The Sage Group (LON:SGE) reported what Chief Executive Officer Steve Hare called an “excellent first half” of fiscal 2026, citing broad-based double-digit revenue growth, margin expansion and accelerating annualized recurring revenue as the business continued to invest in artificial intelligence across its finance, HR and payroll software.
Chief Financial Officer Jacqui Cartin said total revenue increased 11% in the first half, underpinned by recurring revenue growth of 11%. Recurring revenue now accounts for 97% of total revenue, which Cartin said reflected “the quality and resilience” of Sage’s business model.
Underlying operating profit rose 15% to GBP 326 million, while operating margin expanded 80 basis points to 23.9%. Profit after tax increased 10% to GBP 224 million, and underlying earnings per share rose 16% to GBP 0.237. Sage increased its interim dividend by 8% to GBP 0.0805.
ARR rises as retention and new customer acquisition improve
Sage said annualized recurring revenue increased by about GBP 275 million year over year to GBP 2.7 billion, up 11% at the half year. The renewal rate by value rose to 102%, reflecting retention, targeted price increases and higher sales to existing customers through add-ons.
Cartin said new customer acquisition increased to GBP 200 million, compared with GBP 190 million in the first half of the prior year.
In response to a question from Morgan Stanley analyst George Webb, Cartin said the pricing contribution in the first half was about 5.5%, in line with fiscal 2025. She said that reflected the “continued fair value exchange” as Sage rolls out product enhancements and additional features, including Sage Copilot. Cartin also pointed to increased cross-sell and upsell activity, bundled adjacent capabilities such as expense management, AI functionality including accounts payable automation, and slightly improved churn.
Hare said the growth drivers were balanced between attracting new customers and expanding value for existing customers. He added that, while not giving medium-term guidance, his aspiration is for Sage to “consistently” grow at a double-digit rate.
Cloud portfolio drives regional growth
Sage Business Cloud revenue grew 15% in the first half. Cloud-native revenue increased 25%, which Cartin said was particularly driven by Sage Intacct across both new and existing customers. Cloud-connected growth was led by Sage 50, supported by bundled functionality, new AI features and continued migration to the cloud. Subscription penetration reached 84%.
North America revenue growth accelerated to 14%, including 15% growth in the U.S. Cartin said Sage Intacct continued to build momentum through a vertical go-to-market approach, with demand across not-for-profit, construction and financial services, along with increasing adoption of AI-powered modules such as accounts payable automation. Canada revenue grew 9%.
In the U.K. and Ireland region, revenue grew 10%, supported by Sage Intacct, Sage 50 and the small-business suite, including Sage Accounting. Cartin said Sage was also building momentum in Sage Sole Trader and embedded services through partnerships with U.K. banks and fintechs to win customers earlier in their lifecycle and support Making Tax Digital readiness.
Europe revenue grew 7%. France grew 7%, Iberia grew 9% and Central Europe grew 4%. Cartin cited strength in accounting solutions, Sage 200, HR and payroll, and early traction in Sage Intacct in parts of the region.
Sage emphasizes AI as a growth and efficiency lever
Hare framed Sage’s AI strategy around trust, accuracy and compliance, saying the company operates systems of record for finance, HR and payroll in regulated environments where “nearly right is wrong.” He said Sage combines public models with domain-specific models built on proprietary data and expertise, and that its AI is trained on billions of financial transactions across industries, regions and regulatory regimes.
Hare said AI-powered features are now available to more than 500,000 customers across the group. Sage Copilot has delivered more than 75 million insights and answered more than 300,000 customer questions in the last year, he said.
The company highlighted several AI agents already in use:
- Close Agent: Launched in November and now live with more than 500 customers, designed to help finance teams accelerate month-end close.
- Assurance Agent: Monitors financial data in real time and identified more than 6 million potential errors in the last year.
- Accounts Payable Agent: Processes invoices, approvals and reconciliation, handling invoices worth more than $3.3 billion per month and saving customers more than 5 million hours of work, according to Hare.
Hare said Sage is also using AI internally. He said AI tools in research and development saved engineers more than 160,000 work hours in the last six months, while AI in customer support is handling four times more interactions than a year ago and producing a 70% resolution rate at lower cost.
Asked by Bank of America analyst Frederic Boulan about AI monetization, Hare said Sage expects to use a combination of pricing models, including AI functionality embedded in existing packages and consumption-based pricing. He said Sage already monitors usage in Intacct and may charge overage fees or move customers into higher tiers as usage increases.
Hare said direct monetization of AI is currently “very modest,” but AI is supporting customer confidence and retention. “We don’t say, ‘Come and buy AI,’” he said in response to J.P. Morgan analyst Toby Ogg. “What we say is that we have technology, AI and other technology, which enables us to deliver to you things that save you time, give you insights.”
Cash flow supports investment, acquisitions and buybacks
Sage generated GBP 378 million of cash from operations in the first half, with cash conversion of 116%. Free cash flow was GBP 241 million, net of interest and tax. Cartin said the company had GBP 1.1 billion of available liquidity and leverage of about 2 times, at the upper end of its 1-to-2-times target range following share buybacks.
Cartin said Sage’s capital allocation priorities remain organic investment, tuck-in acquisitions and shareholder returns. During the first half, Sage acquired Criterion to strengthen HR and payroll for Sage Intacct in the U.S. and Akao to build e-invoicing capabilities in France. After the period ended, Sage acquired Doyen AI, which Hare said would help enhance migration tools for customers moving to Sage Intacct from other providers or from Sage 50.
Sage also announced GBP 600 million of share buybacks, with about GBP 350 million completed during the first half.
Outlook raised for fiscal 2026
Building on first-half momentum, Sage now expects organic revenue growth for fiscal 2026 to be above 9%. The company also expects operating margins to continue trending upward in fiscal 2026 and beyond as it scales the group efficiently.
Cartin said the upgraded outlook reflects strong first-half momentum but also takes into account tougher comparisons in the second half, particularly in the fourth quarter. She said Sage was making “good progress” in the early stages of the third quarter and would provide further details with its Q3 results.
About The Sage Group (LON:SGE)
The Sage Group plc, together with its subsidiaries, provides technology solutions and services for small and medium businesses in the United States, the United Kingdom, France, and internationally. It offers cloud native solutions, such as Sage Intacct, a cloud accounting software product and financial management software; Sage People, a HR and people management solution; Sage 200, a finance and business management solution; Sage X3, a business management solution; Sage Accounting, a solution for small businesses, accountants, and bookkeepers to manage customer data, accounts, and people; Sage Payroll for small businesses manage their payroll; and Sage HR for small and mid-sized businesses for record management, leave management, staff scheduling, and expenses services.
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