8X8 NASDAQ: EGHT reported a record quarter for service revenue in the first quarter of fiscal 2027, extending its streak of year-over-year revenue growth to five consecutive quarters. The company exceeded its guidance ranges for service revenue, total revenue, non-GAAP operating margin and operating cash flow, while raising its full-year revenue outlook.
Chief Executive Officer Samuel Wilson said the results reflected increasing customer adoption of the company’s unified communications, contact center, communications-platform-as-a-service, or CPaaS, and artificial intelligence offerings. He said 8x8’s investments in its platform over recent years are beginning to translate into broader adoption and stronger operating performance.
“Our focus isn't on managing the business for one quarter. It's on building a company that can create durable value over the long term,” Wilson said.
Revenue Growth and Profitability
Total revenue for the quarter was $190.2 million, up 4.9% year over year, while service revenue rose 5.1% to a record $185.3 million, according to Chief Financial Officer Kevin Kraus. Platform usage revenue, including CPaaS communication APIs, digital channels and AI solutions, reached another record and represented about 26% of service revenue, compared with approximately 17% a year earlier.
Platform usage revenue increased about 63% year over year. Kraus said the growth reflects demand for the company’s usage-based offerings, though those offerings carry lower gross margins than traditional subscription software products.
Gross profit totaled approximately $117.2 million, and gross margin was 61.6%. Kraus said the margin percentage was affected by the growing mix of usage-based revenue, but the company is prioritizing growth in AI-driven customer engagement and other high-growth markets while managing expenses to support operating profit dollars.
Non-GAAP operating income was $18.9 million, producing a 9.9% operating margin, above the high end of the company’s guidance. Operating expenses declined by more than $8 million from a year earlier, primarily from lower sales and marketing costs as 8x8 focused on go-to-market efficiency.
Net income was $13.6 million, or $0.09 per fully diluted share. Cash flow from operations was $17 million, above the company’s guidance range, although Kraus noted that operating cash flow can vary substantially between quarters due to the timing of collections and payments.
AI Adoption and Platform Expansion
Wilson said adoption of the company’s AI products, including AI Studio and Intelligent Customer Assistant, increased 121% year over year. More than 200 organizations were building agents through AI Studio about three and a half months after its official launch, creating more than 2,900 AI agents. More than half of those organizations have moved beyond experimentation to become paying customers, he said.
AI Studio remains in beta and is being used by customers across industries including healthcare, IT services, retail, insurance, automotive, energy and logistics. Wilson said customers are using the platform for applications ranging from IT operations to insurance-policy renewals and training human agents in de-escalation techniques.
The company also reported that customers using three or more paid 8x8 products increased 18% year over year and now account for approximately 38% of recurring revenue. Revenue from newer products increased 18%, led by Engage, AI Solutions and Analytics. Channel-generated pipeline grew about 25% from the prior-year period.
During the quarter, 8x8 introduced Pulse, a product intended to convert conversations into searchable organizational knowledge, and continued expanding AI Studio’s language capabilities. Wilson said the company is concentrating its fiscal 2027 efforts on partner enablement, customer retention and broader multi-product adoption within its installed base.
Retention, Channel Strategy and Margins
In response to an analyst question, Kraus said both contact-center and unified-communications seat counts rose year over year. However, the company continues to face average selling price pressure in smaller unified-communications accounts as customers renew contracts amid lower competitor pricing.
Kraus said the main retention issue is downsell pressure rather than customer losses, adding that the company’s customer losses have been declining. He said retention and average revenue per customer improve materially as clients adopt more products.
Wilson said AI is generally serving as a usage-based add-on to customers’ existing per-seat unified communications and contact center subscriptions rather than creating additional pressure on seat-based pricing. He also said 8x8 is working to educate channel partners on its broader product portfolio, including CPaaS, contact center, workforce management, Engage and AI Studio.
Management said usage-based offerings should produce higher operating profit dollars and cash flow over time as volumes grow and unit costs decline. Kraus added that AI usage margins are stronger than basic wholesale-type usage margins, and that the mix of usage revenue is gradually shifting toward products with potentially better economics.
Debt Reduction and Updated Outlook
8x8 ended the quarter with $90.6 million in cash and cash equivalents and $309.4 million of principal debt outstanding. The debt balance is down nearly $240 million, or about 44%, from its August 2022 peak of $548 million. The company made a $14.5 million term-loan payment during the quarter.
Kraus said the company expects the term loan to move from long-term debt to current liabilities ahead of its August 2027 maturity, a standard accounting classification change. He said 8x8 intends to continue scheduled debt repayment and is confident it can refinance its debt before maturity.
For the second quarter of fiscal 2027, 8x8 expects:
- Service revenue of $180 million to $185 million.
- Total revenue of $185 million to $190 million.
- Gross margin of 60.5% to 61.5%.
- Non-GAAP operating margin of 8% to 9%.
- Non-GAAP diluted earnings per share of $0.07 to $0.08.
- Cash flow from operations of $9 million to $11 million.
For the full fiscal year, the company raised its service revenue forecast to $725 million to $745 million from a prior range of $707 million to $727 million. Total revenue guidance increased to $745 million to $765 million from $727 million to $747 million. 8x8 maintained its outlook for approximately $70 million of non-GAAP operating income at the midpoint, non-GAAP diluted earnings per share of $0.33 to $0.38, and operating cash flow of $45 million to $52 million.
About 8X8 (NASDAQ:EGHT)
8x8, Inc NASDAQ: EGHT is a global provider of cloud-based enterprise communications, collaboration and contact centre solutions. The company's unified communications as a service (UCaaS) platform integrates voice, video, chat, SMS and contact-centre capabilities into a single, software-driven solution. By combining real-time analytics, team messaging and interoperability with third-party business applications, 8x8 aims to simplify communications infrastructure for organisations of all sizes.
Founded in 1987 and headquartered in Campbell, California, 8x8 pioneered hosted VoIP services for businesses in the late 1990s and went public on the NASDAQ in 1997.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider 8X8, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and 8X8 wasn't on the list.
While 8X8 currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
The AI wave will soon hit public markets with Anthropic and OpenAI set to go public later this year. However, you don't have to wait to invest. This report shows seven AI stocks that you can buy today while the big model providers get ready to go public.
Get This Free Report
