The Sage Group plc

Revenue grew 11% in the first half, with recurring revenue also up 11% and 97% of revenue recurring. Operating margin expanded 80 basis points to 23.9%, operating profit rose 15% to GBP 326 million, profit after tax increased 10% to GBP 224 million, and underlying EPS increased 16% to 23.7p. Cash from operations was GBP 378 million, free cash flow was GBP 241 million, cash conversion was 116%, and ARR increased by around GBP 275 million to GBP 2.7 billion, up 11%. Renewal rate by value increased to 102%, new customer acquisition increased to GBP 200 million from GBP 190 million a year ago, and the interim dividend increased 8% to 8.05p. For FY '26, Sage now expects organic revenue growth above 9% and operating margins to continue trending upward.

Stephen Hare framed the quarter as proof that Sage’s AI-led strategy is strengthening the business, not threatening it, because customers in regulated workflows need trusted, explainable outputs. He emphasized Sage’s embedded position in finance, HR, and payroll, its proprietary domain data, and its ecosystem as durable advantages versus newer AI-native competitors. His tone was confident and focused on long-term adoption, saying the priority is to get customers using AI features first and monetize more over time.

Jacqui Cartin highlighted accelerating revenue growth, margin expansion, and strong cash generation, with revenue up 11%, operating margin at 23.9%, EPS up 16% to 23.7p, and cash conversion at 116%. She said ARR rose to GBP 2.7 billion, renewal rate by value improved to 102%, and new customer acquisition increased to GBP 200 million. On capital allocation, she noted GBP 600 million of share buybacks announced, around GBP 350 million completed in the first half, GBP 1.1 billion of available liquidity, leverage at around 2x, and continued investment through R&D plus tuck-in acquisitions like Criterion, Akao, and Doyen AI.

Analysts focused on what is driving the acceleration in revenue/ARR, how durable the 102% renewal rate is, and how much AI is contributing to monetization. Management said the growth is coming from strong underlying demand, execution, better AI monetization, and regional strength in North America and the UKIA, while renewal gains reflect pricing, cross-sell/upsell, AI add-ons, and slightly better churn. On AI and competition, management said adoption is still the priority, monetization is modest today, and Sage believes its trusted, domain-specific AI is stronger than generic or AI-native alternatives in regulated finance workflows.