8x8, Inc. Q2 FY2026 earnings call

• The company is transitioning to posting a detailed quarterly letter on the Investor Relations website instead of lengthy prepared remarks. - They are embedding AI throughout their platform for smarter, faster, and more personal communications, including real-time call summarization and AI-powered transcription. - Stephen Hamil has become Chief Revenue Officer. - Launched 8x8 Workforce Management available next week at no additional cost to all contact center customers via the 8x8 App Store, marking the first product-led growth launch. - Highlighted an example of a large U.K. automotive dealership that transformed its communication with 8x8. - Focus on aligning sales, marketing, and partner motions around customer outcomes, with pipeline quality measured by deals reaching Stage 3 in a 7-stage sales process.

Total revenue for Q2 2026 was $184.1 million, with service revenue at $179.1 million. Both exceeded the high end of guidance by ~$4 million. Service revenue grew 1.7% year-over-year, and excluding Fuze customers, service revenue grew nearly 6% y/y. Usage revenue, including CPaaS API, was ~19% of service revenue, up from ~13% in Q2 2025. Gross profit was $120.9 million, with gross margin at 65.7%.

• Fiscal Q3 2026 guidance: Service revenue $172M - $177M, total revenue $177M - $182M, gross margin 64% - 66%, operating margin 9% - 10%, fully diluted non-GAAP EPS $0.08 - $0.09, cash flow from operations $10M - $14M. - Full year 2026 guidance: Service revenue $692M - $706M, total revenue $712M - $726M, gross margin 65% - 66%, operating margin 8.5% - 9.5%, fully diluted non-GAAP EPS $0.31 - $0.33, cash flow from operations $38M - $42M.

• Pricing pressure in renewals as contracts from the pandemic period are rightsized. - Mix shift toward lower margin usage revenue impacting gross margin in the short term. - Transitioning Fuze customers could have an impact on future growth rates. - Seasonality in usage-based revenue could affect performance.

Q: How much of the service margin change is due to volume vs price?

A: Mostly volume as it's a mix issue for usage-based revenue, with some pricing pressure in deals but not a major driver currently.

Q: Anticipate pro forma ex-Fuze next year?

A: Samuel Wilson says he hasn't thought that far ahead but may provide numbers if helpful.

Q: How measuring pipeline quality and improvement?

A: Pipeline quality is measured by deals reaching Stage 3 in a 7-stage sales process, improved by using more SDRs and AI in the sales process.

Q: Pricing pressure during renewals and headwinds?

A: Yes, pricing pressure due to rightsizing of pandemic-era contracts, offset by AI and other new products.

Q: WFM strategy and target customers?

A: WFM is a free offering to replace spreadsheets for basic contact centers, not designed for large enterprises, aiming for a freemium model to meet customer needs.

Q: M&A and covenants?

A: Have done a small tuck-in acquisition, looking at others, debt covenants are manageable as per filings.

Q: AI buying patterns and deployment change?

A: Customers are adopting specific AI use cases, move towards consumption-based models, deployment is more continuous services with constant fine-tuning.

Q: Cost actions and operating margin expansion?

A: Aggressively deploying AI in-house for cost control and ROI benefits, using AI to right-size software purchases.

Q: Revenue trends by domestic U.S. vs international?

A: International business growing faster than U.S. due to less price compression and gamesmanship in international markets