8x8 Raises FY2027 Outlook After Record Q2 Revenue

8x8, Inc. (Nasdaq: EGHT) reported record quarterly service and total revenue for its fiscal second quarter and raised several full-year fiscal 2027 guidance ranges after results exceeded the company’s prior outlook. The business communications provider also delivered higher operating profit and its 23rd consecutive quarter of positive operating cash flow, although a shift toward platform-usage revenue continued to weigh on gross margin.

For the quarter ended September 30, 2026, service revenue rose 4.9% year over year and 1.3% sequentially to $187.8 million. Total revenue increased 4.3% from a year earlier and 1.0% from the preceding quarter to $192.0 million. Both measures were above 8x8’s previous guidance ranges of $180 million to $185 million for service revenue and $185 million to $190 million for total revenue.

Service revenue, which includes subscriptions and platform usage, accounted for 97.8% of total revenue. Other revenue fell 15.7% year over year to $4.2 million and represented the remaining 2.2%.

Operating Profit Rises as Gross Margin Contracts

GAAP operating income increased 29.6% year over year to $6.9 million, producing a 3.6% operating margin. GAAP net income was $3.4 million, or $0.02 per diluted share, compared with net income of $767,000, or $0.01 per diluted share, in the year-earlier quarter.

On a non-GAAP basis, operating income rose 19.7% to $20.7 million, while operating margin reached 10.8%. That compared with the company’s previous guidance for an 8% to 9% margin. Non-GAAP diluted earnings were $0.12 per share, above the earlier range of $0.07 to $0.08. Adjusted EBITDA increased 13.1% to $24.9 million, equal to 13.0% of revenue.

Gross profit moved in the opposite direction. GAAP gross profit declined 4.0% to $114.6 million, with gross margin falling to 59.7%. Non-GAAP gross profit decreased 4.5% to $115.5 million, resulting in a 60.1% margin. The presentation attributed the margin pressure to revenue mix, as the business shifts toward platform usage. Lower operating expenses as a percentage of revenue offset that pressure at the operating-income level.

The company said recurring revenue from AI products grew 58% year over year, while the number of customers using at least three products increased 19%. Its product strategy includes AI-powered interaction processing, analytics and automated agents across voice and digital channels, as well as integrations with customer relationship management, ticketing and other business applications.

Cash Generation and Debt Reduction

Operating cash flow was $13.1 million, above 8x8’s prior guidance of $9 million to $11 million and up $4.2 million from the year-earlier period. Trailing-12-month operating cash flow totaled $65.2 million.

Cash, cash equivalents and restricted cash stood at $102.6 million at quarter-end, up $25.9 million from a year earlier. Total debt was $309.4 million, including $201.9 million of 2028 convertible notes and a $107.5 million term loan. Net debt declined by $45.4 million year over year to $206.8 million, reducing the ratio of net debt to trailing-12-month adjusted EBITDA to 2.1 from 2.8.

After the quarter closed, 8x8 made a further $12.5 million principal payment in October. The company said cumulative debt repayments since August 2022 reached approximately $251.2 million. Debt reduction remains a priority, and management anticipates refinancing the term loan before its August 2027 maturity.

Fiscal 2027 Outlook Increased

For fiscal 2027, 8x8 now expects service revenue of $732 million to $752 million, compared with its previous range of $725 million to $745 million. The company projects total revenue of $750 million to $770 million, up from the prior outlook of $745 million to $765 million. Both updated ranges imply year-over-year growth of 2% to 5%.

The non-GAAP operating-margin forecast increased to 9.1% to 10.1% from 8.8% to 9.8%, while the non-GAAP diluted earnings outlook moved to $0.36 to $0.40 per share from $0.33 to $0.38. Expected operating cash flow rose to $49 million to $54 million from $45 million to $52 million.

However, 8x8 lowered its full-year non-GAAP gross-margin range to 59.7% to 60.2%, from 60.5% to 61.5%. The company expects the growing contribution from platform usage to reduce gross margin as a percentage of revenue even as it supports top-line growth. Platform usage is projected to represent 25% to 30% of fiscal 2027 service revenue, compared with 20% in fiscal 2026.

For the fiscal third quarter, management expects service revenue of $184 million to $188 million and total revenue of $188 million to $192 million. The company forecast a non-GAAP gross margin of 58% to 60%, a non-GAAP operating margin of 8% to 10%, non-GAAP diluted earnings of $0.08 to $0.09 per share, and operating cash flow of $11 million to $13 million.

Looking further ahead, 8x8’s financial model calls for revenue growth to reach the mid-to-high single digits during fiscal 2028 through fiscal 2030 as adoption of AI-based customer engagement products expands. Management targets more than $100 million of non-GAAP operating profit and progress toward zero net debt around fiscal 2030. These targets remain subject to execution, customer retention, the pace of AI-product adoption, revenue mix, competition, macroeconomic and currency conditions, and the company’s ability to service and refinance its debt.