Summary
8x8's third quarter of fiscal 2026 showed top-line growth but a weaker gross margin. Total revenue was $185.1 million, up 3.4% from the prior-year quarter. Gross profit slipped to $118.2 million, down 2.4%, and gross margin was 63.9%, down 3.8 percentage points. Operating income was $9.7 million, up 8.0%. Operating margin was 5.2%, up 0.2 percentage points. Net income was $5.1 million, up 68.4%. Diluted EPS was $0.04, up $0.02.
The nine-month picture looks different. Revenue for the nine months ended December 31, 2025 was $550.5 million, up 2.3%. Gross profit was $358.0 million, down 2.0%, and gross margin was 65.0%, down 2.9 percentage points. Operating income was $15.6 million, up 5.6%, while operating margin was 2.8% and flat against the prior-year period. Net income was $1.5 million, up 107.1% and swung to a profit. Diluted EPS was $0.01, up $0.18 and swung to a profit. On a non-GAAP basis, the quarter produced operating profit of $21.7 million, net income of $17.1 million, and Adjusted EBITDA of $26.3 million.
Service revenue growth came from a $14.0 million increase in platform usage revenue, mostly in the Asia-Pacific region, driven by messaging, minutes, and AI-based solutions. That was partly offset by a $7.8 million decline in subscription revenue, predominantly former Fuze customers. Management pointed to 8x8 Engage gaining traction and to new capabilities such as Workforce Management, now standard in every 8x8 Contact Center seat at no extra cost, 8x8 Retail Nationwide, Customer 360, native Mitel support, and new meeting controls in 8x8 Work. The company also adopted the ISO IEC 27018 privacy standard and was named a Major Player in the IDC MarketScape assessment for AI-enabled contact center workforce engagement management.
Cash generation softened. Operating cash flow was $20.7 million for the quarter, down 24.0%, and $41.4 million for the nine months, down 28.2%. Capital expenditures were $1.6 million for the quarter, up 246.3%, and $3.1 million for the nine months, up 51.5%. Deferred revenue was $36.8 million, up 10.2%, while remaining performance obligations were $675.0 million, down 15.6%. Ending cash and equivalents, including restricted cash, was $88.2 million after a voluntary $5 million principal prepayment on the 2024 Term Loan. The company has repaid $224 million of debt and cut total debt outstanding by 41% since August 2022, leaving $122.0 million of principal on the 2024 Term Loan, with $39.5 million of scheduled repayments in fiscal 2027 and $82.5 million due before or upon maturity in fiscal 2028.
Guidance for the fourth quarter of fiscal 2026, on a non-GAAP basis, includes operating margin of 8.5% to 9.5% and diluted net income per share of $0.07 to $0.08. For the full fiscal year 2026, management guided non-GAAP operating margin of 9.5% to 10.0% and non-GAAP diluted net income per share of $0.36 to $0.37. The company raised guidance for both the next quarter and the full fiscal year.
Risks cluster around the cost base and the customer mix. General and administrative expenses rose 25.2% for the quarter, largely on a $6.7 million increase in legal and regulatory costs. The installed base includes roughly 50,000 small businesses, which tend to be hit harder by macroeconomic headwinds such as tariffs, inflation, higher interest rates, and currency swings. Churn could run higher than expected, and competition in cloud communications and AI may shift in ways the company does not anticipate. Management also warned that its push on profitability and cash flow may not work, and that cutting total costs as a percentage of revenue could hurt revenue. Cash commitments are meaningful: material cash requirements and other obligations were $527.1 million as of March 31, 2025, and the non-cancellable three-year hosting contract grew from $24.1 million to $54.0 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2026 | Q2 FY2026 | QoQ | Q3 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $185.1M | $184.1M | +0.5% | $178.9M | +3.4% |
| Gross profit | $118.2M | $119.3M | -0.9% | $121.1M | -2.4% |
| Gross margin | 63.9% | 64.8% | -0.9 pp | 67.7% | -3.8 pp |
| Research & development | $27.2M | $27.9M | -2.6% | $29.8M | -8.9% |
| Sales & marketing | $60.5M | $63.8M | -5.2% | $65.6M | -7.8% |
| General & administrative | $20.8M | $22.2M | -6.4% | $16.6M | +25.2% |
| Total operating expenses | $108.5M | $114.0M | -4.8% | $112.1M | -3.2% |
| Operating income (loss) | $9.7M | $5.3M | +81.2% | $9.0M | +8.0% |
| Operating margin | 5.2% | 2.9% | +2.3 pp | 5.0% | +0.2 pp |
| Net income (loss) | $5.1M | $767.0K | +563.6% | $3.0M | +68.4% |
| Net margin | 2.8% | 0.4% | +2.3 pp | 1.7% | +1.1 pp |
| Diluted EPS | $0.04 | $0.01 | +$0.03 | $0.02 | +$0.02 |
Risks
Gross margin fell 3.8 percentage points to 63.9% in the quarter ended December 31, 2025, as cost of service revenue rose 17.8% on a $10.9 million increase in network and carrier service provider costs. Management expects the cost of delivering communication services to vary with service revenue mix, so continued usage-led growth could keep pressuring margins.
Quarterly service revenue growth of 3.6% was driven by a $14.0 million increase in platform usage revenue generated primarily in the Asia-Pacific region, while subscription revenue fell $7.8 million, predominantly from former Fuze customers. Results are increasingly dependent on a single region and on usage-based consumption rather than recurring subscriptions.
Remaining performance obligations declined 15.6% to $675.0 million at December 31, 2025 from $800.0 million a year earlier, indicating a shrinking contracted backlog. Management also cites variability from contract duration, churn, upsell and down-sell, renewals and payment terms.
The installed base includes approximately 50,000 small businesses, which management states tend to be disproportionately impacted by macroeconomic headwinds such as geopolitical instability, tariffs, continued inflation, higher interest rates and supply chain disruptions. Adverse economic conditions could reduce demand in future periods.
Management identifies technological changes in artificial intelligence and AI-related developments as factors that could affect customer buying behavior and demand, alongside the competitive environment. The strategy depends on accelerating AI-based platform and contact center capabilities to attract and retain customers.
General and administrative expenses rose 25.2% in the quarter ended December 31, 2025, primarily on a $6.7 million increase in legal and regulatory costs, and were up $10.9 million for the nine months ended December 31, 2025. Rising legal and regulatory spend is a recurring drag on operating results.
Operating cash flow fell 28.2% to $41.4 million for the nine months ended December 31, 2025 from $57.7 million a year earlier, and cash and cash equivalents declined to $86.9 million at December 31, 2025 from $88.1 million at March 31, 2025. Management attributes the decline partly to working capital, billing and collection timing and vendor disbursement timing.
The 2024 Term Loan bears interest at Term SOFR plus a margin of 2.50% to 3.00% based on the consolidated total net leverage ratio, with the margin at 3.00% as of December 31, 2025. Remaining principal is $122.0 million, with $39.5 million of scheduled repayments due in fiscal year 2027 and $82.5 million due before or upon maturity in fiscal year 2028.
SaaS KPIs
All quarters →Non-GAAP gross margin
Non-GAAP Operating Profit
Adjusted EBITDA
Adjusted EBITDA Margin
Cash Flow from Operations
Small business customers (installed base)
Summary, forecast, risks and KPIs are extracted from 8X8 INC /DE/'s SEC filings for Q3 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.