8×8 Inc. Balances Growth and Challenges in Earnings Call

8×8 Inc ((EGHT)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for 8×8 Inc. presented a mixed sentiment, balancing optimism with caution. The company showcased positive strides in revenue growth, AI innovation, and significant debt reduction. However, challenges such as a decline in gross margin, potential revenue decline in Q3, and pricing pressures in the U.S. market were also acknowledged. The overall sentiment reflects a company navigating both opportunities and hurdles.

Revenue Growth

Q2 marked a notable period for 8×8 Inc., with the company achieving its second consecutive quarter of year-over-year revenue growth. The total revenue reached $184.1 million, while service revenue was $179.1 million, both surpassing the high end of guidance by approximately $4 million. Excluding revenue from Fuze customers, service revenue grew nearly 6% year-over-year, underscoring the company’s robust performance.

AI and Innovation

8×8 Inc. is making significant strides in AI and innovation, embedding AI throughout its platform. This includes real-time call summarization and AI-powered transcription. A notable highlight was the launch of 8×8 Workforce Management for free, marking their first product-led growth initiative. The company plans to expand its offerings with more applications in the 8×8 App Store.

Usage Revenue Surge

The company reported a surge in usage revenue, which includes CPaaS communication API, achieving another record performance. Usage revenue accounted for approximately 19% of service revenue, up from 13% in Q2 ’25, demonstrating strong growth in this segment.

Debt Reduction

8×8 Inc. is committed to reducing its debt, having decreased its debt principal by $224 million or 41% since the peak debt of $548 million in August 2022. This strategic allocation of capital highlights the company’s focus on strengthening its financial position.

Gross Margin Decline

Despite the positive revenue growth, the company experienced a decline in gross margin, which stood at 65.7%. This sequential decline is attributed to a mix shift toward usage revenue, which carries a lower margin profile.

U.S. Market Challenges

The U.S. market presents challenges for 8×8 Inc., with the business underperforming compared to its international counterpart. Price compression and competition are affecting performance, posing hurdles for the company’s domestic operations.

Potential Revenue Decline

The company anticipates a sequential revenue decline in Q3, influenced by the record usage revenue in Q2 and the ongoing wind-down of Fuze-related revenue. This reflects a cautious outlook for the upcoming quarter.

Pricing Pressure

8×8 Inc. faces pricing pressure in the market, particularly from competitors. This pressure is impacting renewals and could potentially affect revenue, adding to the challenges the company must navigate.

Forward-Looking Guidance

During the earnings call, 8×8 Inc. provided updated guidance for fiscal Q3 and the full fiscal year 2026. For Q3, the company anticipates service revenue between $172 million and $177 million, with total revenue expected to be between $177 million and $182 million. Gross margins are projected to range from 64% to 66%, while operating margins are forecasted between 9% and 10%. For the full fiscal year 2026, service revenue is anticipated between $692 million and $706 million, with total revenue ranging from $712 million to $726 million. These projections reflect a cautious approach, considering potential variability in usage-based revenue and the ongoing wind-down of Fuze-related revenue.

In summary, 8×8 Inc.’s earnings call highlighted a balanced sentiment of optimism and caution. While the company celebrates achievements in revenue growth, AI innovation, and debt reduction, it remains vigilant of challenges such as gross margin decline, U.S. market pressures, and potential revenue dips. The forward-looking guidance underscores a cautious yet strategic approach, aiming to navigate the complexities of the current market landscape.