8X8 Q3 Earnings Call Highlights

Key Points

• 8x8 delivered a record Q3 service revenue of $179.7 million (total revenue $185 million), marking its third consecutive year‑over‑year service revenue increase and 20th straight quarter of positive operating cash flow, and the company raised fiscal‑year guidance.
• Usage‑based offerings grew nearly 60% YoY and now represent about 21% of service revenue, while AI deployments (intelligent assistant contracts +70%, voice AI interactions +200%) are moving from pilots to production, shifting mix and contributing to a lower gross margin (64.8%) but higher scalable operating dollars.
• The Fuze customer migration was completed by Dec 31, 2025, but higher churn from customers who didn’t upgrade will create a near‑term revenue headwind of roughly $4M–$4.5M in early fiscal 2027 quarters; despite this, 8x8 has materially improved profitability and strength of the balance sheet, cutting debt principal by $224 million since 2022.

8X8 NASDAQ: EGHT executives highlighted a return to top-line growth and continued cash generation during the company’s fiscal third-quarter 2026 earnings call, pointing to rising usage-based revenue, accelerating AI adoption, and progress on platform consolidation following the completion of Fuze customer upgrades.

Q3 results: record service revenue and guidance beat

CEO Samuel Wilson said the quarter showed “encouraging momentum across multiple dimensions of the business,” while emphasizing that execution work remains. He noted the company delivered its third consecutive quarter of year-over-year service revenue growth and its 20th consecutive quarter of positive operating cash flow, while exceeding the high end of guidance for service revenue, total revenue, operating profit, and cash flow.

CFO Kevin Kraus reported total revenue of $185 million and service revenue of $179.7 million, up 3.4% and 3.6% year-over-year, respectively. Kraus described Q3 as an “all-time record high for service revenue,” adding that results exceeded the high end of guidance by approximately $3 million for both total and service revenue.

Usage-based offerings expand, shifting mix and margins

Management repeatedly pointed to the growing role of usage-based offerings—including CPaaS communication APIs, digital channels, and AI solutions—as a core driver. Wilson said usage-based offerings grew nearly 60% year-over-year and now represent more than 20% of service revenue, up from the mid-teens a year earlier. Kraus quantified that mix at about 21% of service revenue in Q3 2026 versus about 14% in Q3 2025.

Kraus said 8x8’s gross margin was 64.8%, down sequentially due to the mix shift toward usage-based offerings, which he said have a lower margin profile but contribute “meaningful operating profit dollars” as they scale. In the Q&A, management reiterated that gross margins on usage-based revenue may be structurally lower than SaaS because there is no “shelfware,” but argued operating margins can still be attractive with scale. Wilson said management is targeting sustained double-digit operating margins, but added he does not know exactly when the company will reach that level on a consistent basis.

AI adoption and voice AI growth move from pilots to production

Wilson said 8x8 is seeing customers move beyond pilot projects into production deployments for digital channels and AI-based offerings. He cited metrics the company released separately, including:

• Intelligent customer assistant contracts up 70% year-over-year
• Voice AI interactions up more than 200%, representing a “vast majority” of AI interactions on the platform

In response to analyst questions, Wilson said AI deployments are increasingly use-case driven and are expanding once customers see results. He gave examples of “micro use cases” such as routing calls based on a serial number, handling FAQ-style questions, biometric identification and authentication, and self-service bill payment flows that can authenticate a user and enable payment via SMS and mobile options. He said a healthcare deployment focused on booking appointments 24/7, shifting work previously handled by four agents into more productive roles.

Wilson also pushed back on the idea that AI adoption is immediately reducing contact center staffing needs, stating that 8x8’s total number of contact center seats was up both quarter-over-quarter and year-over-year. He said his focus is on increasing revenue per customer and “stickiness,” regardless of whether customers purchase via seats or usage-based interactions.

Multi-product strategy, new product momentum, and partner channel traction

Wilson said the company’s multi-product strategy is gaining traction, noting that all of 8x8’s top 20 customers now have multiple products and that most have three or more. He said customers with three or more products generate more than three times the revenue of customers with two products, and that multi-product adoption supports higher satisfaction and retention.

He also said four strategic new products grew triple digits year-over-year, including 8x8 Engage, which he described as one of the fastest-growing products in the company’s history and gaining momentum in healthcare, retail, and professional services. Wilson said Engage recently won gold at the London Design Awards for User Experience, which he framed as external validation of product strategy and design focus.

On distribution, Wilson said the company is seeing increased momentum from channel partners and “sequential improvement” in channel-sourced pipeline as new partner programs and incentives take root. In the Q&A, he added that the channel has become more comfortable selling AI-based products as the market shifts from experimentation to production, and said the company is seeing the channel business improve relative to direct performance.

Fuze platform transition completed, but churn creates near-term headwind

Both executives emphasized the completion of Fuze customer upgrades to the 8x8 platform by December 31, 2025. Wilson called it a significant operational milestone, saying all 8x8 customers are now on a modern, integrated platform, enabling more efficient operations and improved expansion opportunities.

However, management acknowledged a near-term revenue headwind tied to the decommissioning of the legacy Fuze platform. Wilson said not all remaining Fuze customers elected to upgrade, which contributed to higher churn in Q3 that will be reflected in Q4 and fiscal 2027 revenue. Kraus said Q4 guidance reflects an expected year-over-year decrease in revenue from former Fuze customers of approximately $4.5 million, as well as about a $3 million quarter-over-quarter decrease. In the Q&A, management characterized the headwind for fiscal 2027 as roughly $4 million, $3 million, $3 million from Q1 to Q3 before anniversarying in Q4, and said the impact should be most pronounced in the first half of fiscal 2027 and fully roll off by the fourth quarter.

Kraus added that former Fuze customers generated cumulative revenue of more than $300 million over four years, which supported investment in innovation and debt reduction. He compared the business today to Q3 2022 (the quarter preceding the acquisition), stating that service revenue is up 20%, operating income has increased nearly seven times, and net income has increased nearly nine times.

From a profitability and balance sheet standpoint, Kraus reported operating income of $21.7 million (an 11.7% operating margin), net income of $17.1 million, and fully diluted EPS of $0.12. He also said year-to-date operating expenses are down about $8 million versus the first nine months of fiscal 2025, and that the company is on track to reduce operating expenses by about $12 million in fiscal 2026 versus fiscal 2025. Interest expense was $4.2 million, down more than 20% year-over-year as the company reduced debt. 8x8 ended the quarter with $88.2 million in cash, cash equivalents, and restricted cash after a $5 million principal prepayment, and Kraus said the company has reduced debt principal by $224 million since August 2022.

Looking ahead, Kraus raised guidance. For fiscal Q4 2026, 8x8 expects service revenue of $173.5 million to $178.5 million and total revenue of $178.5 million to $183.5 million. The company guided to gross margin of 64% to 65%, operating margin of 8.5% to 9.5%, and non-GAAP EPS of $0.07 to $0.08. Kraus said Q4 cash flow from operations is expected to be $1 million to $4 million, reflecting higher cash interest payments, including semiannual interest on the 2028 convertible notes, and a lower balance of collectible receivables entering Q4 versus Q3.

For the full year, 8x8 guided to service revenue of $708.6 million to $713.6 million and total revenue of $729 million to $734 million, with gross margin of 65% to 66%, operating margin of 9.5% to 10%, and non-GAAP EPS of $0.36 to $0.37. While not providing fiscal 2027 guidance, Kraus said the company still expects to deliver service revenue growth in fiscal 2027 despite lingering year-over-year headwinds from Fuze churn.

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.

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