Should You Continue Holding Q2 Holdings (QTWO)?

Core Insights - Conestoga Capital Advisors reported that equity markets reached new all-time highs in Q3 2025, but their Smid Cap Composite underperformed the Russell 2500 Growth Index, returning -1.1% net-of-fees compared to the index's +10.7% [1] - The stock market rally that began in April continued with a narrow and "low quality" leadership [1] Company Overview: Q2 Holdings, Inc. (NYSE:QTWO) - Q2 Holdings, Inc. is a digital solutions provider for financial institutions, FinTechs, and alternative finance companies [2][3] - The stock experienced a one-month return of -23.43% and a 52-week loss of 27.27%, closing at $59.86 with a market capitalization of $3.738 billion on October 17, 2025 [2] Performance and Challenges - Q2 Holdings faced pressure on its shares due to concerns about IT spending by regional banks and credit unions, along with company-specific issues such as elevated customer churn in Q2 2025 [3] - The elevated churn was attributed to a mix of M&A and some point solution customers not renewing contracts, although the company maintains a target of sub 5% overall churn for 2025 [3] - Q2 Holdings aims to achieve a 13% subscription revenue growth target for 2025 and is seeing improved profitability and cash flow [3] Market Sentiment - Q2 Holdings was not among the 30 most popular stocks among hedge funds, with 29 hedge fund portfolios holding the stock at the end of Q2 2025, down from 31 in the previous quarter [4] - While the potential of Q2 Holdings is acknowledged, certain AI stocks are viewed as offering greater upside potential with less downside risk [4]