8x8, Inc. Q3 FY2026 earnings call

• Return to top-line growth: Third consecutive quarter of year-on-year service revenue growth and twentieth consecutive quarter of positive operating cash flow. Exceeded high end of guidance range for service revenue, total revenue, operating profit, and cash flow.
• Usage-based offerings: Grew nearly 60% year over year, now over 20% of service revenue, driven by CPaaS APIs.
• AI-based offerings: Adoption accelerating, with customer contracts for intelligent customer assistant up 70% year over year, voice AI interactions up over 200% and majority of AI interactions.
• Multiprodcut strategy: Top 20 customers now have multiple products, with customers having three or more products generating more than three times revenue of those with two products.
• New products: Four strategic new products grew triple digits, including 8x8 Engage which won gold at London Design Awards.
• Channel partners: Early traction from newly implemented partner programs, with channel source pipeline showing sequential improvement.
• Fuze upgrade: Completed final upgrade of Fuze customers to 8x8 platform, allowing focus on growth and customer success instead of legacy infrastructure.

In Q3 2026, 8x8 saw return to top-line growth, with service revenue at $179.7 million and total revenue at $185 million, both exceeding the high end of guidance. Usage-based offerings, including CPaaS APIs, digital channels, and AI solutions, grew nearly 60% year over year and now represent more than 20% of service revenue. Service revenue excluding Fuze customers grew 6% year over year. Gross profit was approximately $120 million, with gross margin at 64.8% due to mix shift toward usage-based offerings with lower margin profile.

• Fiscal Q4 2026: Service revenue expected to be between $173.5 million and $178.5 million, total revenue between $170.5 million and $183.5 million; gross margin between 64-65%, operating margin range 8.5-9.5%, fully diluted non-GAAP earnings per share range $0.07 to $0.08.
• Full-year 2026: Service revenue anticipated to be between $708.6 million and $713.6 million, total revenue between $729 million and $734 million; gross margin between 65-66%, full-year operating margin 9.5-10%.
• 2027: Expect year-over-year growth headwinds related to Fuze churn, but expect service revenue growth with impacts most pronounced in 2027 and fully rolling off by Q4.

• Forward-looking statements involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements as described in risk factors and SEC filings.
• Revenue dynamics associated with Fuze upgrades and related churn, especially impactful in 2027.

Q: Thanks for taking my question. Congratulations on the exceptionally strong quarter. But also getting infused across the finish line. I know that was a big undertaking for the company as a whole. Backing out some of the numbers for fiscal 4Q, Fuze was a $4.5 million service headwind in fiscal 4Q. So if you adjust for that, that kind of implies that service revenue guidance in the fourth quarter ex Fuze is up like 5% plus year over year, which is kind of in line with the last couple of quarters. Is that right?

A: It's a fair assessment of it. And as we go into next year, you can think about it as, like, a $4 million, $3 million, $3 million kind of headwind from Q1 to Q3, Josh.

Q: I just wanna dig into one of your commentary about Voice AI. I guess the interaction you talked about how it grew now 2200% and now 80% of all interaction. Wondering what are you seeing from customer their adoption of voice AI Are you seeing, like, lately any kind of increased adoption there?

A: Yeah. Absolutely. So I what I would say is, you know, we and I think we've commented on this in the past is we're starting to see all the AI products start to move out of the first phase prototyping, beta sites, etcetera, and really move into production. We're seeing that run of the mill. Our voice technology is so fantastic. And our voice AI technology is awesome. And we're seeing that they're working. And then once they're working, the customer comes back and starts adding more and more use cases. And this further validates the usage-based model because it doesn't require a whole new sales cycle and everything else. They just slap down another use another use case on it. Usage goes up and they pay the bill because they're getting the ROI.

Q: Maybe to piggyback off Sam the comment you made earlier on the usage base, but a comment you made on the call you know, you kinda called out some customers moving from pilot projects to, like, larger scale deployments. Can you maybe just be a little bit more specific on what kind of projects how these customers are using it? In terms of just the monetization?

A: I'm more than happy to, Peter, and we may have to go back forth a little bit depending on what level of detail you want. So what we're seeing right now with the AI stuff is a lot of it is very use case based centric. And I can talk about this extensively, but when we first went into market a couple years ago, we tried to sell like an AI platform that customers could build their use cases on top of. And that really struggled. And we sort of switched to taking the platform and going in and targeting customers on a more use case base type thing. So what's a use case? Having a person say their serial number front end of a call and routing the call differently based on that or answering simple questions that are out of the FAQ or doing the biometric identification so that they can be passed to the proper agent. And financial service firms pulling the bat you know, doing the biometrics security check and pulling the balances. We also have a lot of self-service capabilities. So if you wanna pay your bill, let's say you call and you say, I just wanna pay my bill. You don't need an agent. We'll just, you know, pull it. We'll authenticate you, pull it, send you an SMS message, let you pay with Apple Pay via phone, and take care of that stuff. And so I know you're asking me, like, what's happened? What I'll tell you is right now, we're still the phase that these are micro use cases. Each individual customer is seeing a land and maybe it's, you know, their second one or their third use case, but we're still at the micro use case data What I believe we'll start to see out several years is those all come together in more macro use cases.