8x8 framed Q4 fiscal 2026 as a turning point, delivering a fourth straight quarter of year-over-year revenue growth (total revenue $185.2M, +4.6%; service revenue a record $180.2M, +5%) and its first GAAP-profitable full fiscal year since 2015, with net income up more than 19% for the year. Growth was led by usage-based offerings (CPaaS APIs, digital channels and AI), which grew over 70% year-over-year to ~23% of service revenue from ~14%, though that mix shift pressured gross margin to 64.2%; management stressed it manages to operating income, which reached $19.8M (10.7% margin) above guidance on a 5% year-over-year cut in operating expenses. The balance sheet strengthened materially, with principal debt down ~43% from its $548M peak and cash interest paid down ~51% since FY2024. For fiscal 2027, 8x8 guided conservatively - full-year total revenue of $727M-$747M, operating margin of 9%-10% (~$70M operating income at midpoint), EPS of $0.33-$0.38, and ~$45M-$52M of operating cash flow - citing limited visibility into uncontracted usage revenue and ~40% international exposure. Strategic themes centered on embedding agentic AI (AI Studio, Engage), an open orchestration platform positioned against closed ecosystems, the shift to consumption-based pricing, restarted tuck-in acquisitions (Synthflow AI, Maven Lab, Callroute), and continued deleveraging.
Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for the Fourth 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. In addition to our prepared remarks, we have posted a more detailed letter to shareholders in the quarterly results section of our investor relations website. 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 and 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 reports 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 obligations 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 the 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 investor relations website at investors.8x8.com.
With that, I'll turn the call over to our Chief Executive Officer, Samuel Wilson.
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 a growing momentum across the business. We've 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 of the 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. 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 a 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. It is evident in our numbers. Usage-based revenue, including CPaaS communications APIs, AI solutions, digital channels, 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 accrues 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, 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, extended 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 Synthflow AI expands our capabilities for SMBs and strengthens our position in AI-powered agentic engagement. Maven Lab 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 U.S., an insurance company replaced two competitors with a full UCaaS/CCaaS deployment after evaluating six competing vendors. A healthcare organization operating more than 100 locations implemented an omnichannel engagement solution integrating voice, SMS, web chat, and Salesforce to modernize patient communications. Internationally, a U.K. 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, and 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 expanded 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 and 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 Fuze 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 and 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. With that, let me turn it over to Kevin.
Thanks, Sam. Good afternoon, everyone, and thank you for joining us for our fiscal Q4 2026 earnings call. In addition to our shareholder letter, detailed financial results are available in our press release and on our investor relations website. I'll focus my remarks on a few key highlights. Unless otherwise noted, all figures other than revenue and cash flow are presented on a non-GAAP basis. Q4 was our fourth consecutive quarter of year-over-year revenue growth, capping a fiscal year that returned 8x8 to growth, achieved healthy operating profit, and meaningfully strengthened our balance sheet. We exceeded our guidance ranges for service revenue, total revenue, operating profit, earnings per share, and cash flow from operations. We had another record quarter for service revenue, we have had positive operating profit and cash flow from operations in every quarter for over five years.
Total revenue was $185.2 million, and service revenue was $180.2 million, growing 4.6% and 5% year-over-year respectively. These results reflect a continued strength in our usage-based offerings. Our usage-based offerings, which include our CPaaS communication APIs, digital channels, and AI solutions, set another all-time record and accounted for approximately 23% of service revenue in the quarter, compared to approximately 14% in Q4 2025. Gross profit was approximately $118.9 million, approximately $2 million above the gross profit implied by the midpoint of our Q4 guidance.
Gross margin as a percent of revenue was 64.2%, modestly below Q3 due to the continued mix shift toward our usage-based offerings, which in aggregate carry a lower margin profile, but can add meaningful profit dollars as the business scales. As we have noted in prior quarters, our usage-based offerings can fluctuate, which may introduce some quarter-to-quarter variability in gross margin. We are actively working to expand margins within the usage portfolio, but as that part of the business grows, it does impact the consolidated gross margin percentage. Importantly, we are leaning into where the market is growing and not where the highest gross margin sits today. As we have articulated over the past few years, we manage the business to operating income, and we have consistently demonstrated the ability to offset gross margin mix impacts with disciplined operating expense management.
Operating income came in at $19.8 million, resulting in a 10.7% operating margin, well above the high end of our guidance range and demonstrating our commitment to operating discipline. Operating expenses were favorable to expectations and down 5% year-over-year. For the full fiscal year, total operating expenses declined approximately 3%, reflecting our continued focus on our cost structure. We have meaningfully reduced our debt service cost through significant pay downs of debt principal over the past two years. Trailing 12-month cash interest paid declined approximately 51% from fiscal 2024 to fiscal 2026, from approximately $35.6 million to approximately $17.3 million.
The combination of higher revenue, lower operating expenses, and lower interest expense resulted in net income of $16.6 million and fully diluted EPS of $0.11 per share, $0.03 above the high end of our guidance range. Cash flow from operations was $14.4 million for the quarter, significantly above the high end of our guidance range. The strong Q4 result reflects both operating over performance and favorable timing of collections and payments, and is a reminder that cash flow from operations can vary meaningfully quarter to quarter based on timing. We ended the quarter with $93.3 million in cash and cash equivalents, excluding restricted cash, an increase of approximately $6.4 million sequentially. We ended Q4 2026 with $323.9 million of principal debt outstanding.
In early April, we made a $14.5 million principal payment on the term loan, bringing the principal balance down to approximately $309.4 million as we entered fiscal Q1 2027. This represents a reduction of approximately 43% from the August 2022 peak of $548 million. Turning to guidance, we are providing both first quarter and full year fiscal 2027 guidance. Our outlook reflects continued discipline and a measured view given the broader macro environment as we continue building a more diversified, durable business. We are leaning into where the market is growing fastest while protecting profitability through the operating discipline we have demonstrated quarter after quarter. For fiscal Q1 2027, we are providing the following guidance. Service revenue is expected to be between $175 million and $180 million.
Total revenue is anticipated to be between $180 million and $185 million. We anticipate gross margin between 63.5% and 64.5%, reflecting the ongoing mix shift toward usage-based revenue. We anticipate operating margin between 8.5% and 9.5%. This results in a range for fully diluted non-GAAP earnings per share of $0.08-$0.09 per share based upon approximately 147 million fully diluted shares outstanding. In fiscal Q1, we expect to make cash interest payments of approximately $1.8 million, which reflects the term loan interest payment. The next semi-annual interest payment on our 2028 convertible notes occurs in fiscal Q2. We anticipate cash flow from operations to be between $10 million and $12 million.
For fiscal 2027 full year, we are providing the following guidance. Service revenue is anticipated to be between $707 million and $727 million. Total revenue is anticipated to be between $727 million and $747 million. We anticipate gross margin to be between 62.5% and 63.5%, noting the increasing amount of usage-based revenue in our revenue mix and potential variability in the proportion of usage-based revenue. Full year operating margin is projected between 9% and 10%, translating to non-GAAP operating income of approximately $70 million at the guidance midpoint. We expect fully diluted non-GAAP earnings per share to be in the range of $0.33-$0.38 per share, assuming approximately 150 million average diluted shares outstanding.
For the full year fiscal 2027, we anticipate cash flow from operations of approximately $45 million-$52 million. Our fiscal 2027 cash flow outlook reflects the timing of certain non-recurring items. We expect to make $39.5 million of principal payments on the term loan during fiscal 2027, in line with the loan's amortization schedule. Looking back, fiscal 2026 was a year of meaningful progress on the financial fundamentals of the business. We returned 8x8 to year-over-year revenue growth, expanded our usage-based offerings, and delivered positive operating margins in every quarter, meeting or exceeding our guidance each time. We also significantly reduced our debt and cash interest costs, driving net income growth to over 19% for the year.
The discipline we applied to managing the business gave us the flexibility to invest where the business needed it most while still expanding profitability. Our forward planning reflects continued focus on the same priorities. We view the work ahead as a multi-year journey, and the foundation we built in fiscal 2026 positions us well for what comes next. With that, I will turn the call over for Q&A.