In fiscal 2026 Q1, 8x8 returned to year-over-year revenue growth for the first time in nine quarters, with total revenue of $181.4 million and service revenue of $176.3 million (up 2%, and just over 5% excluding fuse), both at or above the high end of guidance. Growth was driven by consumption-based revenue, led by 8x8 CPaaS Solutions, which grew more than 30% year-over-year and lifted usage-based revenue to about 17% of service revenue, alongside strong AI and Microsoft Teams momentum. That mix shift toward lower-margin platform revenue pushed gross margin down to 67.8% and operating margin to 9%, and management guided to a sequential Q2 revenue decline and lower full-year gross margins, compounded by an FX headwind from a stronger U.S. dollar. The company continued to deliver durable cash generation (18th straight quarter of positive operating cash flow, over $11 million) and reduced debt by 40% since 2022 while returning over $17 million to investors. With the fuse platform down to about 4% of service revenue and on track to sunset by fiscal year end, management framed the quarter as an inflection point balancing a deliberate trade of near-term margin for a return to durable growth.
Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for the first quarter of fiscal 2026 with Samuel Wilson, our Chief Executive Officer, and Kevin Kraus, our Chief Financial Officer. Following our prepared remarks, there will be a question and answer session. Before we get started, let me remind you that our discussion today includes forward-looking statements about our future financial performance, including investments in innovation, our focus on profitability and cash flow, as well as statements regarding our business products and growth strategies. We caution you not to put undue reliance on these forward-looking statements, as they involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements, as described in our risk factors in our report filed with the SEC.
Any forward-looking statements made on this call and in the presentation slides reflect our analysis as of today, and we have no plans or obligation to update them. All financial metrics that will be discussed on this call are non-GAAP unless otherwise noted. These non-GAAP metrics, together with year-over-year comparisons in some cases, were not prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. A reconciliation of these non-GAAP metrics to the closest comparable GAAP metric is provided in our earnings press release and earnings presentation slides, which are available on 8x8's Investor Relations website at investors.8x8.com. With that, I will turn the call over to Samuel Wilson.
Good afternoon, everyone, and thank you for joining us. Before I dive in, I want to take a moment to acknowledge our global 8x8 team. Your focus, your commitment, and your drive are what power this transformation. To our customers and partners, thank you. Your feedback and trust are foundational to everything we do. This quarter marked a big milestone. In Q1, we returned to year-over-year growth for the first time in nine quarters. We exceeded the midpoint of our service revenue guidance by more than $3 million. This growth was fueled by strong growth for our 8x8 CPaaS Solutions, continued momentum in platform adoption, a steady shift towards usage-based consumption models, and a small tailwind on FX. We are now seeing the headwinds from the fuse platform upgrade continue to recede. 8x8 is aligned with how the market is evolving.
Enterprises are shifting away from fixed-seat licenses and towards usage-based intelligent platforms. They are prioritizing solutions that are flexible, AI-enabled, and easy to integrate across their stack. Metrigy research really tells the story. Over 50% of CX leaders now prefer consumption-based pricing. Average handle times in live contact centers are increasing because automation is deflecting simpler requests, allowing agents to focus on higher-value conversations like upsells and account reviews. More than 50% of companies are using multiple AI tools, and over 70% expect to expand their usage in the coming year. Despite macro pressures, only 17% of enterprises plan to reduce customer engagement budgets. It is clear customer experience is undergoing a foundational shift. Enterprises are moving towards intelligent engagement models that combine AI-driven self-service with seamless human interaction, balancing scale and efficiency with trust and empathy. Change at this scale does not happen quietly.
Legacy vendors are responding with aggressive pricing and long-term lock-ins, trying to slow the pace of change and protect their installed base. That resistance introduces complexity even as the direction of travel is clear. For us, the opportunity is significant, and we are already aligned with where we believe the market is headed. Our rapid growth in 8x8 CPaaS Solutions reflects that alignment, as more customers tap into programmable voice, video, digital messaging, authentication, and AI-enabled workflows. At the same time, our UCaaS and CCaaS offerings continue to evolve, supporting more integrated, flexible deployments. Together, these trends signal a clear shift in how organizations engage, and we are building our platform to meet those needs. That said, this transition brings trade-offs: a different financial profile with higher growth but lower gross margins. It is a shift that scales and strengthens our competitive position over time.
That position starts with voice. There is a perception out there that voice is in decline. We see the opposite. Voice is still the fastest, most trusted way to resolve complex issues and build relationships. When it is clean, smart, and seamlessly integrated with AI, it becomes transformative. Voice is the primary way humans will communicate with AI, and our world-class voice infrastructure is an asset. This is where our expertise runs deep. Decades of experience in voice, global reach, clean audio, real-time transcription, multilingual accuracy, and intelligent routing. These are not easy things to replicate. As AI rewires customer experience, voice is becoming foundational again. We are uniquely positioned to lead because we are a modern business communications company. Let's talk about how we are delivering that today.
In Q1, consumption-based revenue, primarily 8x8 CPaaS Solutions, but also usage related to our UCaaS and CCaaS subscriptions, grew more than 30% year-over-year. It was not just about volume. We saw growth in new use cases, new channels, and more diverse engagement models. We are moving beyond SMS into programmable voice, alerts, authentication, and AI-driven workflows, and we are seeing real customer success stories. A UK-based utility used video in the contact center and 8x8 CPaaS messaging to reduce on-site troubleshooting visits by 40%. That freed up their engineers to focus on more strategic work and saved them a meaningful amount of money. A Melbourne-based leader in hospitality technology started with a simple SMS implementation back in 2023. Today, they have expanded to include WhatsApp, Fiverr, programmable voice, and authentication. We just added dScope, our identity and access management solution, to their footprint.
This is the power of our land and expand strategy. A Fortune 500 U.S. specialty retailer is running an RCS pilot integrated out of the box with 8x8's contact center. Initial use cases include order and delivery updates and appointment reminders with suggested replies, SMS fallback, and seamless agent handoff aimed at improving CSAT. We are continuing to see strength in Microsoft Teams environments. Sales of 8x8 Voice for Teams licenses grew more than 30% year-over-year again this quarter. We are now recognized as a top five Operator Connect partner worldwide by country reach, which gives us strong visibility in that ecosystem. Here's another great example of what that looks like in practice. A professional membership organization in the U.K. supporting thousands of engineers and technologists needed to unify voice, contact center, and CRM within Microsoft Teams.
With 8x8, they brought it all together into a single experience, streamlining agent workflows and improving service response times. These wins aren't isolated. The momentum is clear. Adoption of our intelligent customer assistant rose 75% year-over-year. Voice interactions grew more than 7x year-over-year, representing more than three quarters of all AI interactions this quarter. 8x8 communication API messaging interactions, such as WhatsApp, RCS, Viber, and Line, increased more than 200% year-over-year and more than 50% quarter on quarter. We're innovating rapidly, but more importantly, our customers are scaling with us. Let's shift gears a bit and talk about go-to-market. We're evolving in how we show up. We've moved from SKU-based selling to outcome-based selling.
We lead with solutions like 8x8 BallotIt, our government voting information solution, enhanced security using dScope and messaging, After Sale Assist, our automated post-sales self-service solution for retailers, not a features list. We are investing in customer success. We know customers with active CSMs have a higher NPS score and gross retention above 90%. That's why we're doubling down on high-touch support and AI-powered tools that help our customers unlock more value from the platform. We are also improving how we qualify and target accounts, focusing on those where our platform is the clearest fit and long-term upside. This approach is working. We closed our first ever seven-product customer. Amazing. Revenue from customers using three or more products now accounts for about one-third of our annual subscription revenue. Every single one of our top 10 new logo wins this quarter included multiple solutions.
One example that really illustrates this evolution: a public university in the Western United States ran an RFP for a contact center with more than 15 vendors, including all of the major players. Instead of a generic pitch, we built interactive proposals using AI to personalize each use case for each department and aligned our solutions directly to their goals. They chose 8x8 for their contact center and told us our customer-first approach sealed the deal. Another example: a global electrical systems company had been running a hybrid setup with us for UC and a third-party contact center provider. Over time, friction around analytics and reporting led them to standardize on 8x8 across the board. They needed to simplify operations with a consistent, scalable platform, and we delivered. Our channel partners continue to be a force multiplier as we make this transformation.
Our largest U.K. based partner increased bookings by more than 100% year-over-year this quarter. That was a result of closer collaboration, co-selling from day one, and better alignment with our platform strategy. Now let me turn to where we're headed. As we look forward, our product roadmap is focused on continuing to enhance our platform with features and capabilities that add value and improve customer outcomes. That includes AI-enabled tools, but it also includes ongoing work to make the platform easier to use with a modern, intuitive interface, advanced data analytics that give our customers real-time visibility and actionable insights, and orchestration across bots, agents, and CX tools to create seamless experiences. We're investing in both internally developed innovations and deeper native integrations with technology partners from our ecosystem.
Key areas of focus include predictive customer journey orchestration, real-time sentiment analysis with automated escalation, and AI orchestration using internal and external tools, AI summarization across the platform, and others. These innovations will help differentiate our platform in competitive evaluations and, more importantly, they're grounded in real customer needs. We're also expanding internationally with a focus on industries undergoing transformation, like retail, healthcare, and government, where our compliance posture, self-service capabilities, and global infrastructure are real advantages. We're wrapping up a key chapter in our transformation. We remain on track to fully sunset the fuse platform by fiscal year end. That eliminates complexity, unlocks margin leverage, and frees up resources to focus on growth. Already, the upgraded fuse cohort delivered 94% gross retention and over 100% net revenue retention in Q1. Here is the bottom line: the foundations are strong, the strategy is clear, and execution is accelerating.
With our foundational expertise in voice, a capability many underestimate, we have a lasting edge as customer engagement enters a smarter, more connected era. To the 8x8 team, your resilience has made this return to growth possible. To our customers and partners, thank you for your trust and collaboration that guides us every day. To our shareholders, thank you for believing in our long-term vision. With that, I hand it over to Kevin to take you through more financial details.