Revenue Performance - Service revenue for the three months ended September 30, 2025, increased by $4.0 million, or 2.3%, compared to the same period in 2024, driven by an increase in platform usage revenue in the Asia-Pacific region [120]. - For the six months ended September 30, 2025, service revenue rose by $7.5 million, or 2.2%, primarily due to a $20.1 million increase in platform usage revenue, also mainly from the Asia-Pacific region [121]. - The service revenue for the three months ended September 30, 2025, was $179.1 million, representing 97.3% of total revenue [119]. - Other revenue decreased by $0.9 million, or 15.6%, for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to lower product revenue of $0.8 million [123]. - For the six months ended September 30, 2025, other revenue decreased by $1.2 million, or 10.8%, compared to the same period in 2024, driven by a $1.6 million decline in product revenue [124]. Profitability and Expenses - Gross profit for the three months ended September 30, 2025, was $119.3 million, with a gross profit margin of 64.8% [108]. - The company reported a net income of $767,000 for the three months ended September 30, 2025, which is 0.4% of total revenue [108]. - Cost of service revenue increased by $7.4 million, or 14.8%, for the three months ended September 30, 2025, mainly due to a $10.1 million rise in costs to deliver subscription and platform usage services [126]. - For the six months ended September 30, 2025, cost of service revenue rose by $11.8 million, or 11.8%, primarily due to a $17.3 million increase in subscription and platform usage service costs [127]. - Research and development expenses decreased by $3.4 million, or 10.8%, for the three months ended September 30, 2025, mainly due to a $2.1 million reduction in stock-based compensation [132]. - General and administrative expenses increased by $2.4 million, or 12.0%, for the three months ended September 30, 2025, primarily due to a $3.6 million rise in legal and regulatory costs [138]. - Sales and marketing expenses decreased by $1.0 million, or 1.6%, for the three months ended September 30, 2025, primarily due to a $3.3 million decline in channel commissions [135]. - Cost of other revenue decreased by $0.5 million, or 6.8%, for the three months ended September 30, 2025, primarily due to lower product costs associated with IP telephone hardware [129]. Strategic Focus and Initiatives - The company is focusing on retaining existing customers and expanding its mid-market, enterprise, and public sector customer base as part of its long-term strategy [105]. - The company plans to increase service revenue through new customer acquisition, cross-selling additional products, and strategic acquisitions of technologies and businesses [109]. - The company is committed to maintaining a high level of investment in research and development to drive innovation across its Platform for CX [105]. - The company is enhancing its platform with AI-based capabilities and expanding its Technology Partner Ecosystem to provide tailored solutions [106]. - The company has expanded its reseller partner programs to increase market reach and improve sales efficiency [107]. Cash Flow and Financial Position - Cash and cash equivalents totaled $75.9 million as of September 30, 2025, down from $88.1 million on March 31, 2025 [151]. - Net cash provided by operating activities decreased by $9.8 million to $20.7 million for the six months ended September 30, 2025, compared to $30.5 million in 2024 [155]. - Cash used in investing activities increased to $8.7 million for the six months ended September 30, 2025, up from $7.2 million in 2024 [155]. - The company repurchased 1.0 million shares of common stock for approximately $1.8 million at an average price of $1.83 per share during the six months ended September 30, 2025 [153]. - The outstanding principal of the 2024 Term Loan is $127.0 million as of September 30, 2025, after a reduction of $25.0 million during the fiscal year [160]. - The company has a material cash requirement of $527.1 million as of March 31, 2025, with a significant increase in a non-cancellable hosting service contract commitment from $24.1 million to $54.0 million [165]. - The 2024 Term Loan bears interest at an effective rate of 8.65% as of September 30, 2025 [159]. - The company anticipates that existing cash and cash flows from operations will be sufficient to meet working capital and contractual obligations for at least the next twelve months [150]. Accounting and Risk Management - The company's consolidated financial statements are prepared in accordance with U.S. GAAP, with no significant changes to critical accounting policies during the six months ended September 30, 2025 [168]. - There have been no material changes in the company's exposures to market risk since March 31, 2025, including interest rate and foreign currency exchange risks [170]. - The preparation of financial statements requires estimates and judgments that affect reported amounts of assets, liabilities, revenue, and expenses [167]. Other Income and Taxation - Other income increased to $0.5 million for the three months ended September 30, 2025, compared to a loss of $12.7 million in the same period of 2024, primarily due to a decrease in loss on debt extinguishment by $12.0 million [144]. - The provision for income taxes decreased by $0.9 million for the three months ended September 30, 2025, representing an 81.1% decline compared to the same period in 2024 [147]. - Interest expense decreased by $3.1 million, or 38.7%, for the three months ended September 30, 2025, primarily due to a lower interest rate on the 2024 Term Loan compared to the 2022 Term Loan [141]. - The percentage of total revenue attributed to research and development was 15.2% for the three months ended September 30, 2025, down from 17.3% in the same period of 2024 [131].

Core Insights - 8x8's shares surged by as much as 27.7% following the release of Q2 2026 results, which exceeded Wall Street's expectations and included optimistic guidance for the upcoming quarters [1][7] Financial Performance - Q2 2026 sales for 8x8 increased by 1.7% year-over-year, reaching $184.1 million, marking the second consecutive quarter of revenue growth after a prolonged decline [2] - Adjusted earnings remained stable at $0.09 per diluted share, surpassing the consensus estimate of $0.07 per share, with revenues expected around $178 million [2] Company Outlook - Despite the positive revenue trends, 8x8 is still in a turnaround phase, having faced challenges in growing top-line sales, with the stock down approximately 20% in 2025 and 49% over the past three years [4] - The company is actively reducing long-term debt and integrating artificial intelligence features into its services, although the fastest-growing products have lower gross margins [5] Market Position - While 8x8's stock has recently gained, it remains significantly down over the past year, indicating ongoing challenges in the digital communications market [7]

Core Insights - 8x8 reported quarterly earnings of $0.09 per share, exceeding the Zacks Consensus Estimate of $0.07 per share, with a year-over-year comparison showing no change in earnings [1] - The company achieved revenues of $184.1 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 3.82% and showing an increase from $181 million year-over-year [2] - The stock has underperformed, losing approximately 30.3% since the beginning of the year, while the S&P 500 has gained 16.5% [3] Earnings Outlook - The future performance of 8x8's stock will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [4][5] - The current consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $177.24 million, and for the current fiscal year, it is $0.30 on revenues of $713.67 million [7] Industry Context - The Internet - Software industry, to which 8x8 belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Ziff Davis, another company in the same industry, is expected to report quarterly earnings of $1.76 per share, reflecting a year-over-year increase of 7.3% [9]

Financial Data and Key Metrics Changes - Total revenue for Q2 2026 was $184.1 million, exceeding guidance by approximately $4 million, with a year-over-year growth of 1.7% [13] - Service revenue reached $179.1 million, growing 2.3% year-over-year, driven by strong usage-based offerings [13] - Gross profit was $120.9 million, with a gross margin of 65.7%, reflecting a sequential decline due to a shift towards lower-margin usage revenue [14] - Operating income was $17.3 million, resulting in a 9.4% operating margin, above expectations [14] - Cash flow from operations was $8.8 million, exceeding guidance, with a cash balance of $76.7 million at quarter-end [14][15] Business Line Data and Key Metrics Changes - Usage revenue, including CPaaS communication APIs, accounted for approximately 19% of service revenue, up from 13% in Q2 2025 [13] - Service revenue from Fused customers declined to about 3% of total service revenue, down from 7% in Q2 2025, as the company transitions these customers to the 8x8 Platform [13] Market Data and Key Metrics Changes - The U.S. business is experiencing slower growth compared to international markets, with the U.K. and international segments growing substantially faster [63] - The company is seeing increased demand for its AI-powered solutions, which are becoming integral to customer engagement strategies [55] Company Strategy and Development Direction - The company is focusing on innovation, particularly through the integration of AI across its platform to enhance customer experiences and operational efficiency [5][11] - A new product, 8x8 Workforce Management, will be offered free to all Contact Center customers, marking a shift towards product-led growth [6][7] - The company is committed to disciplined capital management, including debt reduction, with a significant reduction of $224 million in debt principal since August 2022 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver sustained shareholder value, despite potential variability in usage-based revenue growth [16][19] - The transition to a usage-based revenue model is expected to lead to increased revenue growth, albeit with decreasing gross margins in the short term [61] - Management is aware of pricing pressures in the market but believes that the introduction of new AI products will help offset these challenges [42] Other Important Information - The company is actively exploring M&A opportunities to drive geographic and product portfolio expansion, while maintaining a focus on cash flow and debt management [49][50] - The company is implementing a new conference call format, providing detailed quarterly letters and financial highlights to enhance communication with investors [4][12] Q&A Session Summary Question: What is driving the service margin changes? - Management indicated that the changes are primarily driven by volume rather than price, with stable margins on application services [22] Question: How will the revenue trajectory look as Fused customers transition? - Management noted that while there will be a temporary headwind as Fused customers are upgraded, they expect to return to normalized growth rates thereafter [23][24] Question: How is pipeline quality being measured? - Pipeline quality is measured by the number of deals reaching stage three in their sales process, indicating a higher likelihood of closing [25][26] Question: What actions are being taken regarding cost management? - The company is deploying AI technologies internally to improve efficiency and reduce costs, while also managing supplier pricing [60][62] Question: How does the company view M&A versus organic growth? - Management stated that while they are looking at tuck-in acquisitions, debt reduction remains a priority, and they are focused on cash flow-driven growth [49][50]

Financial Performance - Service revenue reached $179 million, a 2.3% year-over-year increase and a 1.6% quarter-over-quarter increase[40] - Total revenue amounted to $184 million, reflecting a 1.7% year-over-year increase and a 1.5% quarter-over-quarter increase[40] - The company's GAAP operating margin was 2.9%, while the non-GAAP operating margin was 9.4%[40] - Positive operating cash flow was generated for the 19th consecutive quarter, reaching $8.8 million[40] Customer & Product Growth - Customers using 3 or more products increased by 11% year-over-year[40] - Revenue from products sold on an as-used basis accounted for 19% of service revenue[38] - Intelligent Customer Assistant (ICA) customer adoption increased by 59% year-over-year[18] - API Messaging Interactions experienced a 181% year-over-year growth[18] Debt Reduction - A $10 million prepayment of principal was made on the Term Loan during Q2 2026[40, 41] - The company has reduced the principal amount of debt by approximately $224 million since August 2022[70] Q3 2026 Guidance - The company projects service revenue to be between $172 million and $177 million, representing a growth rate between -1% and 2% year-over-year[73] - Total revenue is expected to be between $177 million and $182 million, also indicating a growth rate between -1% and 2% year-over-year[73]

Financial Performance - Total revenue for Q2 FY 2026 was $184.1 million, a year-over-year increase from $181.0 million in Q2 FY 2025[5] - Service revenue for Q2 FY 2026 reached $179.1 million, compared to $175.1 million in the same quarter last year[5] - GAAP net income for Q2 FY 2026 was $0.8 million, a significant improvement from a net loss of $14.5 million in Q2 FY 2025[5] - Non-GAAP net income for Q2 FY 2026 was $13.1 million, up from $12.1 million in Q2 FY 2025[5] - Total revenue for Q2 2025 was $184.1 million, a 1.2% increase from $181.0 million in Q2 2024[36] - Service revenue reached $179.1 million, up from $175.1 million year-over-year, indicating a growth of 1.2%[36] - Net income for Q2 2025 was $767,000, a significant improvement from a net loss of $14.5 million in Q2 2024[36] - Basic and diluted net income per share for Q2 2025 was $0.01, compared to a loss of $0.11 per share in Q2 2024[36] - GAAP net income for Q3 2025 was $767, representing 0.4% of total revenue, a significant improvement from a loss of $14,543 in Q3 2024, which was -8.0% of total revenue[43] - Non-GAAP net income for Q3 2025 reached $13,113, or 7.1% of total revenue, compared to $12,099, or 6.7% in Q3 2024[43] Cash Flow and Expenses - Cash flow from operations for Q2 FY 2026 was $8.8 million, down from $12.3 million in Q2 FY 2025[5] - Total operating expenses decreased slightly to $114.0 million from $116.0 million year-over-year[36] - Cash and cash equivalents as of September 30, 2025, were $75.9 million, down from $88.1 million at the end of March 2025[38] - Total assets decreased to $670.8 million from $683.2 million since March 31, 2025[38] - Stockholders' equity increased to $133.2 million from $122.2 million since March 31, 2025[38] - Net cash provided by operating activities for the six months ended September 30, 2025, was $20,708, compared to $30,465 for the same period in 2024, representing a decrease of 32.2%[40] - Cash, cash equivalents, and restricted cash at the end of the period were $76,684, down from $117,867 at the end of the previous year[40] Profitability Metrics - Non-GAAP operating margin for FY 2026 is projected to be between 8.5% and 9.5%[19] - GAAP service revenue margin for the six months ended September 30, 2025, was 68.6%, down from 71.3% in 2024[42] - Non-GAAP gross margin as a percentage of total revenue for the six months ended September 30, 2025, was 66.7%, compared to 70.4% in 2024[42] - Non-GAAP operating profit for the six months ended September 30, 2025, was $33,657, down from $41,648 in 2024, reflecting a decrease of 19.2%[42] - Adjusted EBITDA for Q3 2025 was $22,037, accounting for 12.0% of total revenue, down from $26,650, or 14.7% in Q3 2024[43] Debt and Capital Management - The company has reduced total debt by $224 million, or 41%, since August 2022, reflecting a commitment to disciplined capital management[12] - The company incurred $25,000 in principal repayment on term loans during the six months ended September 30, 2025[40] - The company reported a loss on debt extinguishment of $46 in Q3 2025, compared to a significant loss of $11,996 in Q3 2024[43] Recognition and Innovation - 8x8 was recognized as a leader in the IDC MarketScape for European Contact Center-as-a-Service Applications Software 2025[12] - The company introduced AI-powered features to enhance agent productivity and improve service quality in the contact center[12] Stock-Based Compensation - Stock-based compensation expense for the six months ended September 30, 2025, was $12,671, compared to $23,438 in 2024, indicating a reduction of 46%[42] - Stock-based compensation expense for Q3 2025 was $5,762, down from $9,845 in Q3 2024[43]

Core Insights - 8x8, Inc. has introduced native support for Mitel SIP desk phones, allowing users to access the 8x8 platform while preserving their existing hardware investments and enhancing voice resiliency without disruptions [1][2][3] Company Developments - The integration of Mitel SIP support expands 8x8's enterprise voice capabilities, enabling businesses to modernize their communication systems without the need for device replacements [2][4] - 8x8's platform combines various communication tools, including business phone, contact center, chat, video, APIs, and AI, ensuring a comprehensive solution with a guaranteed 99.999% uptime SLA and global PSTN coverage in over 55 countries [4][7] Industry Context - The partnership with Mitel emphasizes the importance of physical handsets in enterprise communication, as they are trusted for their reliability and performance in various environments [5][3] - Mitel's recent relocation of IP phone production to Germany aims to enhance supply chain stability and reduce lead times for European customers, which is particularly beneficial for clients in regulated industries [9]

Core Insights - UK consumers prefer human support over AI, with 83% favoring real person interactions compared to only 4% for virtual agents or chatbots [2][15][3] - Financial incentives can shift consumer preferences, as over 30% would consider using AI if it resulted in lower prices [4][9] Consumer Preferences - A significant majority (75%) of respondents across the UK prefer human interaction for urgent issues, with no region reporting below 76% support [3] - For non-urgent matters, support for AI increases slightly, indicating a nuanced view on the use of technology [3] Regional Variations - Londoners show the highest price sensitivity, with 45% more likely to accept AI if it reduces costs, followed by Newcastle (39%) and Wales (36%) [5] - In contrast, only 20% of Scots indicated that discounts would influence their preference for AI [5] Demographic Insights - Younger demographics (25-34 years) are more open to hearing a relative's voice in customer interactions, with 48% in favor, while only 12% of those aged 55 and older support this idea [6][8] - Among 16-24 year olds, 7% prefer AI assistance, and 17% have no preference, suggesting a generational divide in attitudes towards AI [8] AI Integration in Customer Experience - The 8x8 platform integrates AI to enhance customer experience, supporting human agents with real-time assistance and workflow automation [10] - The approach emphasizes empowering agents rather than replacing them, aligning with customer expectations for a balanced service model [9]

Core Viewpoint - Investors in the Internet - Software sector should consider 8x8 (EGHT) and Clearwater Analytics (CWAN) as potential value opportunities, with EGHT currently presenting a stronger case for investment [1]. Group 1: Zacks Rank and Earnings Outlook - 8x8 has a Zacks Rank of 2 (Buy), indicating a favorable outlook, while Clearwater Analytics has a Zacks Rank of 3 (Hold), suggesting a less favorable position [3]. - The earnings outlook for 8x8 has likely improved more significantly than that of Clearwater Analytics recently, which is a key consideration for value investors [3]. Group 2: Valuation Metrics - 8x8 has a forward P/E ratio of 6.69, significantly lower than Clearwater Analytics' forward P/E of 31.43, indicating that 8x8 may be undervalued [5]. - The PEG ratio for 8x8 is 0.77, while Clearwater Analytics has a PEG ratio of 1.57, further suggesting that 8x8 offers better value based on expected earnings growth [5]. - 8x8's P/B ratio is 2.22 compared to Clearwater Analytics' P/B of 2.61, reinforcing the notion that 8x8 is more attractively priced relative to its book value [6]. Group 3: Overall Value Grades - Based on various valuation metrics, 8x8 holds a Value grade of A, while Clearwater Analytics has a Value grade of F, indicating a significant disparity in perceived value between the two stocks [6]. - The combination of Zacks Rank and Style Scores suggests that value investors are likely to favor 8x8 over Clearwater Analytics at this time [6].

Core Insights - 8x8, Inc. has been recognized in the 2025 Gartner Magic Quadrant for Unified Communications as a Service [1] Company Summary - 8x8, Inc. is acknowledged for its position in the Unified Communications as a Service sector, indicating its competitive standing and capabilities in this industry [1]