8x8, Inc. (EGHT) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings report shows mixed signals. Strong financial results, including higher-than-expected revenue and EPS, are offset by concerns over declining margins and Fuze churn. The Q&A reveals uncertainty about achieving double-digit operating margins and vague responses on key issues. Despite positive trends in voice AI and new partner programs, the lack of clear guidance and margin decline dampen optimism. The stock price is likely to remain stable, with a neutral sentiment prevailing over the next two weeks.
Key Financial Performance
Service Revenue $179.7 million, growing 3.6% year-over-year. Growth driven by strong consumption of usage-based offerings and improved sales execution.
Total Revenue $185 million, growing 3.4% year-over-year. Growth attributed to increased usage-based offerings and better sales execution.
Usage-based Offerings Revenue Accounted for approximately 21% of service revenue, up from 14% in Q3 '25. Growth driven by CPaaS communication APIs, digital channels, and AI solutions.
Gross Profit Approximately $120 million, $3 million above guidance midpoint. Gross margin was 64.8%, down sequentially due to a mix shift toward lower-margin usage-based offerings.
Operating Income $21.7 million, an increase of over $4 million sequentially. Operating margin was 11.7%, above the guidance range of 9% to 10%.
Net Income $17.1 million, with fully diluted EPS of $0.12 per share, $0.03 above the high end of guidance. Increase due to higher revenue, lower operating expenses, and reduced interest expense.
Cash Flow from Operations $20.7 million, well above guidance range due to net timing benefit from collections and payments.
Debt Reduction Reduced debt principal by $224 million (41%) since August 2022, lowering annualized interest expense by more than 50% compared to the second half of fiscal 2023.
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Operating Highlights
Usage-based offerings: Increased consumption grew nearly 60% year-over-year, now representing over 20% of service revenue. Growth driven by CPaaS APIs and AI-based offerings.
Intelligent Customer Assistant: Customer contracts increased 70% year-over-year. Voice AI interactions grew over 200%, becoming the majority of AI interactions on the platform.
8x8 Engage: One of the fastest-growing products, achieving triple-digit growth year-over-year. Gaining traction in industries like healthcare, retail, and professional services.
Channel partner revenue: Increased momentum with early traction from new partner programs and incentives. Channel source pipeline showing sequential improvement.
Global distribution: Efforts underway to expand distribution globally, with early signs of success.
Fuze platform upgrade: Completed upgrades of Fuze customers to the 8x8 platform, improving efficiency and customer satisfaction. However, resulted in higher churn and near-term revenue headwinds.
Cost management: Operating expenses reduced by $8 million year-to-date, with a projected $12 million reduction for fiscal 2026 compared to fiscal 2025.
Hybrid pricing models: Shift from SaaS subscriptions to hybrid/tokenized pricing models, linking revenue to customer outcomes.
AI-driven transformation: Investments in AI to enhance customer success, sales processes, and operational efficiencies.
Multiproduct strategy: All top 20 customers now use multiple products, leading to higher revenue and retention.
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Risk or Challenges
Fuze platform decommissioning: The decommissioning of the Fuze platform has created a near-term revenue headwind as not all remaining Fuze customers elected to upgrade, resulting in higher churn in Q3 that will impact Q4 and fiscal '27 revenue.
Usage-based offerings margin: The continued mix shift toward usage-based offerings, which carry a lower margin profile, has led to a sequential decline in gross margin.
Seasonality in CPaaS APIs: Revenue from CPaaS APIs is expected to experience typical seasonality, particularly during holidays in the Asia Pacific region, which could impact Q4 revenue.
Fuze churn impact: Year-over-year growth headwinds related to Fuze churn are expected to persist through fiscal 2027, particularly in the first half of the year.
Competitive and evolving marketplace: The company acknowledges the need to accelerate installed base expansion and drive stronger channel momentum to navigate competitive and evolving market dynamics.
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Guidance & Outlook
Service Revenue Guidance for Q4 FY26: Service revenue is expected to be between $173.5 million and $178.5 million, reflecting a $7 million increase versus the midpoint of prior guidance.
Total Revenue Guidance for Q4 FY26: Total revenue is anticipated to be between $178.5 million and $183.5 million, also a $7 million increase over the midpoint of prior guidance.
Gross Margin Guidance for Q4 FY26: Gross margin is expected to be between 64% and 65%.
Operating Margin Guidance for Q4 FY26: Operating margin is projected to be between 8.5% and 9.5%, reflecting seasonal expenses and lower revenue compared to the prior quarter.
Earnings Per Share (EPS) Guidance for Q4 FY26: Fully diluted non-GAAP EPS is expected to range from $0.07 to $0.08 per share.
Cash Flow from Operations Guidance for Q4 FY26: Cash flow from operations is anticipated to be between $1 million and $4 million, reflecting higher cash interest payments and lower collectible receivables.
Full Year FY26 Service Revenue Guidance: Service revenue is anticipated to be between $708.6 million and $713.6 million, an increase of $12 million compared to prior guidance.
Full Year FY26 Total Revenue Guidance: Total revenue is anticipated to be between $729 million and $734 million, an increase of $12.5 million compared to prior guidance.
Full Year FY26 Gross Margin Guidance: Gross margin is expected to be between 65% and 66%.
Full Year FY26 Operating Margin Guidance: Operating margin is projected to be between 9.5% and 10%, translating to approximately $71 million in non-GAAP operating income at the midpoint.
Full Year FY26 EPS Guidance: Fully diluted non-GAAP EPS is expected to range from $0.36 to $0.37 per share.
Fiscal 2027 Service Revenue Growth Expectation: Despite headwinds from Fuze churn, service revenue growth is expected in fiscal 2027, with the most pronounced impacts in the first half of the year and full recovery by Q4 FY27.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Was the service revenue guidance in the fourth quarter ex Fuze up year-over-year?
A:Yes, the service revenue guidance in the fourth quarter ex Fuze was up 5% plus year-over-year, which is in line with the last couple of quarters.
Q:What needs to happen for the company to achieve sustainable double-digit operating margins?
A:The company needs to achieve more scale in its usage-based business. While gross margins may trend slightly downward, operating margins are expected to improve with scale. However, the exact timeline for achieving sustained double-digit operating margins is uncertain, though it remains a target.
Q:What is the current adoption trend for voice AI among customers?
A:Voice AI adoption is increasing, with 80% of all interactions now involving voice AI. Customers are moving from prototyping and beta stages to production, adding more use cases as they see positive ROI. The usage-based model supports this growth.
Q:Did Maven Lab contribute to revenue this quarter or guidance?
A:No, Maven Lab closed in January and did not contribute to revenue this quarter. It is a small technology tuck-in and too small to significantly impact guidance.
Q:Was there any FX impact on revenue this quarter?
A:Yes, there was a small FX impact. There was a headwind of well under $1 million relative to the beginning of quarter guidance and a year-over-year tailwind of approximately $1 million.
Q:What kind of projects are customers moving from pilot to larger-scale deployments?
A:Customers are deploying AI for specific use cases such as routing calls based on serial numbers, answering FAQ questions, biometric identification, and self-service payments. These are currently micro use cases, but they may evolve into macro use cases over time.
Q:Are contact center seats increasing or decreasing?
A:Contact center seats are increasing both quarter-on-quarter and year-on-year, despite the adoption of AI. Total cases handled by agents are decreasing, but handle times are increasing.
Q:What is the status of the new partner programs and go-to-market strategy?
A:The new partner programs are showing momentum, with quarter-on-quarter increases in pipeline and channel business now outperforming direct business. The company is focusing on AI-based products and does not plan significant changes to its go-to-market strategy in the next 12 months.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific timeline for achieving sustained double-digit operating margins, using vague language about scale and uncertainty in usage peaks. Additionally, they did not provide detailed revenue contributions from Maven Lab, only stating it was too small to move the needle.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI communication
AI era
AI interaction
AI journey
AI market
AI offering
APIs acceleration
Adoption AI
Awards user
CPaaS APIs
Customer contract
Design Awards
ESG afternoon
Finance Investor
Fuze churn
Fuze platform
Head Investor
IP voice
Instructions conference
Relations website
Voice
capacity
consumption usage
customer interaction
distribution
employee
expansion
finance
health care
interface
letter
platform partner
point solution
process
program
satisfaction
service cash
traction
EGHT Transcript
8x8, Inc. (EGHT) Q3 2026 Earnings Call Transcript
Unknown2-4
The earnings report shows mixed signals. Strong financial results, including higher-than-expected revenue and EPS, are offset by concerns over declining margins and Fuze churn. The Q&A reveals uncertainty about achieving double-digit operating margins and vague responses on key issues. Despite positive trends in voice AI and new partner programs, the lack of clear guidance and margin decline dampen optimism. The stock price is likely to remain stable, with a neutral sentiment prevailing over the next two weeks.
8x8, Inc. (EGHT) Q2 2026 Earnings Call Transcript
Positive11-5
The earnings call indicates strong financial performance with a revenue and EPS beat, disciplined capital management, and debt reduction. Despite some margin pressures, the overall profitability and cash flow are improving. The Q&A reveals a strategic focus on AI and M&A for growth, with international markets showing promising trends. While management was vague about certain future projections, the overall sentiment is positive due to strong financial metrics, optimistic guidance, and strategic initiatives.
8x8, Inc. (EGHT) Q1 2026 Earnings Call Transcript
Positive8-5
The earnings call presented a positive outlook, with strong revenue performance, debt reduction, and shareholder returns. Despite a slight decline in gross margin, the company is effectively managing cash flow and demonstrating growth in usage-based revenue. The Q&A highlighted challenges with the Fuze migration but also revealed growth opportunities in AI and CPaaS, especially in Asia. The stock buyback and debt reduction further support a positive sentiment. Overall, the company's strategic initiatives and financial health suggest a positive stock price movement in the short term.
8×8, Inc. (NYSE:EGHT) Q4 2025 Earnings Call Transcript
Unknown5-21
The earnings call presents a mixed outlook. Positive aspects include stable financial performance, debt reduction, and strategic investments in R&D and multi-product strategy. However, challenges such as economic uncertainty, competitive pressures, and supply chain issues temper enthusiasm. The lack of a share repurchase or dividend program further neutralizes sentiment. The Q&A section reveals concerns about macroeconomic impacts and ongoing transitions, but also highlights potential growth areas. Overall, the combination of stable financial results and external challenges suggests a neutral stock price movement over the next two weeks.
EGHT Slides
EGHT Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
