8X8 (NASDAQ:EGHT) raised its fiscal 2027 revenue, earnings and operating cash flow outlook after reporting a sixth consecutive quarter of year-over-year revenue growth, driven in part by demand for usage-based communications services.
For the fiscal second quarter ended in September, total revenue rose 4.3% from a year earlier to $192 million, while service revenue increased 4.9% to $187.8 million. Both figures exceeded the high end of the company’s guidance, Chief Financial Officer Kevin Kraus said.
Platform usage revenue grew approximately 51% year over year, primarily because of communications API usage in the Asia-Pacific region. The category also includes digital and voice AI interactions and telephony minutes.
Chief Executive Officer Samuel Wilson said the company’s core communications-platform-as-a-service, or CPaaS, business continued to grow in Southeast Asia as some competitors exited the market. He added that most of 8X8’s AI products are usage-based, although Kraus said the bulk of platform usage revenue remains in Asia-Pacific.
Higher usage changes margin mix
The growth in usage-based services has brought a trade-off: Those offerings generally carry lower gross margins, even as they contribute revenue growth. Second-quarter non-GAAP gross margin was 60.1%, with gross profit of approximately $115.5 million.
Kraus said the company is focused on increasing gross profit dollars rather than the consolidated margin percentage. “As platform usage grows, we expect gross profit dollars to increase, but the mix shift will continue to impact the consolidated gross margin percentage, and this is a deliberate choice,” he said.
Non-GAAP operating expenses fell approximately $9 million year over year. Non-GAAP operating income was $20.7 million, or 10.8% of revenue, while non-GAAP net income was $17.6 million, or 12 cents per diluted share. Operating cash flow was $13.1 million, marking the company’s 23rd consecutive quarter of positive operating cash flow.
Unless otherwise noted, financial metrics discussed on the call other than revenue and cash flow were non-GAAP.
Full-year outlook raised
For fiscal 2027, 8X8 raised its service revenue forecast to $732 million-$752 million from $725 million-$745 million. It also increased its total revenue outlook to $750 million-$770 million from $745 million-$765 million.
The company raised its non-GAAP earnings forecast to 36-40 cents per diluted share from 33-38 cents and its operating cash flow outlook to $49 million-$54 million from $45 million-$52 million. It projected non-GAAP operating income of $68 million-$78 million, with a $73 million midpoint, up from an approximately $70 million midpoint implied by its prior guidance.
For the fiscal third quarter, management forecast total revenue of $188 million-$192 million, service revenue of $184 million-$188 million and non-GAAP earnings of 8-9 cents per diluted share. It expects operating cash flow of $11 million-$13 million.
Kraus said 8X8 expects platform usage revenue growth to moderate to 35%-45% year over year in the third quarter from 51% in the second quarter. He cited a strong year-earlier comparison and a focus on higher-margin solutions within the CPaaS portfolio.
AI adoption and partner initiatives
Wilson said recurring revenue from AI solutions grew 58% year over year. Customers using at least one AI solution represented approximately 13% of total recurring revenue at the end of September, up from 7% a year earlier. Customers using three or more revenue-producing products increased 19%, while those using four or more grew more than 50%.
The company’s AI Studio, a development environment for building agents and workflows, has moved from open beta to an early adopter program. Interactions powered by the product have grown nearly 450% since it became available through the 8X8 App Store in April, although Wilson said the numbers remain small.
Wilson also highlighted a new tiered reseller program and a consumption-based small-business offering designed for resellers. He said 8X8 had earned Microsoft certification for its session border controller technology for both Direct Routing and Operator Connect, and expects to operate the infrastructure itself rather than use a third-party infrastructure provider.
Debt refinancing in progress
8X8 ended the quarter with $309.4 million in principal debt outstanding. After an additional $12.5 million principal repayment on Oct. 9, total debt stood at approximately $297 million, including a $95 million term loan balance, Kraus said.
The remaining term loan was reclassified as a current liability ahead of its August 2027 maturity. Kraus said the company is well along in its refinancing process and is confident it will have a solution addressing both the term loan and its 2028 convertible notes before the term loan matures.
About 8X8 (NASDAQ:EGHT)
8×8, Inc is a cloud communications and customer experience technology company that provides voice, video, chat, contact center and communications application programming interface (API) services. Its platform is designed to help businesses manage employee communications and customer interactions through integrated, cloud-based tools.
The company’s offerings include 8×8 Work, a unified communications service for business calling, messaging and meetings, and 8×8 Contact Center, which supports customer service operations across voice and digital channels.
