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8X8 INC /DE/ (EGHT) Q2 2026 Earnings Summary

Executive Summary

  • EGHT delivered top-line and EPS beats, with total revenue of $184.1M and non-GAAP diluted EPS of $0.09, both above the high end of guidance; service revenue grew 2.3% YoY to $179.1M, aided by record usage and AI-driven CX adoption .
  • Usage-based revenue reached ~19% of service revenue versus ~13% a year ago; mix shift pressured gross margin to 65.7% non-GAAP, as management emphasized focus on absolute profit dollars and cash flow .
  • Guidance raised for FY26 revenue and EPS (low end), but Q3 FY26 outlook calls for sequential revenue decline and lower gross margins (64–66%) due to consumption variability and remaining Fuze migration headwinds .
  • Strategic catalysts: native WFM embedded at no extra cost, Mitel phone support, and expanding AI features across platform; deleveraging continues with $224M debt reduction since Aug 2022, lowering ongoing interest expense .

What Went Well and What Went Wrong

What Went Well

  • Above-guide execution: Total revenue $184.1M and service revenue $179.1M, both exceeded the high end of Q2 guidance; non-GAAP operating margin at 9.4% and non-GAAP diluted EPS $0.09 also topped expectations .
  • AI-led product momentum: “We are embedding AI across our platform and our operations… as a real driver of efficiency, accuracy, and customer success” (Samuel Wilson, CEO) ; usage-based offerings (CPaaS, voice automation, AI) scaled to ~19% of service revenue .
  • Go-to-market and product innovation: WFM included in every Contact Center seat at no extra cost; native Mitel phone support simplifies enterprise migrations; recognition across IDC, Gartner, and industry awards .

What Went Wrong

  • Margin compression: Non-GAAP gross margin decreased to 65.7% (vs 67.8% in Q1 and 69.0% in Q4) due to usage mix; GAAP gross margin 64.8% also declined sequentially .
  • Q3 outlook softer: Management guided Q3 total revenue to $177–$182M with lower gross margins (64–66%) on variable consumption and remaining Fuze headwinds .
  • Pricing pressure and seat rationalization, particularly in the U.S., as renewals reset post-COVID; offset by multi-product adoption (AI, messaging) improving ARPC and retention over time .

Financial Results

Revenue, EPS, Margins vs Prior Periods and Estimates

MetricQ4 2025Q1 2026Q2 2026
Total Revenue (USD M)$177.043 $181.361 $184.095
Service Revenue (USD M)$171.588 $176.308 $179.094
Other Revenue (USD M)$5.455 $5.053 $5.001
GAAP Diluted EPS (USD)$(0.04) $(0.03) $0.01
Non-GAAP Diluted EPS (USD)$0.08 $0.08 $0.09
GAAP Gross Margin (%)67.8% 66.4% 64.8%
Non-GAAP Gross Margin (%)69.0% 67.8% 65.7%
Non-GAAP Operating Margin (%)10.0% 9.0% 9.4%

Actuals vs S&P Global Consensus

MetricQ4 2025Q1 2026Q2 2026
Revenue Consensus Mean (USD M)*177.979177.992178.157
Revenue Actual (USD M)$177.043 $181.361 $184.095
Revenue Surprise (USD M)$(0.936)$3.369$5.938
Primary EPS Consensus Mean (USD)*0.07860.07750.07
Non-GAAP Diluted EPS Actual (USD)$0.08 $0.08 $0.09
EPS Surprise (USD)$0.0014$0.0025$0.02

Values retrieved from S&P Global.*

Highlights: Q2 revenue beat by ~$5.94M and EPS beat by $0.02; Q1 also beat on both; Q4 missed revenue slightly but met EPS .

Segment/Revenue Composition

MetricQ4 2025Q1 2026Q2 2026
Service Revenue (USD M)$171.588 $176.308 $179.094
Other Revenue (USD M)$5.455 $5.053 $5.001
Usage Revenue Share of Service (%)N/A~17% ~19%

KPIs

KPIQ4 2025Q1 2026Q2 2026
Cash Flow from Operations (USD M)$5.9 $11.9 $8.8
Ending Cash & Equivalents incl. Restricted (USD M)$89.3 $82.2 $76.7
Non-GAAP Operating Income (USD M)$17.711 $16.333 $17.324
GAAP Operating Income (USD M)$0.419 $0.565 $5.349
Debt Reduction Since Aug 2022 (Cumulative USD M)N/A~$219 ~$224

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Service Revenue (USD M)Q2 FY26$170–$175 Actual $179.1 Beat
Total Revenue (USD M)Q2 FY26$175–$180 Actual $184.1 Beat
Non-GAAP Gross Margin (%)FY2666–68 65–66 Lowered
Non-GAAP Operating Margin (%)FY268.5–9.5 8.5–9.5 Maintained
Non-GAAP Diluted EPS (USD)FY26$0.28–$0.33 $0.31–$0.33 Raised (low end)
Cash Flow from Operations (USD M)FY26$35–$45 $38–$42 Narrowed/raised low end
Service Revenue (USD M)FY26$685–$700 $692–$706 Raised
Total Revenue (USD M)FY26$706–$720 $712–$726 Raised
Q3 FY26 Service Revenue (USD M)Q3 FY26N/A$172–$177 New
Q3 FY26 Total Revenue (USD M)Q3 FY26N/A$177–$182 New
Q3 FY26 Non-GAAP Gross Margin (%)Q3 FY26N/A64–66 New
Q3 FY26 Non-GAAP Operating Margin (%)Q3 FY26N/A9–10 New
Q3 FY26 Interest Expense (USD M)Q3 FY26N/A~$4.2 New
Q3 FY26 Cash Interest Paid (USD M)Q3 FY26N/A~$2.2 New
Q3 FY26 Non-GAAP Diluted EPS (USD)Q3 FY26N/A$0.08–$0.09 New
Q3 FY26 Cash Flow from Ops (USD M)Q3 FY26N/A$10–$14 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY25)Previous Mentions (Q1 FY26)Current Period (Q2 FY26)Trend
AI/Technology InitiativesRoadmap: AI Orchestrator, JourneyIQ; multiple AI features across platform Return to growth; voice+AI foundational; CPaaS growth; multi-channel AI adoption Deeper AI embedding (live summarization, transcription, agentless payments, Engage expansions); AI internal efficiency gains Expanding scope and adoption
Usage-based Revenue ShiftN/A explicitlyUsage ~17% of service revenue; model transitioning to usage; margin profile changing Usage ~19% of service revenue; CFO/CEO emphasize profit dollars, stickiness Accelerating mix shift
Go-to-Market TransformationPartner-led momentum; platform differentiation Outcome-based selling; multi-product wins; pipeline quality focus CRO appointment; unified GTM across direct/channel; improved pipeline quality Structural GTM integration
Fuze MigrationPlan to complete in CY25; Fuze headwinds impacting growth Fuze base ~4% of service revenue; headwind ~3%; target completion by FY end ~3% of service revenue remaining; completion by year-end; legacy systems by Mar 31, 2026 Approaching completion
Pricing Pressure/RenewalsN/ASeat-based declines offset by AI/messaging adds; usage up U.S. pricing pressure; seat rationalization post-COVID renewals; offset via multi-product adoption Continuing, offset by product expansion
Regional TrendsN/AStrong APAC CPaaS, UK traction; RCS in U.S. International ~40% and growing faster than U.S.; U.S. competitive pricing pressure Int’l strength vs U.S. pressure
SeasonalityN/ACall out seasonal usage (holiday boost; Q4 softer) Modeling usage cautiously; holiday boost expected; variability remains Seasonality more visible
Deleveraging/Interest ExpenseFY25 term loan repayments; lower debt outstanding $219M reduction since Aug 2022; amendment adds M&A basket $224M reduction; Q3 interest expense ~$4.2M; cash interest ~$2.2M Ongoing debt reduction lowers interest burden
Product Adds (WFM/Mitel)N/AN/AWFM free in CC seats; native Mitel support for SIP phones Enhancing platform value, easing migrations

Management Commentary

  • “We are embedding AI across our platform and our operations… With innovation as our foundation and disciplined execution, we are building a stronger company positioned for sustainable, long-term growth.” — Samuel Wilson, CEO .
  • “Usage revenue… carries a lower margin profile but will add meaningful profit dollars as usage revenue continues to scale.” — Kevin Kraus, CFO .
  • “We would not be surprised if we saw gross margin come down a little bit as we scale the business while gross profit dollars increase… more products → higher LTV and retention.” — Samuel Wilson, CEO .
  • “Workforce Management… available to all Contact Center customers at no additional cost through our new 8x8 App Store.” — Samuel Wilson, CEO ; product release details reinforce ease-of-adoption .
  • “Appointed Stephen Hamill as Chief Revenue Officer… driving global adoption of 8x8’s CPaaS solutions.” — Corporate update .

Q&A Highlights

  • Margins: Mix-driven pressure from rising usage; pricing pressure exists but volume dominates; management focuses on absolute profit dollars and cash flow as usage scales .
  • Fuze impact: Ex-Fuze service revenue growth nearly 6% YoY; ~3% of service revenue remains on Fuze, migration to 8x8 platform by year-end; modest growth headwind persists into next year .
  • Pipeline quality: Measured by stage-three+ deals; improved via SDRs and AI tools increasing GTM efficiency .
  • Seasonality and consumption: Holiday-season boosts usage; variable consumption modeled conservatively; emerging seasonality in APAC (Lunar New Year) and retail/hospitality verticals .
  • Pricing/renewals: Post-COVID renewals driving seat rationalization and pricing pressure in U.S.; offset by adds in AI, messaging (RCS, WhatsApp) driving multi-product ARPC increase .
  • M&A and covenants: Preference for tuck-ins aligned to geography/product/customer expansion; covenants manageable; ongoing focus on debt retirement .

Estimates Context

  • Q2 FY26 beat: Revenue $184.1M vs consensus $178.2M*, EPS $0.09 vs $0.07*, on usage strength and AI-driven adoption .
  • Trajectory: Q1 FY26 also beat; Q4 FY25 modest revenue miss with EPS in line* .
  • Update implications: Street models likely to raise FY26 revenue, EPS at low end and adjust gross margin downward to reflect mix; incorporate Q3 sequential revenue decline and consumption variability .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Strong execution: Two consecutive quarters of YoY revenue growth; Q2 revenue/EPS beat and above-guide performance underscore operational discipline .
  • Mix matters: Rising usage share (~19%) is structurally compressing gross margins, but increases profit dollars and cash generation; expect continued margin pressure with scaling consumption .
  • Near-term setup: Q3 guide implies sequential revenue decline and lower gross margins; trade the beat vs cautious outlook while watching holiday-season usage .
  • Structural catalysts: Free WFM in Contact Center, Mitel phone support, and deepening AI features should enhance win rates, retention, and multi-product penetration .
  • Deleveraging tailwind: $224M debt reduction since Aug 2022 lowers interest expense; supports stable non-GAAP net income despite margin mix shifts .
  • International buoyancy vs U.S. pressure: Stronger growth outside U.S.; U.S. competitive pricing and seat rationalization remain headwinds—multi-product adoption offsets .
  • Watch consumption variability and seasonality: Model conservatively for usage revenue; monitor APAC and retail/hospitality seasonal patterns .

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