I've written quite a bit this year about Qualtrics and its purchase of Press Ganey Forsta. Back in May, when the $6.75 billion acquisition closed, I questioned how quickly the company could combine those businesses and deliver enough additional value to justify what it had paid. I still think there are valuable assets in the deal, particularly in healthcare, and I laid out that argument in A Good Asset Is Not the Same Thing As A Good Buy.
The financing behind the deal is now attracting some unwanted attention, and it adds another layer to my original concerns.
On October 15, Quartz reported, citing Bloomberg, that JPMorgan Chase was considering another attempt to sell the debt used to finance the acquisition. Banks had originally committed approximately $5.3 billion, expecting investors to buy much of that debt. Investors weren't interested at the proposed terms, leaving the banks holding loans they had expected to move off their own books. The latest proposal under consideration would reportedly involve selling around $4 billion, split between loans and bonds, possibly with stronger protections for lenders.
Qualtrics hasn't been reported to have missed a payment, and the difficulties the banks face selling the debt shouldn't be confused with Qualtrics having a cash shortage today. But the investors' reluctance tells us something about how they're viewing the company's future earnings. Given how much Qualtrics now owes and how much technology it has promised to deliver next year, I think its customers have good reason to look at the numbers too.
First, what went wrong with the financing?
Large acquisitions often work like this: banks promise to provide financing so a transaction can close, then sell portions of those loans to investors that want the interest income. The investors have to believe the borrower will make its payments, of course, and they'll want a higher return if they see greater risk.
Imagine a bank agreeing to lend a company $100 million. It plans to sell that loan to other investors for roughly $100 million and move on. A few months later, investors decide the company isn't as safe a bet as they thought. They're now willing to pay only $85 million for the same loan. The bank can accept a loss, keep the loan, or offer different terms and see whether that brings buyers back.
That's broadly the bind facing JPMorgan and the other banks that backed the Qualtrics deal. The original offering stalled earlier this year as investors became more concerned about established software companies and whether AI could reduce their growth and profitability. In May, Bloomberg reported that the banks faced more than $500 million in potential paper losses.
Those losses belong to the financing banks, and they aren't the same as a $500 million loss on Qualtrics' income statement. Equally, if JPMorgan sells only $4 billion of the original package, that doesn't magically remove the remaining debt from Qualtrics' balance sheet. It means the banks would still need to manage the portion they hadn't sold.
There's another useful detail in the October report. An existing Qualtrics loan that matures in 2030 was trading at about 84 cents on the dollar. Somebody buying $100 of that loan's principal was paying roughly $84 for it. Prices move for several reasons, including interest rates and the return investors demand, so 84 cents isn't a prediction of default. It does show that the loan was trading at a meaningful discount, and that investors wanted additional compensation for the risk.
How much does Qualtrics actually owe, and what might the interest cost?
Fitch's May credit assessment and subsequent rating reporting describe approximately $6.7 billion in term loans after the transaction: $1.4 billion of existing debt and $5.3 billion of new acquisition borrowing. Qualtrics also had a $500 million revolving credit facility, with approximately $175 million drawn when the deal closed, according to S&P's reported assessment.
That gives us a useful starting point, although Qualtrics hasn't publicly provided a complete, current interest-expense breakdown covering every loan and the revolver. We shouldn't pretend to know an exact annual debt-service figure.
We can, however, estimate the interest cost. If the $6.7 billion in term loans carries an average rate of 7%, annual interest would be roughly $469 million. At 8%, it would be $536 million. At 9.5%, it would be about $637 million. Those are illustrations using assumed borrowing costs, not confirmed rates for each loan. Principal repayments, fees, and interest on the revolver would come on top.
Let's compare that with what Qualtrics earns. The October reporting puts second-quarter revenue at $718 million and adjusted EBITDA at $332 million. EBITDA is an earnings measure before interest and certain other costs. It's useful for thinking about whether a company can support its debt, but it isn't the same as cash left over to spend.
Simply multiplying those second-quarter figures by four gives about $2.87 billion of revenue and $1.33 billion of adjusted EBITDA for a hypothetical full year. Under the 8% interest assumption, $536 million would equal approximately 19% of that revenue and 40% of adjusted EBITDA. Put another way, four dollars in every ten of that simplified earnings measure would go toward interest alone.
I wouldn't use that as a forecast. Press Ganey Forsta closed in May, partway through the second quarter, and annualizing one reported quarter does not tell us what a complete year of the combined business will earn. Company-adjusted EBITDA can also differ considerably from the measures lenders use.
The ratings agencies provide an important check. Moody's June assessment, as reproduced in rating coverage, estimated debt at approximately nine times its own adjusted EBITDA at closing, while Fitch expected debt to remain above six times its adjusted EBITDA through 2027. Moody's measure includes adjustments and isn't directly comparable with the $332 million quarterly company figure. The agencies are looking at a more demanding debt load than the quick calculation might suggest.
That leads me to a fairly measured conclusion. Qualtrics appears capable of making its required payments, and Fitch explicitly said it expected the company to do so. But there's a difference between being able to pay the lenders and having plenty of money to fund acquisitions, support existing products, build new technology, and handle unexpected problems. The financing leaves less room for error, especially if growth disappoints.
Why are investors so nervous about software companies?
Software used to be an especially attractive business to lend money to. Companies paid recurring subscriptions, implementations were often expensive, and switching suppliers could take years. Lenders could make reasonable assumptions about how much revenue would return next year, particularly when customers depended on software for important operations.
Some of those assumptions still hold. Qualtrics has longstanding enterprise relationships, extensive product capabilities, and customers who cannot simply move their data and processes to another system over a weekend. But the cost of building certain software capabilities is changing. Smaller companies can increasingly analyze feedback, summarize service conversations, identify patterns, and build useful customer intelligence tools without reproducing every feature of an older, much larger platform.
It would be a mistake to assume those newer products can replace an entire enterprise deployment. Security, data governance, global support, and complicated integrations still matter. What changes is how buyers value individual pieces of the software they're paying for.
An organization might keep its existing survey platform while deciding that a newer product does a better job of understanding why customers keep contacting service. It might maintain a broad employee listening program but stop buying additional tools from the same supplier simply because they're packaged together. That doesn't require a wholesale replacement to affect an established vendor's growth.
Investors can see the pressure on future sales, renewal prices, and margins. Reuters reported in February that software companies were delaying borrowing plans as lenders reassessed these risks. Qualtrics happens to be a highly visible example, with a very large acquisition to finance at the same time.
The company's size gives it advantages, but it also means management has a lot to maintain. Every existing product needs engineers, security work, support, and improvements, even as customers start expecting more from the money they spend.
The 2027 product promise needs a much clearer date
Qualtrics announced its XM Data & AI platform on September 9. It described technology intended to help customers simulate how people may behave, predict outcomes, and act on those predictions. I can see why the company wants to go there. CX software has spent years getting better at collecting information, while many organizations still struggle to use what they learn to change what happens to customers.
The announcement also emphasized the experience information and healthcare data available following the acquisition. I've already written about the strengths and limits of that argument, so I won't repeat the full analysis here. The more immediate issue is when customers can actually use the new platform.
Qualtrics' September 9 announcement says XM Data & AI will be available in 2027. It does not give a month or even a quarter. The September 23 Healthcare XM announcement also says 2027 without narrowing the date. Some associated services were described as available immediately, but they shouldn't be confused with general availability of the broader new platform.
January 2027 and December 2027 are nearly a year apart. If you're renewing an agreement in February, the difference could be enormous. A feature you can use next month may belong in your purchasing decision. A feature that arrives ten months later, takes another six months to implement, and requires an additional subscription needs to be assessed very differently.
I'd ask Qualtrics for the planned general availability date by product and capability, what is in production today, which features require migration, and what additional costs will apply. I'd also want written clarity on what happens if dates move. Product announcements are useful, but they aren't a substitute for a schedule you can actually plan around.
This is where the debt concerns intersect with the company's technology plans. Qualtrics is promising substantial development while integrating several businesses and managing a significant interest bill. I hope it succeeds, because customers would benefit from software that does more of the work after a problem is identified. But I would not sign a multi-year agreement that assigns financial value to features with no specific release date.
The financial pressure could affect choices inside the company
A debt load doesn't dictate every product decision. Qualtrics may improve profitability, reduce duplication across its acquired businesses, and put more money toward the products customers want most. Management could become more disciplined in ways that help both the company and its customers.
Still, the company can't avoid choosing what receives funding. The teams supporting existing platforms need investment, as do the people building XM Data & AI. Integrations between acquired systems require engineering work, and customers expect continued service while all of this is happening.
Moody's assessment anticipated some of the improvements coming from eliminating duplicated costs, reducing staff, and increasing automation. It also expected growth and profitability improvements to take time. Those are reasonable ways to improve a business, but they're not free of risk, especially when a vendor has several established customer groups with different needs.
I would pay particularly close attention if I were using a product acquired as part of Press Ganey Forsta. I'd want to know which platform receives ongoing development, whether important functions are moving elsewhere, and how Qualtrics intends to handle customers who've invested heavily in the existing technology. The company can have a sound integration plan and still cause considerable expense for customers if product changes aren't managed carefully.
I'd also watch for changes to pricing and packaging. A vendor with significant financial commitments may have an incentive to sell more capabilities to its existing customers or seek more predictable subscription revenue. That's normal commercial behavior, not evidence of misconduct. It becomes a problem when the cost rises faster than the results customers are getting.
What I'd do if I were buying or renewing Qualtrics
I wouldn't begin replacing Qualtrics just because a bank is struggling to sell a loan. That would be an expensive reaction to information that doesn't, on its own, show the software or the company is failing. But I'd use the next renewal to find out exactly what we're getting and what the future agreement would commit us to.
First, I'd ask the account team to separate the products we use today from the products being promised. If XM Data & AI is central to their proposal, I want the expected release date, live customer references, the implementation requirements, and the cost in writing. I'd also want to know which promised capabilities are part of the current price and which will be charged separately.
Next, I'd review the future of the particular platform we've implemented. This matters across acquired products as much as it does for the core Qualtrics offering. I'd ask what technology is being retained, what may be consolidated, how long current versions will be supported, and whether the company will cover any migration costs resulting from its own product decisions.
I'd have finance and procurement review the commercial terms more closely than usual. Three years of predictable pricing may be a good deal for a stable, proven system, but it can be restrictive when the most attractive capabilities haven't been released. We would need clear limits on annual price increases, data export rights, service commitments, and practical options if a product we rely on changes materially.
Then I'd take a current business problem and make Qualtrics demonstrate the value of the technology against it. If our goal is to reduce repeat service contacts, for example, I'd ask whether the platform can identify the recurring causes, help staff decide what to fix, and show whether the fix actually reduced those contacts. I would run the same test with a credible alternative where practical, using comparable data and measuring the full cost of delivery.
This is also how I approached the 2027 Customer Experience Technology Budget. Many companies are still funding software categories because those categories appeared in last year's budget. The problems they need to solve, and the technology available to solve them, may have changed substantially.
Finally, I'd keep a realistic alternative in view without treating a replacement as inevitable. Knowing what another provider can deliver is useful even if we end up renewing Qualtrics, because it gives the buying team something concrete to compare with the proposed renewal.
What would change my view of Qualtrics?
There's a perfectly credible path through this. Qualtrics could refinance the borrowing on workable terms, improve its earnings, integrate the acquired businesses, and introduce products that genuinely improve what its customers can accomplish. Its healthcare relationships and historical data could help, particularly in areas where the connection between experience, operations, and outcomes can be demonstrated.
I would become more optimistic as the company provides specific release dates, credible customer results, stronger growth, and clearer evidence that the new technology can be deployed without expensive rebuilding. I'd also want to see how quickly it reduces borrowing relative to earnings, because that would provide more room to invest if the market or its own plans change.
On the other hand, if release dates keep moving, growth remains flat, or customers are asked to pay substantially more while existing products receive less attention, I would become more cautious about large, long-term commitments. We should judge what happens over the next several quarters, not assume either outcome in advance.
For now, my working estimate is that annual interest on the term loans could fall somewhere around $470 million to $640 million, depending on the actual borrowing costs. At an illustrative 8%, that's approximately $536 million a year before fees, principal repayments, and interest on the revolving facility. The estimate may move as the financing changes, so it belongs in the analysis as a range, not as a reported expense.
The broader point is how much the company is trying to accomplish while carrying those obligations. Qualtrics has significant assets, real customers, and a product direction that could address some of the shortcomings of traditional CX technology. It also has a large acquisition to integrate, competition for the next software dollar, and a new platform that won't be generally available until an unspecified point in 2027.
If I were signing a Qualtrics renewal today, I'd want a lot more detail on that last point. I would also want to understand how the company plans to invest in the products we're already paying for, how pricing will change, and how the contract protects us if the future looks different from the sales presentation. Those are reasonable questions to ask of any important software supplier, especially one making this many changes at once.
Be Customer Led helps organizations assess CX software investments, run vendor selection and RFP processes, compare emerging technology, and negotiate informed renewal or replacement decisions. If you're approaching a major technology commitment, get in touch to discuss the options.
Reporting and company announcements reviewed through October 20, 2026. Debt service illustrations are estimates based on explicitly stated interest-rate assumptions, not disclosed Qualtrics financial guidance.
