EGHT Q3 Deep Dive: AI-Driven Usage Revenue Offsets Margin Pressures as Platform Expansion Accelerates

Cloud communications provider 8x8 (NASDAQ:EGHT) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 1.7% year on year to $184.1 million. The company expects next quarter’s revenue to be around $179.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.09 per share was 28.6% above analysts’ consensus estimates.

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StockStory’s Take

8x8’s third quarter results were met with a significant positive market reaction, reflecting the company’s ability to outperform Wall Street’s revenue and profit expectations. Management attributed this to the rapid adoption of AI-powered features and a successful transition towards usage-based revenue streams. CEO Samuel Wilson highlighted the role of embedded AI in enhancing both customer and employee experiences, citing real-time call summarization, agentless payment capabilities, and expanded digital channels as key differentiators driving growth for the quarter.

Looking forward, management’s outlook is shaped by the continued expansion of AI-centric offerings and a strategy to drive multiproduct adoption across its customer base. The upcoming rollout of the 8x8 Workforce Management solution at no additional cost is expected to support customer retention and increase engagement. CEO Samuel Wilson emphasized, “We are actively managing the evolution of our business model, and as usage-based revenue grows, we’re focused on delivering durable long-term profitability through disciplined execution and innovation.”

Key Insights from Management’s Remarks

Management highlighted AI product adoption, a shift towards usage-based revenue, and new platform initiatives as the main forces shaping both the quarter’s outcome and the company’s forward momentum.

• AI integration across platform: 8x8 embedded artificial intelligence throughout its communications suite, enabling features like real-time call summarization, AI-powered transcription, and smart assistants. Management stated this innovation is driving higher customer engagement and differentiating 8x8’s offerings in a competitive market.
• Usage-based revenue scaling: The company’s usage-based offerings, particularly its Communications Platform as a Service (CPaaS) APIs, saw record performance. Usage-based revenue represented nearly one-fifth of service revenue, illustrating a successful transition from traditional subscription models toward consumption-driven growth.
• App Store and product-led growth: 8x8 launched its App Store, enabling customers to quickly adopt new products such as Workforce Management. This marks the company’s first foray into product-led growth, designed to accelerate adoption and increase average revenue per customer.
• International outperformance: Management reported that international markets, especially the U.K. and Asia-Pacific regions, are growing substantially faster than the U.S. business, helping offset price compression and competition in the domestic market.
• Deleveraging and disciplined capital management: The company continued to focus on reducing debt and controlling stock-based compensation, reinforcing its commitment to financial discipline and operational efficiency. CFO Kevin Kraus noted ongoing cost controls, including internal AI deployment to optimize spending.

Drivers of Future Performance

8x8’s guidance reflects a cautious approach to usage-based revenue forecasting, with AI product adoption, international expansion, and operational discipline as the primary forward drivers.

• AI and multiproduct strategy: The company plans to deepen customer relationships by rolling out more AI-enabled features and promoting multiproduct adoption, which management believes will raise customer lifetime value and retention rates.
• Shift to usage-based billing: Management expects the growing share of usage-based revenue to introduce some variability and margin pressure, but sees this as a sustainable way to align customer value with company profitability over time.
• International and vertical expansion: 8x8 is prioritizing growth in international markets and verticals like retail and hospitality, where AI-powered communications tools are gaining traction. Management sees these segments as key to driving revenue beyond U.S.-centric headwinds.

Catalysts in Upcoming Quarters

Looking ahead, our analysts will watch for (1) the success and customer adoption rate of the new 8x8 Workforce Management tool, (2) sustained international growth and the company’s ability to offset U.S. margin pressures, and (3) the impact of AI-driven, usage-based revenue on long-term profitability and customer retention. The evolution of the App Store and product-led growth initiatives will also be important indicators of future momentum.

8x8 currently trades at $1.95, up from $1.78 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

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