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8X8 INC /DE/ (EGHT) Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered total revenue of $177.0M and service revenue of $171.6M; non-GAAP diluted EPS was $0.08. GAAP gross margin was 67.8% and non-GAAP gross margin 69.0% .
  • Versus Wall Street, revenue was a slight miss, but EPS was a slight beat; mix shift toward platform usage (≈13.5% of total) pressured gross margin while operating margin landed at 10% (top of guidance) .
  • Guidance introduced for Q1 FY2026 and FY2026 points to continued discipline with non-GAAP operating margin of 9–10% and operating cash flow of $40–50M for FY2026 .
  • Strategic catalysts: accelerating core 8x8 growth ex-Fuze, multiproduct adoption (>700 customers, +13% YoY), and AI/RCS feature launches; debt reduction (net debt/EBITDA ≈2.7x) enhances flexibility .

What Went Well and What Went Wrong

What Went Well

  • Multiproduct adoption and CPaaS momentum: customers with 3+ products rose 13% YoY to >700; usage-based platform revenue reached a record, signaling healthy demand .
  • Execution and profitability discipline: Q4 non-GAAP operating margin of 10% (high end of guidance) and 17th straight quarter of positive operating cash flow; stock-based comp declined to 4.6% of revenue (multiyear low) .
  • Product innovation in AI and RCS: launched AI Orchestrator, JourneyIQ, AI chat summaries/composition, and became first to fully integrate RCS business messaging in contact center—“we are carrying traffic today… bullish on RCS” .

What Went Wrong

  • Gross margin compression: non-GAAP gross margin fell to 69.0% (from 70.2% in Q2) due to higher mix of lower-margin usage revenue (≈13.5% of total) .
  • Q4 operating cash flow moderated to $5.9M (vs. Q3 record $27.2M), reflecting term loan prepayment timing and seasonality .
  • Fuze transition headwinds persisted (though diminishing): service revenue declined 1% YoY, with legacy Fuze revenue now <5% of service revenue; sequential RPO step-down tied to accelerating Fuze roll-off .

Financial Results

MetricQ2 2025Q3 2025Q4 2025
Total Revenue ($USD Millions)$181.0 $178.9 $177.0
Service Revenue ($USD Millions)$175.1 $173.5 $171.6
Other Revenue ($USD Millions)$5.9 $5.4 $5.5
GAAP Diluted EPS ($)$(0.11) $0.02 $(0.04)
Non-GAAP Diluted EPS ($)$0.09 $0.11 $0.08
GAAP Gross Margin %68.1% 67.7% 67.8%
Non-GAAP Gross Margin %70.2% 69.5% 69.0%
Non-GAAP Operating Margin %11.9% 10.7% 10.0%
Adjusted EBITDA ($USD Millions)$26.7 $23.9 $22.2

Segment breakdown:

Segment Revenue ($USD Millions)Q2 2025Q3 2025Q4 2025
Service Revenue$175.075 $173.459 $171.588
Other Revenue$5.923 $5.423 $5.455

KPIs and operating metrics:

KPIQ3 2025Q4 2025
Platform usage revenue (% of total)N/A13.5%
Remaining Performance Obligation (RPO) ($USD Millions)N/A$780
Fuze revenue share (% of service revenue)N/A<5%
Customers with 3+ products (#)N/A>700 (+13% YoY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Service Revenue ($M)Q4 FY2025$170–$175 —Maintained (actual within range; actual $171.6)
Total Revenue ($M)Q4 FY2025$175–$181 —Maintained (actual within range; actual $177.0)
Non-GAAP Operating MarginQ4 FY2025~9%–10% —Maintained (actual 10.0%)
Service Revenue ($M)Q1 FY2026—$170–$175 New
Total Revenue ($M)Q1 FY2026—$175–$182 New
Non-GAAP Operating MarginQ1 FY2026—9.0%–9.5% New
Non-GAAP Diluted EPS ($)Q1 FY2026—$0.07–$0.09 (≈141M diluted shares) New
Operating Cash Flow ($M)Q1 FY2026—$5–$6 New
Service Revenue ($M)FY2026—$682–$702 New
Total Revenue ($M)FY2026—$702–$724 New
Non-GAAP Operating MarginFY2026—9%–10% New
Non-GAAP Diluted EPS ($)FY2026—$0.34–$0.37 (≈144M diluted shares) New
Operating Cash Flow ($M)FY2026—$40–$50 New
Interest Expense ($M)Q1 FY2026—≈$4.9; cash interest ≈$2.6 New
Target Expense Mix (% of revenue)Ongoing—R&D 14–15%; S&M 33–35%; G&A ~10% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 FY2025)Trend
AI/technology initiativesSales of new products up >60% YoY led by AI; expanded language/translation and partnerships (Q2) Launched AI Orchestrator, JourneyIQ, AI chat summaries/composition; AI Agent Boost; deepened analytics via Engage/Conversation IQ Continued expansion; platform-wide AI rollouts
RCS/business messagingNot highlightedFirst contact center provider with fully integrated RCS; “carrying traffic today,” bullish on RCS New capability; differentiator
CPaaS/platform usageStrong usage revenue growth (Q2) Record usage revenue; ~13.5% of total, driving gross margin mix impact Growing share of mix
Multiproduct adoptionNew products +60% YoY (Q3) 3+ product customers >700 (+13% YoY); 2+ products now >50% subscription revenue Increasing adoption/retention
Fuze migrationDebt reduction and transition progress (Q3) Fuze revenue <5% of service; all upgrades expected by end-2025; sequential RPO step-down tied to transition Headwind diminishing
Macro/tariffsFX pressure vs guidance (Q3) U.S. tariffs created near-term “chaos” (elongated cycles/smaller deals) in March–April; May calmer; ROW steady Near-term volatility; stabilizing
Regional trendsUK strength noted (Q3 investors deck) Strong UK execution and retention; new leadership driving wins Positive momentum
Balance sheet/interestRetired term loan principal; debt reduction (Q2/Q3) Net debt/EBITDA ≈2.7x; prepayments reduce interest burden; EPS stability despite margin compression Deleveraging continues

Management Commentary

  • “The flywheel is starting to turn… we are seeing real acceleration in our core 8x8 revenue, platform differentiation, and strategic execution.” — CEO Samuel Wilson .
  • “We became the first contact center provider to fully integrate RCS business messaging… we are carrying traffic today, and I’m bullish on RCS.” — CEO Samuel Wilson .
  • “Reducing the remaining revenue on the Fuze platform to under 5% of service revenue… on track to complete the transition by the end of calendar year 2025.” — CFO Kevin Kraus .
  • “Stock-based compensation declined to 4.6% of total revenue, a multiyear low… reflecting our shift to primarily cash-based compensation.” — CFO Kevin Kraus .

Q&A Highlights

  • Macro impact: U.S. tariffs led to elongated sales cycles and phased/smaller deals in March–April; May calmer; ROW remained steady .
  • Go-to-market rebuild: ~60–70% complete; pivot to solution/outcome-based selling; expect fine-tuning over next year .
  • Growth path to high single digits: driven by higher multiproduct penetration, better retention (>2+ product customers), CPaaS inflection, and Fuze headwinds rolling off through FY2027 .
  • Cash flow vs margin: FY2026 cash flow guide ($40–$50M) reflects growth investments; non-GAAP net income expected stable despite modest margin compression due to lower interest burden .
  • Regional and product wins: UK execution strong; CPaaS “killed it” again; Teams integrations cumulatively >550k seats .

Estimates Context

MetricQ2 2025Q3 2025Q4 2025
Revenue Consensus Mean ($USD Millions)*178.31179.19177.98
Revenue Actual ($USD Millions)180.998 178.882 177.043
Primary EPS Consensus Mean ($)*0.07960.08620.0786
Non-GAAP Diluted EPS Actual ($)0.09 0.11 0.08
  • Q4 FY2025: revenue slight miss vs $177.98M*, EPS slight beat vs $0.0786*. Q3: revenue slight miss vs $179.19M*, EPS beat vs $0.0862*. Q2: revenue beat vs $178.31M*, EPS beat vs $0.0796*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix dynamics matter: growing usage-based CPaaS revenue (~13.5% of total) boosts growth but compresses gross margin; watch margin trajectory as mix evolves .
  • Core growth accelerating ex-Fuze: 8x8 service revenue growth excluding Fuze accelerated to ~4.6% YoY in Q4; Fuze migration to complete by end-2025, reducing headwinds .
  • Multiproduct strategy is working: >700 customers with 3+ products (+13% YoY) and >50% subscription revenue from 2+ products supports retention and upsell; expect continued adoption tailwinds .
  • Guidance implies steady profitability with investment: FY2026 non-GAAP operating margin 9–10% and cash from operations $40–$50M, with non-GAAP EPS $0.34–$0.37; interest burden declining supports EPS stability .
  • Balance sheet improving: net debt/EBITDA ≈2.7x and term loan prepayments enhance flexibility; reduces sensitivity to rate/income headwinds .
  • Near-term catalysts: AI/RCS product launches, UK/Teams-led wins, and completion milestones on Fuze migration; risk factors include macro/tariff volatility and FX .
  • Estimates likely tweak: modest upward EPS bias given beat vs consensus and lower interest expense; revenue estimates may reflect margin-aware mix considerations and Fuze roll-off pacing .

Additional Data Points and Cross-References

  • Q4 operating cash flow $5.9M; cash/cash equivalents/restricted/investments $89.3M; total debt principal $353.9M .
  • FY2025 totals: total revenue $715.1M; service revenue $692.9M; adjusted EBITDA $98.6M .
  • Non-GAAP definition and reconciliations provided in release and 8-K exhibits .

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