Executive Summary / Key Takeaways

• 8x8 is undergoing a significant transformation, shifting focus to its integrated CX platform for mid-market and enterprise customers, powered by increasing AI capabilities and a strengthening balance sheet.
• The core 8x8 service revenue (excluding legacy Fuze customers) is showing accelerating growth, reaching 4.6% year-over-year in Q4 FY25, the highest in 10 quarters, indicating momentum from new products and strategic execution.
• Strong cash flow generation ($63.6 million in FY25, $142 million over two years) and disciplined debt reduction (35% principal reduction since peak) have significantly de-risked the balance sheet and provide flexibility for strategic investments.
• Innovation in AI-based features and the Technology Partner Ecosystem is driving multi-product adoption and increasing win rates in the critical Contact Center segment, positioning 8x8 as a differentiated provider of outcome-driven solutions.
• Management is guiding for continued positive operating cash flow and non-GAAP operating income in FY26, with strategic investments aimed at achieving high single-digit service revenue growth by FY28, despite near-term revenue headwinds from the accelerated Fuze platform migration.

The Transformation of 8x8: Building a Unified CX Leader

Founded in 1987 and reincorporated in Delaware in 1996, 8x8, Inc. has evolved from a telecommunications hardware and software company into a global provider of integrated customer experience and business communications solutions. The company's strategic journey has increasingly centered on unifying contact center, business communications, and application programmable interfaces (APIs) into a single, secure, AI-powered system: the 8x8 Platform for CX. This strategic shift, particularly amplified following the acquisition of Fuze, Inc., targets mid-market, small and mid-sized enterprise, and public sector organizations (500 to 10,000 employees) with complex communication needs.

The Fuze acquisition, completed in fiscal 2023, served as a catalyst for a comprehensive transformation. This initiative focused on three key areas: fixing the financial model, accelerating innovation, and delivering measurable customer experience (CX) outcomes. The company embarked on a complete rebuild of its go-to-market functions, including rebranding and restructuring sales and channel strategies to emphasize solution selling and partner enablement. This period has been marked by disciplined cost management and a relentless focus on generating cash flow and reducing debt, laying a stronger financial foundation for future growth.

The Platform for CX & Technological Edge

At the heart of 8x8's strategy is its cloud-native Platform for CX, designed to eliminate communication silos and deliver seamless, data-driven interactions. This platform integrates Unified Communications-as-a-Service (UCaaS), Contact Center-as-a-Service (CCaaS), and Communications Platform-as-a-Service (CPaaS) capabilities. A key differentiator is the underlying Customer Interaction Data Platform (CIDP), which captures, connects, and contextualizes interaction data across the organization, providing a rich data foundation for AI-powered features.

8x8's approach to AI is built on four pillars: comprehensive AI-driven data processing (transcriptions, summaries, sentiment analysis), an ecosystem of best-in-class integrated AI applications, AI insights for operational optimization, and professional services for AI consulting. This focus aims to turn AI technologies into tangible business outcomes for customers. Specific AI-powered features include intelligent routing, live agent guidance, JourneyIQ for visualizing customer journeys, AI Orchestrator for managing virtual agents, and tools like Agent Assist and Compose with AI.

The company's investment in R&D, consistently around 15% of non-GAAP revenue, is yielding results. Sales of new products, including AI-based solutions like Intelligent Customer Assistant, have shown significant acceleration, increasing over 60% year-over-year in Q2 FY25 and more than 200% year-over-year for AI-based new products in the same quarter. Operational metrics demonstrate the impact of these technologies; for instance, video interactions within the contact center were up 150% quarter-on-quarter in Q1 FY25, and solutions like Remote Fix are enabling substantial reductions in truck rolls for field service companies.

The Technology Partner Ecosystem (TPES) is a critical component of 8x8's technology strategy, aiming to provide "Best-of-Breed from a Single Source." By deeply integrating with curated partners offering solutions in areas like workforce management, compliance (e.g., CallCabinet), and vertical-specific applications (e.g., SpinSci for healthcare), 8x8 enables customers to easily assemble customized CX solutions with native-like user experiences, reducing integration complexity and accelerating time to value. This approach is particularly valuable for mid-market and enterprise customers who may lack extensive internal development resources.

Competitive Positioning in a Dynamic Market

The cloud communications and contact center markets are intensely competitive, featuring a diverse set of players ranging from cloud-native specialists to legacy vendors transitioning to the cloud and large technology giants. 8x8 competes across the UCaaS, CCaaS, and CPaaS segments, facing rivals such as Zoom (ZM), RingCentral (RNG), Cisco (CSCO), and Microsoft (MSFT).

Compared to larger, more diversified players like Microsoft and Cisco, 8x8's strength lies in its specialized, integrated CX platform and its focus on the mid-market and enterprise segments. While Microsoft's Teams and Azure ecosystem offer broad reach and deep integration within enterprise IT, 8x8 differentiates through its AI-driven analytics and contact center-specific features, which can offer quantifiable advantages in interaction efficiency (e.g., potentially 20-30% higher efficiency in customer interactions via AI). However, 8x8's smaller scale results in higher customer acquisition costs and lower net margins (TTM net margin -6.33%) compared to Microsoft (TTM net margin 36%) and Cisco (TTM net margin 19%), making it vulnerable in large enterprise deals where scale and existing relationships are paramount.

Against cloud-native competitors like RingCentral and Zoom, 8x8's integrated UCaaS, CCaaS, and CPaaS platform provides a competitive edge. While RingCentral and Zoom may excel in specific areas (Zoom in video, RingCentral in UCaaS scalability), 8x8's CPaaS APIs offer more robust programmability, enabling faster custom integrations. This can translate to lower operating costs per unit in API-heavy applications. However, RingCentral and Zoom generally exhibit stronger revenue growth (RNG TTM revenue growth ~15-20%, ZM TTM revenue growth ~8-10%) and higher profitability margins (RNG TTM gross margin 71%, ZM TTM gross margin 76%) than 8x8 (TTM gross margin 67.97%). Their superior cash flow generation provides greater flexibility for aggressive marketing and expansion.

8x8's strategic response to this competitive landscape involves leveraging its integrated platform and TPES to offer a compelling "Best-of-Breed from a Single Source" value proposition, particularly for customers seeking advanced CX capabilities without complex integrations. The company is seeing increasing success in CCaaS-led deals and multi-product lands, indicating that its messaging around outcome-driven solutions is resonating. While competitive pricing pressures, particularly in UCaaS, can elongate sales cycles, 8x8 believes its differentiated product portfolio and improving go-to-market execution position it to gain market share, especially as customers migrate from legacy on-premise systems driven by digital transformation needs.

Financial Performance & Operational Discipline

8x8's financial performance in fiscal year 2025 reflects the ongoing transformation and the impact of the Fuze integration. For the year ended March 31, 2025, total revenue was $715.1 million, a decrease of 1.9% from $728.7 million in fiscal 2024. Service revenue, the primary component, decreased by 1.1% to $692.9 million, largely due to a $19.9 million decline in subscription revenue (primarily from the legacy Fuze platform), partially offset by a $12.2 million increase in platform usage revenue (driven by CPaaS). Other revenue, consisting of professional services and hardware sales, decreased by 21.3% to $22.1 million, influenced by lower product and professional service revenue and a trend towards softphones over physical hardware.

Despite the slight revenue decline, the company demonstrated improved operational efficiency in certain areas. Operating expenses decreased by $61.3 million, or 11.5%, in fiscal 2025 compared to fiscal 2024. This was driven by significant reductions in general and administrative expenses (down 26.6%, partly due to a $24.2 million decrease in regulatory/tax matters), research and development (down 9.5%), sales and marketing (down 2.8%), and the absence of the prior year's impairment charge on long-lived assets. This resulted in a GAAP operating income of $15.2 million for fiscal 2025, a significant improvement from a loss of $27.6 million in fiscal 2024. The company achieved GAAP operating profitability for three consecutive quarters exiting fiscal 2025.

Interest expense decreased by 27.5% in fiscal 2025 due to debt reduction and refinancing. However, other expense, net increased significantly, primarily due to a $10.6 million loss on debt extinguishment related to the payoff of the 2022 Term Loan. The net result was a GAAP net loss of $27.2 million for fiscal 2025, an improvement from a loss of $67.6 million in fiscal 2024.

A key highlight has been 8x8's consistent cash flow generation. The company reported $63.6 million in cash provided by operating activities in fiscal 2025, contributing to a total of over $142 million in operating cash flow over the past two fiscal years. This strong cash generation has been primarily directed towards strengthening the balance sheet through debt reduction. Since its peak in August 2022, the company has reduced its total debt principal by approximately 35%, including the repayment of the $225 million 2022 Term Loan and subsequent prepayments on the new Term Loan. As of March 31, 2025, the net debt to trailing 12-month EBITDA ratio stood at approximately 2.7 times, a substantial improvement from over 6 times in fiscal Q2 2023, significantly enhancing financial flexibility. Stockholders' equity has also shown consistent growth over the past four quarters.

Operational metrics indicate positive momentum in the core business. The number of customers with three or more products increased 13% year-over-year in Q4 FY25. The remaining base of customers on the legacy Fuze platform has been significantly reduced, representing under 5% of service revenue by Q4 FY25, down from 11% a year prior. Customer loyalty and revenue retention for customers on the 8x8 platform are at multiyear highs, and the company's support organization has maintained world-class satisfaction metrics.

Outlook & Accelerating the Transformation

Management's guidance for fiscal year 2026 reflects a period of continued transition and strategic investment aimed at accelerating growth beyond the current fiscal year. For fiscal year 2026, the company anticipates service revenue between $682 million and $702 million and total revenue between $702 million and $724 million. This outlook incorporates the expected impact of accelerating the migration of remaining Fuze customers to the 8x8 platform, which may result in some attrition from the long-tail base, although the company is committed to migrating as many customers as possible by the end of calendar year 2025.

Non-GAAP operating margin is projected between 9% and 10% for FY26. While this represents a modest step down from the approximately 10.7% to 11% projected for FY25, it reflects planned strategic investments in go-to-market initiatives aimed at strengthening market position and accelerating long-term revenue expansion. Despite this potential margin compression, non-GAAP net income is expected to remain relatively stable with fiscal 2025 levels, primarily due to the significant reduction in interest expense resulting from debt paydowns.

Cash flow from operations for FY26 is anticipated to be between $40 million and $50 million. This reflects the impact of strategic investments and typical seasonal fluctuations in cash expenses, particularly in the fiscal fourth quarter. The company's capital deployment strategy for FY26 includes investing excess cash in growth initiatives, software development, and further debt reduction.

The long-term outlook is centered on achieving high single-digit service revenue growth by fiscal year 2028, with expected improvement each year until then. This growth is anticipated to be driven by the increasing contribution from new products, higher retention rates from the growing base of multi-product customers, and continued acquisition of new customers, particularly in the mid-market and enterprise segments. The company's focus on disciplined execution, scalable innovation, and delivering value is seen as essential to achieving this goal.

Key Risks and Challenges

Despite the positive momentum in core business areas and strengthening financial position, 8x8 faces several risks and challenges that could impact its trajectory. Macroeconomic uncertainty and geopolitical tensions continue to create volatility, potentially affecting customer spending and lengthening sales cycles. Intense competition, including pricing pressure from rivals with greater resources, remains a significant factor influencing market share and profitability.

Executing the accelerated migration of remaining Fuze customers to the 8x8 platform carries inherent risks, including potential customer attrition if the transition is not seamless or compelling enough for the long tail of users. Delays in completing the platform shutdown could result in increased costs for maintaining duplicative infrastructure and support teams.

Operational risks include the ability to scale the business efficiently, maintain the reliability and security of the cloud platform (including against evolving cybersecurity threats), and comply with complex and evolving global regulatory and data privacy requirements. Dependence on third-party network service providers and hardware vendors also presents potential points of failure or cost increases.

The company's substantial amount of indebtedness, while significantly reduced, still requires dedication of cash flow to debt service and imposes restrictive covenants that limit financial flexibility. The ability to refinance debt or raise additional funds on favorable terms in the future could be impacted by market conditions. Finally, the success of investments in new products and go-to-market initiatives is not guaranteed and may not yield the anticipated returns or accelerate revenue growth as quickly as expected.

Conclusion

8x8 is in the midst of a significant transformation, strategically repositioning itself as a unified customer experience and business communications leader powered by an integrated platform and increasing AI capabilities. The company has made substantial progress in strengthening its financial foundation through disciplined cost management and aggressive debt reduction, significantly de-risking the business and providing flexibility for future investments. While facing near-term headwinds from the accelerated migration of legacy Fuze customers and ongoing competitive pressures, the core 8x8 business is showing encouraging signs of acceleration, driven by innovation in AI-based solutions, growing multi-product adoption, and improving go-to-market execution.

The investment thesis hinges on 8x8's ability to successfully complete the Fuze migration, translate its technological differentiation (particularly in AI and platform integration) into sustained market share gains against larger and more profitable competitors, and achieve its target of high single-digit service revenue growth by fiscal year 2028. The company's consistent cash flow generation and commitment to financial discipline provide a solid base, but execution on strategic growth initiatives and navigating the dynamic competitive and macroeconomic environment will be critical factors to watch in the quarters ahead.