Business communications software company 8x8 (NYSE: EGHT) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 1.8% year on year to $181.4 million. On the other hand, next quarter’s revenue guidance of $177.5 million was less impressive, coming in 1% below analysts’ estimates. Its non-GAAP profit of $0.08 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

8x8’s second quarter results were met with a negative market reaction, as the company’s revenue surpassed analyst expectations but future guidance lagged. Management attributed the return to year-over-year growth—after nine quarters of declines—to robust adoption of its communications platform-as-a-service (CPaaS) solutions and a growing preference for usage-based pricing models. CEO Samuel Wilson explained, “The headwinds from the Fuze upgrade continue to recede,” highlighting that the company’s transition away from fixed-seat licenses played a key role in driving performance this quarter.

Looking ahead, 8x8’s forward guidance was shaped by management’s expectation that lower-margin, usage-based revenue will continue to grow but could pressure gross margins. CFO Kevin Kraus noted that while customer engagement remains healthy, “We forecast growth in usage-based revenue somewhat more cautiously.” CEO Wilson emphasized ongoing investments in AI-enabled features, expanding international reach, and deeper technology partnerships, but also flagged macroeconomic headwinds and foreign exchange volatility as factors shaping the outlook.

Key Insights from Management’s Remarks

Management pointed to a mix of business model transformation, technology investments, and macro trends as core drivers of the latest quarter’s results, while also outlining ongoing challenges in profitability and market conditions.

• CPaaS and usage-based momentum: The shift toward usage-based consumption, especially in CPaaS solutions, drove over 30% year-over-year growth in that business line. Management highlighted new use cases—such as programmable voice, video, and digital messaging—that are expanding customer engagement and supporting the “land-and-expand” strategy.

• AI-enabled product traction: Adoption of AI-powered features like Intelligent Customer Assistant rose 75% year-over-year, with voice interactions now representing the majority of AI interactions. CEO Wilson cited real-world customer success stories, such as a utility that used video and messaging to reduce on-site service visits by 40%.

• Declining impact from Fuze migration: The ongoing migration of legacy Fuze customers continued to be a drag on growth, but management reported that only 4% of revenue now remains on the Fuze platform, with roughly half expected to convert to 8x8 by year-end. CFO Kraus explained that this headwind is “subsiding quite a bit as we move forward.”

• Evolving go-to-market focus: The company has moved from SKU-based to outcome-based selling and is investing in customer success initiatives, such as high-touch support and AI-powered tools, to boost retention and drive multi-product adoption. Management noted that customers using three or more products now account for about a third of annual subscription revenue.

• Margin pressure from business mix: The shift toward usage-based revenues, which have lower gross margins, is starting to weigh on overall profitability. Kraus acknowledged, “Our communications platform revenue, while strategically valuable, has a different margin profile, and its accelerated growth is starting to influence our overall gross margin.”

Drivers of Future Performance

Guidance for the next quarter and year is shaped by management’s focus on expanding usage-based solutions, ongoing AI investments, and external headwinds such as FX volatility and competitive pricing.

• Continued shift to usage-based models: Management expects usage-based revenue to grow as more enterprises seek flexible, scalable communications platforms. However, this mix shift will further pressure gross margins, as these solutions are less profitable than traditional seat-based offerings.

• AI and platform differentiation: Ongoing enhancements in AI-driven features—such as real-time sentiment analysis, predictive customer journey orchestration, and advanced analytics—are expected to drive customer adoption and set the platform apart in a crowded market. Wilson emphasized that the company’s approach to building and partnering for AI capabilities is designed to maximize customer value over Wall Street preferences.

• External risks and margin headwinds: CFO Kraus flagged foreign exchange volatility, particularly the strengthening U.S. dollar against the British pound, as creating a revenue headwind for the next quarter and full year. Competitive pricing pressure from legacy vendors, as well as ongoing macroeconomic uncertainty, remain key risks to both revenue growth and profitability.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace at which legacy Fuze customers complete migration and its effect on retention and growth, (2) the continued expansion and monetization of usage-based and AI-powered solutions, and (3) the impact of foreign exchange volatility and competitive pricing on overall margins. Execution on outcome-based selling and international expansion will also be critical to track.

8x8 currently trades at $1.84, down from $1.93 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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