8x8 Q4 2026 Earnings Call | XCaaS Enterprise Adoption Extension Fuels Record H2 Free Cash Flow

Good afternoon everyone and thank you for joining us. Fiscal 2026 marked a turning point for 8x8. Our Q4 results demonstrated improving execution, operating discipline, and growing momentum across the business. We delivered four consecutive quarters of year-over-year revenue growth, generated our first GAAP profitable full fiscal year since 2015, increased net income and earnings per share, and strengthened our balance sheet. Most importantly, I believe this year validated the strategy we've been building towards for several years. It is clear the business communications market is changing rapidly. The driver is straightforward: AI is beginning to handle low-level repetitive work that used to require people — routine inquiries, transactions, first-line support. We're still early, but the trajectory is clear and customers are making architectural decisions today based on where this is going. As the market evolves, what customers buy and how they pay for it changes. Per-seat pricing made sense when every interaction needed a human. As AI takes on more interactions, pricing needs to shift towards usage and outcomes. These shifts also change how customers buy. AI needs unified context to deliver real results; it doesn't work well in fragments. That's what's accelerating demand for integrated platforms, not as a preference, but as a prerequisite. We built 8x8 for this transition. Today, our platform combines carrier-grade global voice infrastructure, programmable communications APIs, UCaaS, CCaaS, digital engagement, and embedded AI into a single architecture designed to support both human and AI-driven interactions at enterprise scale. And that matters more than ever in an AI era. Voice is not a legacy channel in an AI-driven world. In many ways, it becomes more important. Voice is the bridge between automated execution and human judgment. As enterprises move towards human-to-agent and agent-to-agent interactions, communications infrastructure stops being utility and starts becoming a strategic control layer. Reliability, security, trust, and orchestration matter more than ever. The challenge is no longer leveraging AI to generate responses or drive engagement. It's already happening. We are seeing both generative and agentic AI drive a surge in communications APIs across voice, messaging, and digital channels, and it is evident in our numbers. Usage-based revenue including CPaaS communications APIs, AI solutions, digital channels, and telecom usage grew more than 70% year-over-year and represented approximately 23% of service revenue, up from 14% a year ago. The real challenge is delivering interactions that feel seamless, secure, intelligent, and trustworthy. AI agents must be able to hear clearly, understand intent accurately, authenticate securely, and know exactly when to hand interactions to a human. That requires more than another AI voice model. It requires a highly reliable communications infrastructure and a platform capable of orchestrating interactions seamlessly across both human and agentic layers. This requirement is redefining where value occurs in enterprise communications. Customers do not want another closed ecosystem or another AI model that needs to be tested and integrated. They want platforms that can evolve as the AI landscape evolves. The new winners will be companies that combine carrier-grade infrastructure with orchestration across communications workflows, APIs, analytics, and customer engagement, and do it at scale. Our approach has been different from many of our peers. Instead of building around a single AI model or a closed ecosystem, we have focused on building an open integration and orchestration layer directly into the platform itself. This allows customers to adopt new AI capabilities quickly and deploy AI across voice, messaging, and customer engagement workflows without rebuilding infrastructure. More importantly, this approach helps customers simplify increasingly complex technology environments by reducing operational friction and accelerating deployment, allowing them to adopt new innovation without constantly rebuilding infrastructure. That philosophy has shaped our innovation strategy and we hit some important milestones in Q4. In March, we announced general availability of 8x8 Engage, extending customer engagement beyond the traditional contact center to frontline sales and operational teams. Customer adoption has been strong with partners now fully enabled; demand is building. We also added native agentic AI to our platform for CX with AI Studio. AI Studio allows customers to build and deploy AI-powered voice and digital agents directly on the 8x8 platform for CX using natural language prompts. It could not be easier. Check out the video demo on our website. During the quarter, we expanded platform capabilities across analytics, authentication, CRM integrations, and orchestration workflows designed to simplify deployment and improve how AI-powered interactions move across human and digital engagement channels. Our outcome-focused platform strategy also shapes how we approach partnerships and technology acquisitions. Our partnership with Synflow AI expands our capabilities for SMBs and strengthens our position in AI-powered agentic engagement. Maven Labs expanded our messaging and automation capabilities while CallRoute strengthens our Microsoft Teams integration strategy and will simplify platform-to-platform migrations. Most importantly, our customer wins reinforced that our platform strategy is aligned with where the market is going. In the US, an insurance company replaced two competitors with a full UCaaS deployment after evaluating six competing vendors. A healthcare organization operating more than 100 locations implemented an omni-channel engagement solution integrating voice, SMS, web chat, and Salesforce to modernize patient communications. Internationally, a UK automotive retailer selected 8x8 to replace a legacy environment that combined UC and contact center deployment, and a bank in the Philippines selected 8x8 to strengthen authentication and fraud prevention capabilities ahead of new anti-fraud compliance requirements. Yes, we are a security company in places. Across these wins, customers constantly prioritize integrated workflows, trusted infrastructure, AI-ready engagement capabilities, flexible deployment models, and security over disconnected point solutions. As our markets evolve, we are sharpening our go-to-market strategies, adapting our pricing models, and improving our processes. Partners have always played a central role in the communications and customer experience markets because they maintain trusted customer relationships and expand geographic and commercial reach. We believe 8x8 remains significantly under-distributed relative to the size of the opportunity. As a result, we are increasing our investment in partner recruitment, enablement, onboarding, automation, and deployment tools that make it easier to do business with 8x8 and easier for partners to deliver solutions to their customers. At the same time, we are exploring new consumption-based pricing and deployment models that reduce decision risk traditionally associated with enterprise software purchases and simplify trial and activation. By reducing decision risk and removing traditional barriers to adoption, we can accelerate time to value and better align our go-to-market motions and sales cycles with product innovation cycles. Fiscal 2026 was also a year of operational discipline. We completed the Fuse migration process, integrated several financially immaterial but strategic acquisitions, reduced debt meaningfully, and maintained disciplined operating expense management while continuing to invest in innovation, infrastructure, and AI capabilities. The past several years has required focus, restructuring, and hard operational decisions. This year we begin to see the benefits of that work show up across the business. As we enter fiscal 2027, our overarching objective remains straightforward: drive sustainable growth, profitability, and cash flow. Our priorities remain clear: expand our global communications infrastructure for AI-driven customer engagement; deliver innovation that enables seamless interactions that build trust at every stage of a customer journey; scale our partner distribution ecosystems globally; and continue to drive operational discipline and efficiency. Let me finish by saying that I believe 8x8 is operating from a position of strength with a clear strategy, solid financial fundamentals, and a growing confidence in our ability to compete aggressively in a rapidly evolving market. Thank you again to our customers, our partners, our employees, and our shareholders for your continued support. And with that, let me turn it over to Kevin.

All right, so I'm going to just start by giving you some context and then I'll let Kevin fill in the details. I think the thing that you need to realize, and sort of generically the street and our investors need to realize, is that usage is now 23% of our revenue and we don't have as good visibility in usage when we go out three or four quarters, and so we are naturally conservative in how we forecast usage revenue out that far because it's not contracted. So what you'll see from us over time, and we've tried to highlight this the last couple years as usage has been growing steadily, is that we naturally will be slightly more conservative in our guidance because of those things.

One thing I'd like to add on to the usage — we do have a variety of margin profiles for the variety of usage products that we have. I think that over time, it'll also change perhaps a little bit as we expand some of our usage products geographically and not just focus in certain regions where maybe the pricing might be a little bit more competitive. The other thing I'll say about usage revenue is that it is much lower cost from an opex perspective. And while you see the gross margin percentage might decline, we're focused on the dollars. So the gross profit dollars is something that we look at very closely, and more can fall to the bottom line. So we're interested very much in scaling that part of the business, and that's actually where the market is moving. So we're going toward where the market is moving, and we're not focused on a particular gross margin profile at a given point in time.

Thank you.

Peter, no problem at all. Look, let me take a step back and I swear to God I'll answer your question in excruciating detail in a second. But if you think about new and emerging technologies, I think it's completely fair on our part and we really think about the customer and put them at the center of our universe. Going to a customer today and saying, 'Hey, I need you to forecast how many voice AI interactions you're going to do a year from now or two years from now' is, I believe, fundamental lunacy, and they think it's fundamental lunacy too. So the way we structure the contract is this: we charge a reasonable rate on a per-usage basis with zero commitment, and then as you raise your level of commitment, we will put a discount into your rate on a per-interaction basis, per outcome, per transaction, per credit, however you want to think about it. So at a very basic level, if you give us a commitment for a year or even month-to-month, we will give you a 5% or 10% discount. If you give it to us for a year, we'll give you a bigger discount, those kinds of things. But what we find is even when we get commitments, the customers just don't know a lot on the AI products — and even on some of the CPaaS messaging products — how many marketing campaigns are going to run, how many authentications are going to come in, how much OTP is going to happen, those kinds of things. And so they always want to commit at a number that is substantially below what they think they're actually going to use. And so they're willing to capture some discount, but they always want to really get away from this concept of shelfware or unused commitment. And it's why we've embraced the usage-based business model because it was obvious years ago to us that CFOs were getting incredibly frustrated with unused seats and unused software. Fascinating — my own CIO is incredibly frustrated about it. And so that was why we were going to see more and more of this consumption-based pricing driven by credits or dollars or however you want to do it. But really, it's that notion. So long-winded answer, Peter, to say: a fair price on a per-interaction basis and a discount when you're willing to commit.

Peter, one other thing I want to just add, kind of riffing on what Kevin's saying. I need you to keep this in mind: forecasting token usage and cost is really hard right now, even for us as a software company. So we have our developers running on one of the coding engines, we have our marketing department using automation for content delivery, and all those kinds of things. And the costs associated with tokenization and what's happening is really hard. I think we're still — we haven't even started the game yet, or it's the top of the first inning around token optimization. I'm sure there'll be some startup companies that come about over the next few years that help optimize token usage, but it's still early. And so it is really hard to sort of have these notional thresholds because something that's a low-margin product after you rinse and repeat it through AI a bit can become a pretty nice margin product once you get it up that curve.

Thank you.

I got it, Katherine. Look, I would say what's changed slightly for us is we did three acquisitions last quarter. So the acquisition engine is sort of back at 8x8, and we're really proud of the acquisitions we did. So we did one last year and I think we did a total of four last year — we did one a year ago and then we did three last quarter. So we're tucking in some really interesting technologies that we can use to round out the portfolio and offer better solutions to our customers. So that's a use of capital. We delevered another $14.5 million in April. That's a use of capital. And we did buy back shares a couple quarters ago, but buybacks are a little tougher because I've got to work around covenants and bank things and other things. So my preference is sort of in rank order: acquire things that help us improve our customer outcomes; pay off debt; and then buy back stock — number three.

So two things. First, a stat: 67% of CFOs and CIOs want to consolidate the number of vendors they have. And why? Lower total cost of ownership. So what you're getting from us is if you consolidate your spending dollars with 8x8, you're getting a business communications platform. I believe the walls are coming down with these categories of UC and CC and CPaaS. Our Engage product — interactions were up 300% year-on-year. Is that a CC product? Is that a UC product? It's somewhere in the middle between those two. So the walls are coming down between these segments. Corporate America and the corporate world wants to consolidate on vendors, and they want to pick a vendor where they can get economies of scale in terms of spending and discounts, contract simplification, worldwide support, single throat to choke — all the things you've heard over the past. So when we pitched that story five years ago, there was a pretty big technology discount you had to get from 8x8 to get that story. Today, I think that technology discount doesn't really exist. We have world-class CPaaS. I think we're number 11 or number 10 in the world in terms of CPaaS volumes. So we're way in front of most of our normal competitors. We've got great contact center. We've got Engage, which is completely differentiated from others. We've got UC, and now on top of everything else we've got AI Studio, which is absolutely amazing in the sense that it's prompted, etc. So when we go into a company, what we're trying to do is have a business communications platform discussion and not have a UC-CC — let me divebomb pricing — because that's what my competitors like to conversation.

Thanks, Katherine.

Thank you, everyone. Thank you for joining us today. I'd just like to sort of end with this concept: we're operating from a position of strength. We have a clear strategy which, after four quarters of growth which some of you doubted, clearly is working. Solid financial fundamentals and growing confidence in our ability to compete aggressively in a rapidly evolving market that, let's not forget, is somewhere between $70, $80, $90 billion in size depending on which third-party analyst you use as a reference point. I think we're in a great position as a company to move forward. I thank you for a chance to sort of give you an update on where we are, and I look forward to talking to you again after the end of next quarter.