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Bandwidth Inc. (BAND)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue of $191.9M exceeded both guidance and Street consensus ($189.9M), while Non-GAAP diluted EPS of $0.36 was slightly below consensus ($0.372). Drivers included accelerating core voice usage and growing software mix; lower pass-through messaging surcharges created margin crosscurrents that were offset by software contribution (Revenue/EPS consensus marked with asterisks; values retrieved from S&P Global*).
  • Management raised full-year Adjusted EBITDA guidance to $89–$92M (midpoint ~$91M) and tightened FY revenue to $747–$760M, citing momentum in Voice/Voice AI and expanding software revenue .
  • Operationally, Bandwidth highlighted record million-dollar-plus wins, enterprise deployments of Maestro and Trust Services (Number Reputation Management), and new AI initiatives (AI Receptionist, Activation Agent) alongside a U.S. RCS partnership with Out There Media .
  • Near-term stock reaction catalysts: raised EBITDA guidance, continued Voice AI traction, expanding software MRR exit rate (> $10M expected in 2025), and strategic RCS/AI product announcements .

What Went Well and What Went Wrong

What Went Well

  • Revenue and profitability exceeded the high end of guidance; Adjusted EBITDA was $24.3M on higher revenue and lower spending timing, with strong non-GAAP gross margin at 58% .
  • Voice momentum: Enterprise Voice revenue +22% YoY; combined Voice growth (Enterprise + Global Voice Plans) +9% YoY, supported by Maestro integrations and AI-powered initiatives; international grew +11% YoY .
  • Strategic wins and product innovation: record million-dollar-plus deals; Trust Services and Number Reputation Management improving answer rates; AI Receptionist and Activation Agent introduced; U.S. RCS partnership for next-gen messaging .

What Went Wrong

  • GAAP diluted EPS was -$0.04 (vs. +$0.01 prior year), with non-GAAP diluted EPS down to $0.36 from $0.43 YoY; free cash flow modestly below last year due to normal working capital timing and cloud expansion capex .
  • Messaging surcharge contribution was lower, creating gross margin headwinds; management lowered surcharge expectations entering Q4 seasonality (Black Friday/Cyber Monday) .
  • Continued GAAP net loss (-$1.241M) reflects stock-based compensation and amortization; management emphasizes non-GAAP adjustments and EBITDA focus to reflect core operations .

Financial Results

Actual vs. Street Consensus (Q3 2025)

MetricActualQ3 2025 Consensus
Revenue ($USD Millions)$191.895 $189.915*
Non-GAAP Diluted EPS ($USD)$0.36 $0.372*
# of Estimates (Revenue)—5*
# of Estimates (EPS)—5*

*Values retrieved from S&P Global.

Quarterly Progression (Q1 → Q3 2025)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$174.241 $180.013 $191.895
GAAP Diluted EPS ($USD)$(0.13) $(0.16) $(0.04)
Non-GAAP Diluted EPS ($USD)$0.36 $0.38 $0.36
Gross Margin (%)41% 40% 38%
Non-GAAP Gross Margin (%)59% 58% 58%
Adjusted EBITDA ($USD Millions)$22.213 $21.890 $24.330
Free Cash Flow ($USD Millions)$(13.295) $25.631 $13.135

Q3 Year-over-Year (Q3 2024 → Q3 2025)

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$193.883 $191.895
GAAP Diluted EPS ($USD)$0.01 $(0.04)
Non-GAAP Diluted EPS ($USD)$0.43 $0.36
Gross Margin (%)38% 38%
Non-GAAP Gross Margin (%)58% 58%
Adjusted EBITDA ($USD Millions)$23.971 $24.330

Cloud Communications Revenue (for Non-GAAP margin context)

MetricQ1 2025Q2 2025Q3 2025
Cloud Communications Revenue ($USD Millions)$133 $136 $142

KPIs (Q3 2025)

KPIQ3 2025
Net Retention Rate105% (107% ex. political)
Avg. Annual Revenue per Customer$231K ($224K ex. political)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$745–$760 (Q2 guide) $747–$760 (Q3) Raised low end
Adjusted EBITDA ($USD Millions)FY 2025$86–$91 (Q2 guide) $89–$92 (Q3) Raised range
Revenue ($USD Millions)Q3 2025$189–$191 (Q2 guide) Actual $191.895 Beat high end
Adjusted EBITDA ($USD Millions)Q3 2025$19–$21 (Q2 guide) Actual $24.330 Beat high end

Earnings Call Themes & Trends

TopicQ1 2025 (Prior)Q2 2025 (Prior)Q3 2025 (Current)Trend
AI/technology initiativesMaestro enabling AI integrations; raising FY outlook Enterprise AI voice integrations; accelerating platform momentum AI Receptionist, Activation Agent; BYO AI with OpenAI Realtime API; MCP Server for real-time AI control Expanding AI productization and deployments
Voice growth & mixResilient platform; enterprise adoption Core voice acceleration Enterprise Voice +22% YoY; combined Voice +9% YoY; intl +11% Accelerating voice growth
Software revenue mixMargin expansion focus Record non-GAAP margins and EBITDA Software contribution offsetting lower surcharges; MRR exit rate >$10M expected Rising software mix, margin support
Messaging & surchargesMessaging scalability; compliance tools In-line Programmable Messaging growth Lower surcharges; messaging normalized +6% YoY Mixed: surcharge headwind, stable messaging
Trust/NRM & deliverabilityCloud resilience, compliance Voice anomaly detection wins Trust Services/NRM driving wins, answer rates improvement Building trust moat
RCS/product performance——U.S. RCS partnership with Out There Media; enterprise-brand engagement New channel expansion

Management Commentary

  • “Innovation and disciplined execution continue to define Bandwidth’s performance… closed a record number of million-dollar-plus deals for mission-critical communications.” — David Morken, CEO .
  • “Our solid third quarter performance… led us to raise our full year Adjusted EBITDA outlook to approximately $91 million… AI is not a standalone product… it’s embedded across our cloud platform.” — Daryl Raiford, CFO .
  • “We expect to end 2025 with an annualized MRR exit rate on software greater than $10 million… continuing pillars of gross margin improvements will take us into the 60% and above.” — Daryl Raiford, CFO .

Q&A Highlights

  • Deal cycle and onboarding: Channel opportunities compressed deal cycles; enterprise onboarding remains robust with continuity preserved across mission-critical numbers and sites .
  • Guidance composition: FY revenue midpoint just above $753M; raised cloud communications (voice) expectations; lowered surcharge outlook due to carrier pricing/mix entering Q4 seasonality .
  • Gross margin crosscurrents: Lower messaging surcharge contribution (higher margin historically) offset by growing software; non-GAAP GM held at 58% .
  • Product adoption: Number Reputation Management driving wins across enterprise and wholesale; global opportunity highlighted .

Estimates Context

  • Revenue modest beat: $191.895M actual vs $189.915M consensus; Non-GAAP diluted EPS slight miss: $0.36 actual vs $0.372 consensus (5 estimates each) (consensus values marked with asterisks; retrieved from S&P Global*).
  • Implications: Estimate models may need to reflect stronger voice/software momentum, lower surcharge tailwind, and raised FY EBITDA guidance toward ~$91M midpoint .

Key Takeaways for Investors

  • Revenue/EBITDA exceeded guidance; Q3 Adjusted EBITDA of $24.3M and non-GAAP GM of 58% underscore operating discipline despite surcharge headwinds .
  • Voice engine is accelerating: Enterprise Voice +22% YoY; combined Voice +9% YoY; international +11% YoY—supporting FY revenue tightening/raise .
  • Software mix rising: management targets >$10M software MRR exit rate in 2025, aiding structural margin expansion toward 60%+ over time .
  • Guidance trajectory constructive: FY revenue range to $747–$760M and EBITDA to $89–$92M; Q3 results beat prior guidance ranges on both top and bottom lines .
  • Strategic moat strengthening: Trust Services/NRM and Maestro orchestration enabling wins and higher answer rates; U.S. RCS partnership adds a new growth vector for branded messaging .
  • Non-GAAP vs GAAP: GAAP net loss (-$1.241M) contrasts with Non-GAAP net income ($11.462M), reflecting stock-based comp and amortization—investors should anchor on EBITDA and non-GAAP EPS for core trends .
  • Near-term trade setup: Raised EBITDA guidance and evidence of Voice/AI momentum are supportive; watch Q4 surcharge mix and margin trajectory as holiday seasonality plays through .
*Estimates marked with asterisks were retrieved from S&P Global.