couple of questions. You know, in the past I would imagine you had partnerships with some of the other conversational AI platforms. Just, you know, what is the kind of go forward plan of some of those relationships and then two, just kind of how long do you see for kind of the integration of these two platforms so that you would have that kind of united platform going forward. Thanks.
Yeah, thanks. Great question. On the first one, the relationships, as you rightly point out, one of the benefits and the beauties of the CXone Mpower platform is its open nature. We partner not only with other conversational AI platforms, but we're able to then work seamlessly in a customer's enterprise technology environment, seamlessly with whatever the tech stack is. Whilst clearly Cognigy brings an incredible platform that we are able to orchestrate with CXone, Mpower is still an open platform and will be able to orchestrate with other technologies should a customer require. Clearly the power of the two together and the orchestration and the benefits are compelling, and we have full confidence that that will be one of the future benefits of the joint forces together. Sorry, the second question was.
Just timeline f or kind of integration of the technology stacks.
Yeah, look, clearly we're still focused on, we've only signed, we haven't yet closed the transaction. Closing is obviously subject to regulatory approvals and closing conditions. We are very confident, however, that the technology stack already, Cognigy is a partner of NICE, and so we're able to offer the platform immediately after closing standalone, and then through fast work on our technology teams, we're able to then integrate our technology together. Maybe Barry, given you lead our CX division, maybe you can make a few comments about the timeline of that.
Yeah, absolutely. You said it right, Scott. We have both Agent Assist Hub and Virtual Agent Hubs as part of the Mpower platform architecture. Cognigy are already a partner, already leveraging those hubs, so it's relatively fast for us to incorporate that into the platform at the next level of detail and obviously unleashing all of the power we have through our CX models and that consistent, extensive data set to train Cognigy very quickly to deploy automated customer service. It's going to be pretty quick, but obviously that work won't start until we get regulatory approval.
Great, thank you. Your next question comes from the line of Arun Bhatia with William Blair. Please go ahead.
Yep, perfect. Thank you so much and congrats on this acquisition here. Maybe, Scott, I'm curious what the customer overlap looks like because it does seem somewhat complementary given their European exposure. When you think about the ability to accelerate growth and drive synergies, how much more can you push Cognigy deployment into NICE's install base?
Yeah, thanks Arun, for the question. The synergies or the possibilities are significant. As you rightly point out, there's a few things to call out that Cognigy brings. The first is they're enterprise grade. They're already delivering and proven at the top end of the market with brands such as Mercedes-Benz, Nestlé, Lufthansa Group, and many others that you saw. This means they can scale to what NICE already does, which is meet the top end of the market and the biggest companies on the planet and the brands in their customer service.
It's ready and capable immediately. Clearly, with their European background, the opportunity for us to bring Cognigy into the U.S. market and cross-sell into our already large and broad U.S. and North American customer base is immense. Likewise, with their strength and history in Europe, being able to bring our broader CXone Mpower capabilities into their existing customer base and cross-sell into the European Cognigy customer base is tremendous. Last but not least, with us both, we're excited about the net new possibility for us as well. We're not just looking at cross-sell of existing customer base. We think this is going to be the most compelling because let's face it, companies aren't just looking to upgrade their customer service, they're reimagining it and they're doing it AI-first.
Together with Cognigy and NICE, we're able to give the most compelling platform for existing customers or new companies who are looking to reimagine that in an AI-first customer experience. We think that will be compelling to new customers as well. The opportunities are significant.
Perfect, thank you. Maybe one quick one. You mentioned, I think, the pricing model is consumption based for Cognigy. Can you just touch a little bit more on what that pricing model exactly looks like and how it might interplay with NICE's core pricing? Thank you.
Yeah, sure. The pricing model today is largely based on both the consumption and usage model together with a contract duration, and it's available in that kind of different pricing model. When we go forward, as Scott highlighted, we will continue to offer the plan is to continue to offer their AI platform both on a standalone basis as well as integrated into our CXone Mpower, which would be together with other bundles we offer on the platform.
All right, got it. Very helpful, thank you and congrats again.
Thanks, Arun.
Your next question comes from the line of Jim Fish with Piper Sandler. Please go ahead.
Hey guys, just kind of wanting to interweave some of the questions that have been asked here, but how should we think about the overlap here, particularly on what I'll call the engine side with Enlighten and Cognigy's engine with also the agent assist, smart assist angles, and any sense of what percentage of customers are actually using Cognigy with NICE's CXone routing underneath already? Yes. I guess there's a few things to consider.
First of all, the customer overlap is relatively low, which means we have a large opportunity to be able to cross-sell, as I mentioned before, into the Cognigy customer base with our broader, not just CCaaS, but the broader CXone platform where Cognigy is already providing the conversational and agentic AI platform for those customers and vice versa into our significant customer base, particularly in North America but around the world where customers are looking to move. You can see it with our self-service and AI ARR customers. Our existing customers have already got a high demand for their AI capabilities complemented with their existing customer service platform with NICE, whether it be self-service, assisted service, or human service that we provide through our platform.
The ability for us to be able to quickly offer AI-first and self-service capabilities complemented with our human assistant is compelling because it's not going to be one or the other. Companies are using both capabilities. They want it on a single platform, and then they want that single pane of glass, that single system of engagement when they are interoperating between self-service AI and then assisted with AI, and it's all running on the same models, the same platform, the same orchestration that runs with CXone Mpower. I think when you look at this, you can definitely look at it from a customer base that there is huge upside, but from a technology stack it becomes incredibly compelling.
Just to follow up beyond like, hey look, we're already integrated here, they're one of the market leaders. Why Cognigy versus some of the others that were out there? What was that sort of compelling value add? Are there plans to de-emphasize the connectors to some of your contact center competitors, just given there is integration across the space?
Let me comment on, first of all, about Cognigy and then maybe the connectors. I'll hand it to you, Barry, that you can comment on that as well. Let me first say why Cognigy. First thing I guess to comment is even in my background I knew of them given my previous experience in the German market. We've known them as a company for years. We've been partnering with them for three years. They've given us firsthand insights into their strengths relative to others and we have obviously worked with others. Their excellent capabilities.
They have got not only an incredible technology platform, they've got a great team and I would call out that they're a great cultural fit for NICE as well. With our firsthand knowledge of how their AI platform is purpose built, and I can't stress this enough, it's purpose built for CX. Their platform was designed and built for customer experience. It is a platform that fits what we look for, which is to be the market leader in AI for CX. Secondly, they've also got a roadmap, industry recognition, customer recognition, which is incredibly strong. I guess as the leader with the most comprehensive platform in conversational and agentic , it was pretty straightforward for us when we made that evaluation for Cognigy to become part of the portfolio. Barry, did you want to just talk about the technical side of this?
Yeah, absolutely. When you talk about the connectors, you're referring to our hubs and they go to the heart of our open platform strategy that Scott mentioned earlier. We don't get to the size that we do, the scale we do working with the organizations we do without offering flexibility. We have a number of hubs like a Knowledge Hub, ASR Hub, Agent Assist Hub, Virtual Agent Hub. All of these hubs enable our customers to either use our technology or to bring a third-party technology that may suit them better for various different reasons. That's going to continue as well with Cognigy and that still remains an option. The other side of things of course is with Cognigy itself, it's been very successful connecting to third-party ACDs and other offerings. We will continue to offer Cognigy as a standalone solution as well as part of the CXone Mpower platform.
That's exactly the same strategy we've been very successful with, with our WEM business. Same thing that's available as part of the platform or available connected to third-party ACDs. We've got a very proven runbook that we'll execute again here. At a high level it's about openness, maintaining those connectors and giving our customer base the choice and the power.
Thanks, guys.
Your next question comes from the line of Catherine Trebnick with Rosenblatt Securities. Please go ahead.
Hi. Just so I understand this better, back to the ecosystem. There really isn't going to be an impact on your existing partnerships within the ecosystem? Is that how I understand that? Thank you.
Yes. We've got an open platform, we will continue to work with our partners and our ecosystem of partners. You can look at this very much from an accretive point of view of what Cognigy bring to extend our platform capabilities. Clearly, as Barry mentioned before about the open nature of what we offer, the combined value with our data, our models, and our underlying CX platform, with Cognigy's conversational and AI capabilities, it becomes a really compelling offering combination and that's what we're excited about as well.
All right, thank you. Congratulations.
Your next question comes from the line of Siti Panigrahi with Mizuho. Please go ahead.
Thank you. Good morning everyone. Scott, you talked about this acquisition can extend NICE beyond contact center with the use cases in the workflow. Could you talk about how that going to expand into adjacent market and how big is that opportunity for NICE?
Yeah. I'll try to explain it in two angles in the opportunity that we see. The first is the way that consumers interact with their brands continues to expand and grow. We've talked about before that the interactions and in particular the AI interaction exploding. Why? Because consumers are able to interact with their brands of choice, their service providers in a way that suits them. With Cognigy they are able to deliver this AI-first self-service contained to fulfill as a standalone capability that is market leading. What that allows us to do with our platform is to serve a greater proportion of that interaction.
All the while, when that interaction does require human assistance or a combination in any orchestration between that human agent and AI agent, we have a singular platform with the same data, the same insight that can orchestrate that service provision. If you think more broadly then on that system of engagement, we are the first contact point. When you think about service and you go broader into customer experience, you look at revenue generation and other opportunities and outbound capabilities where you've got synchronous and asynchronous interactions for consumers to their brands, their platform. With CXone Mpower will be the market leading platform with all of those capabilities out of the box for customers to use. We have a broader set of engagement and expanding set with a rapidly growing interaction base. That doesn't finish it.
The other side of the equation is even probably more important because not only are we the first point of interaction and we are that single pane of glass with Cognigy's agentic capabilities. Together with our data models, we're able to fulfill the actions, tasks and the workflows to the front, mid and back office better than ever. We're able to seamlessly orchestrate and ultimately do self-service resolution. If I refer back to what I mentioned at the beginning, AI-led self-service is estimated at only about 5% of the market. There is an enormous market opportunity of AI-led self-service. Part of it is being able to have the full resolution capabilities. Cognigy combined with CXone Mpower gives us the market-leading capability to be able to fulfill better than anybody else.
I would also just highlight that you can now see the strategic partnerships that I've mentioned before, partnerships such as ServiceNow, Amazon Web Services, and Snowflake, and their capabilities in that end-to-end fulfillment becoming a critical part of how we're able to solve end-to-end fulfillment for customers. This as a part of our broader remit really does give us both the system of engagement platform that's best in class, but also the fulfillment platform to ultimately deliver AI full resolution, which is very exciting.
That's great color. Quick follow up. How many customers do they have and what's the number of customer overlap you have with Cognigy? Sorry if you already mentioned, but could you repeat that?
Yeah. I'll use this opportunity to introduce Phil, the CEO of Cognigy. Phil, do you want to just make a comment on the number of customers?
Yes, sure. At this point we're roughly servicing 1,000 brands around the world with the Cognigy platform. There's certain overlap with the NICE platform. Of course, many of our customers are using NICE as the CCaaS platform of choice. We do see quite some overlap there, but the number is around 1,000 brands.
Great, thank you.
Your next question comes from the line of Michael Funk with Bank of America. Please go ahead.
Yeah, great. Thank you for the questions today. Scott, I think you touched on it earlier, maybe just some more detail on your thoughts on the functional and performance advantage for NICE owning Cognigy versus the integration that your customers may have had the potential in the past. How are you advantaged relative to peers owning the asset versus simply offering best of breed in conversational AI?
Yeah, it's a great question, Michael. I guess there's a few things to consider. First is when we talk about the system of engagement. That single pane of glass, I can't overstate how important it is to have a single platform to be able to service every type of interaction, which if you think about it historically has been voice and then moved into digital channels.
Now with the AI agents and the interoperability of AI agents and human agents in delivering customer service, you simply cannot afford to have fragmented stacks. Yes, whilst an integration with other technologies goes some way, a true orchestration of the data and the platform that Cognigy brings, our data and our models together with the AI platform that Cognigy brings, makes it such a seamless ability for customers to be able to serve their consumers in that interoperable system of engagement. My belief, and it is our collective belief, is that the market, because it's still nascent, it's still early days for AI and customer experience. A platform that is able to provide AI agents at scale to enterprise grade is able to deliver every service scenario and an expanding amount of fulfillment that is resolution to more and more complex capabilities.
Interoperable with your CCaaS platform that still handles your most complex tasks, that human might step in, that becomes the game changer. That's where we believe the combination together becomes such a compelling one. I don't think a platform integration is enough to give the full self-service opportunity that AI brings. We're already seeing the demand from customers. Customers are demanding that their environment as they engage with their customers or their consumers is simple, it's easy to use, it's human-like in a self-service capacity. When it has to transition to their contact center, it needs to be interoperable and you cannot have repetition. In fact, they're expecting that the seamless transition to an AI with our Copilot is able to do so without any friction points and without any loss of time.
Hopefully that gives a sense of why we believe the combined platform becomes such a compelling one for our customers. I know the Cognigy team feel the same way.
That makes a lot of sense. Thank you for that, Scott, and quick one on are there management and key employee retention part of the acquisition as well? Is there any details around that?
Yeah, look, as Beth, you can make a comment if you like, but as Beth mentioned at the opening, I guess there's two things that I'll say. I am so excited to welcome Phil, Sasha, and the entire Cognigy team I mentioned on the call in the opening. We're super excited about their technology, Michael. It is superb and we know that after many years of seeing them and watching them operate. I've got to tell you, I'm even more excited by the people.
Incredibly agile, fast, really customer orientated, but they're AI experts. They've been living and breathing and innovating in this space exclusively. It is really important to us that not only do we bring the great technology into our family, but we bring and retain the team. Yes, we do have obviously retention and measures to be in place, but maybe if I can hand to Phil, who might even be able to comment from a Cognigy side of seller the way he sees it.
Yes, sure. Thanks, Scott. One comment on the retention, other than saying that we do have a retention program in place, of course for the most important employees, but I can also tell you, when the news broke today, it was received extremely positively. The reason is because we're not seeing this as the end of the Cognigy journey, but really only the next step.
NICE is supercharging our vision. We have the vision to become the leading AI-first customer interaction platform on the planet. By coming together with NICE, this really just accelerates our vision. We are really keen to keep progressing this. The leadership is staying in place and every single person I've spoken to today is really keen to progress this and stay in place. I don't think we need to worry about that, that piece at all. If anything, people are super excited about it and are looking forward to the joint vision and bringing that together to fruition with the additional resources that we now also have access to that we otherwise wouldn't have access to.
Great. Thank you, Phil. Thank you, Scott.
Thank you, Michael.
Your next question comes from the line of Michael Latimore with Northland Securities. Please go ahead.
Great, thank you. Yeah, so will, you know, NICE offers, you know, virtual agents, agent assistants. So does Cognigy. Will any of the Cognigy products replace any of NICE's products or, you know, feature sets or future R&D here? Just a little bit of clarification on that would be good. Also, the forecasted 80% ARR growth rate exiting 2026, does that assume an acceleration from current rates or similar rates? A little clarification, that would be great as well.
Maybe let me start on the first one and then I might hand to Barry, who can comment as well. I'll come back with Beth and I on the second question. Sorry, maybe let me do the 80% and then we come back to the technology one. On the growth rates, it is consistent and comparable to what Cognigy have been performing on a standalone basis, which obviously gives us high confidence in terms of that growth. Clearly, what we are expecting is as we're able to bring the portfolio together and offer it to the customer base, we're expecting that we're able to deliver significant growth for both Cognigy and NICE, which is why you see that in the growth rates, not only on the standalone portfolio of Cognigy. It is consistent with the existing and current growth rates of Cognigy. On the technology side, Barry, do you want to make a quick comment?
Yeah. Obviously, on the platform, we have literally hundreds of capabilities. Some of those capabilities will be superseded by technologies and capabilities from Cognigy. In some cases, the capabilities we have in the platform will be used by Cognigy to power that forward. In other cases, there's going to be a merging of capabilities. One thing is absolutely certain, and that is we are very customer first. We are absolutely going to make any of those transitions completely seamless to our customers. As they move from, and it's one of the powers of the platform, you're able to do that in a very, very nice, seamless way. From our customer perspective, they'll be able to leverage these advancements in both ways in a seamless manner. There's a mix of things. Obviously, none of that will begin until post regulatory approval.
Okay, thank you.
Your next question comes from the line of Thomas Blakey with Cantor. Please go ahead.
Hi. Thanks for taking my questions and congratulations on the acquisition here. I just wanted to circle back on the single pane of glass that you've mentioned a couple times. Scott, expanding outside the contact center was asked about. Could you just talk about where maybe a couple of examples you're sitting alongside a larger platform like ServiceNow today and how that's kind of like being taken up by the customer? We're seeing an acceleration of AI being taken up by some of these larger platforms. I just want to see where NICE's strategic value is in some of those accounts and I have a follow up .
Maybe if I can refer back to even at our Interactions event where we had great customers like Disney, Charles Schwab, and other companies on stage and talking about their customer service platform where AI is integrated and orchestrated as a part of a broader customer service capability. What they look for is even though each of those large companies and many others are leveraging, for example, AWS on their core technology stack or leveraging ServiceNow for their workflows across the enterprise, what they're very clear about is that the system of engagement, the touch point with their consumer, is on a single platform and that platform is CXone Mpower. Why? Because you can't have friction points, you can't have disconnects with the consumer.
While you've got other technologies that are really complementary, CRMs, super complementary, none of them are able to provide that system of engagement like NICE can. You bring the power of Cognigy to the table, which is the best conversational and agentic AI platform on the planet. We're able to not only leverage our strengths, which is our history and performance from a CCaaS point of view, but the best AI platform to gain in that system of engagement. If you look forward and you look at the AI market, AI plays a pervasive role in self-service in that engagement, but also assisted service. Our Copilot sees tremendous growth because we're able to use the same data, the same models that is helping fulfill a self-service scenario in the future with Cognigy.
When a human agent is brought into the mix, it is able to then provide the assistant the real-time insights contextual for that customer to be able to resolve their requirements or even better create new revenue opportunities for the brand as well. That's the reason why that singular platform from engagement is so critical that goes well beyond what other competitors can do. With Cognigy it just becomes even stronger and more compelling than anybody else in the market.
It's very clear and thank you for double clicking on that for me. Maybe as a follow up regarding the $85 million and the 150- 250 basis point acceleration in cloud, just maybe like you know, unpack that a little bit. The 150- 250, is Cognigy needed there? There was some thinking after Interactions that, you know, some great statistics and some disclosures by Beth about more than half of the $208 million BE in consumption base and already growing dynamically. There could have been some accretion. Just want to kind of, you know, look at that 150- 250 specifically because it sounds like that's over and above the Cognigy standalone. That'd be helpful. Thanks guys and congratulations again.
Thanks. Thanks Thomas. Maybe I'll cover the second part and then Beth, you can then talk about how to think about the cloud growth. I guess there's a few things as you heard and as we spoke about at the Investor Day at Interactions, our self-service and AI growing at 39% in Q1 2025 at the $208 million, it's already growing quickly and that growth is based on our existing platform, the investments that we have made and the organic growth that we've got together with our CX models, with our autopilot, Copilot and auto summary type capabilities.
First and foremost, we will continue and we have high confidence of growth in the AI capabilities that we already bring, that we offer now, that is already growing. When you add in Cognigy on top of that, it's going to continue but it then becomes a compounding effect which is why we're so confident around our AI ARR growth by the end of 2026 more than doubling. The combination of the two, it's not that we only, that is not only Cognigy because obviously we have our existing AI capabilities that are tremendous but then the power of the two together become really compelling. Beth, do you want to then comment on the broader fragment?
Sure. Thank you, Scott. I think just to give a little more detail around that, the kind of the financial model that we thought about to get confident around that growth increment that we'll have on our own cloud is a combination of, you know, we'll see Cognigy continue to upsell into their existing customer base. They have a great pipeline of new logos already lined up. We've seen that they're not only selling into Europe, but they've recently done a lot of expansion here in the U.S. as well. Of course, they'll cross sell into our existing CXone customer install base and likewise we'll be selling and cross selling our CXone into their existing and new logos. There's a great deal of opportunity and that is kind of baked into that estimated $150 million- $250 million incremental growth on our cloud.
I think what's even more exciting that we really didn't even touch on yet is that that's really just representing sort of the two offerings of adding Cognigy into the platform portfolio. Our real expectation is that beyond that there's additional opportunity with really attachment of complementary solutions that we have here already embedded into the CXone Mpower platform. They're not even represented in that growth. We're very excited about the opportunity.
Great, Beth, thank you.
Your next question comes from the line of Pat Walravens from Citizens. Please go ahead.
Oh, great, thank you. Just big picture here, Scott. It's impressive how fast this company is moving since you joined. My first question is what was the, you talked about the background in terms of the partnership, but what was the background of this actual transaction and was it competitive?
First of all, thank you, Pat. It's thrilling to be here and part of an incredible team and I appreciate the comment. More importantly, the excitement is for the future. I think there's a couple of things that are really important and I probably should have stated this even more clearly on the why now. We're at the beginning of the AI market in CX. We really are. If you think about customer experience and where the future is pivoting to and what customers are demanding of us and demanding a cognitive, they want AI-first customer experience.
Now, AI-first can primarily mean self-service, full containment. Where that's not possible, they want a single platform that then can have the human assist and they can fulfill the consumer requirements easily, simply, and in a human-like way. Our view was we needed to move and move quickly. While, yes, we could have continued to try to build and we've got great engineering capabilities, I am so impressed by the quality of the product and engineering teams here at NICE. Speed matters and speed is a choice. We believe that the market will move very quickly. All of the signals indicate that the market will move in a single platform. An AI-first platform becomes really compelling when companies are thinking about how to reimagine their customer experience environment. Hopefully that helps. Sorry, I think that was the second question.
Was it competitive? Was there another bidder?
No, it was non-competitive.
Oh great, great. Then Beth, my follow up for you is, I mean obviously we're 28 days past the close of your quarter and you guys have fantastic financial systems. You decided to do this call without giving us a sense of how Q2 went. Can you just share sort of what your thinking was there?
Yeah, thanks, Pat. We have our earnings coming up in a few weeks from now, and we're looking forward to sharing more about the quarter and the results on that call.
Okay, thank you guys.
Your next question comes from the line of Timothy Horan with Oppenheimer. Please go ahead.
Thanks guys and congratulations. Can you talk about the success rate of your AI agents versus competitors? I'm assuming you're replacing some agents. Can you talk about maybe the ARPU you get for agent replacement in some form? Beth, can you talk about what the ARR might be at the close? Yeah, sorry, go ahead, Scott.
Oh, sure, sure. Maybe I'll hand to Barry who's even better placed to talk about the AI agents and what we see in the market and then I'll come back t he ARR question.
Yeah, so the question about how successful the AI agents are. Honestly, it really depends on the use case that you're in and the degree of fulfillment that you're doing. You can probably find that all technologies are very successful containing basic knowledge. These days, using GenAI and all that kind of stuff, it's pretty easy. The sophistication comes from where we're going with our strategy, as Scott's been talking about, and that's driving complex resolutions through the fulfillment in middle and back office. This strategically is what we think that Cognigy is going to bring us.
The toolkit and the capability is really phenomenal. Combined with what we're doing today, it's going to give us a huge opportunity to do so much better and capture that market space.
What I was referring to is, you obviously can compare Cognigy versus their peers right now because they're all on your platform. How do they execute versus their peers now?
Yeah, so obviously we did a pretty detailed assessment and Cognigy were the strongest platform we have evaluated on a whole bunch of different factors, not just containment but beyond that as well. We are very familiar with the full market of all players and by far the leading technology with great people.
Yeah, and maybe I'll add to that just to.
Yeah, go ahead. Sorry.
Let me just add to that if I can. When you look at the conversational and agentic AI platforms that are out there, one of the things that really stands out for Cognigy is that word platform, what it means for customers that they can design, build, and operate self-service AI agents at scale and they can do it in a solution that comes packaged together with the full NICE portfolio or they can build those agents and they have their own COE and do that themselves.
The platform capabilities of Cognigy is remarkable, and that's one of the compelling factors because if you think about how customers are going to transform or reimagine their customer experience, they don't implement all use cases, all scenarios in one go. They build and use the platform, and then they build out more and more of those scenarios. If you look at the success record that the Cognigy team have built, they're able to do so where they start with a number of use cases and the customers continue to build them out. What's really exciting is with our solutions and our data combined with that platform, you bring it together, then you're able to have prepackaged use cases, solutions out of the box together with that build capability.
It's the combination of two strengths which makes it even more important because they really do complement what we already offer to the market in a unique way. Beth, if you can comment on the ARR.
Yeah, you asked about the expected ARR at the close. What I would share with you is that first of all, we provided you with an expected exit AI and self-service ARR of Cognigy at the end of 2026, which is $85 million. We also provided that we expected year-over-year growth of 80%. You can use those two data points to essentially approximate where they expect to exit at the end of 2025. Currently, as we've highlighted, we expect the close to happen sometime during the course of the fourth quarter. That should give you an approximation. Of course, that's subject to regulatory approval.
Thank you.
Your next question comes from the line of Michael Latimore with Northland Security. Please go ahead.
Yeah, I had a question for Cognigy CEO. You know you've had success using large language models to date for intent determination. Can you talk a little bit about how you view the ability to use NICE as intent models in the mix here? You know, how much more helpful will that be or do you intend to stick with the large language model rep.
Yes, sure. I mean we use large language models in a lot of different capacities in the platform, not just for intent detection, but also agentic orchestration, classification, and many other things. One of the real benefits we see in coming together with NICE is the ability to leverage the data that NICE has collected throughout the years and also specific AI models that they have that can help us train our AI agents better and more purpose driven for specific industries. We believe that the quality of AI agents that we can build together will actually far outstrip anything that we've been able to do standalone so far.
Okay, thank you.
That concludes our question- and- answer session. I will now turn the call back over to Scott Russell for closing comments.
Thank you, operator. Let me just conclude again, it's an exciting day, a landmark day, and one that here at NICE, we are excited not only for what Cognigy can bring in terms of incredible technology, but a fantastic team. We look forward to sharing more details, not only of the collaboration, of what it means in technology terms. I would remind everyone that we have Capital Markets Day coming up in October and we look forward to sharing more details about how this impacts our midterm in terms of our financial outlook and how the NICE growth combined with Cognigy will be the market leader in CX and what that means to our shareholders and investors. Appreciate your questions this morning and look forward to sharing more details and probably joining you all in a couple of weeks when we do our Q2 earnings. Thanks everybody.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.