Key Highlights

  • Revenue of USD 234.02 million rose 22% year over year, edging past the consensus estimate of USD 233.15 million.
  • Non GAAP EPS of USD 0.50 topped the consensus estimate of USD 0.47, while GAAP EPS was USD 0.13.
  • Adjusted EBITDA rose 43% to USD 35 million at a 22% margin, and free cash flow was USD 33 million.
  • Revenue guidance narrowed to USD 905 million to USD 910 million, with non GAAP EPS at USD 1.73 to 1.79.

Bandwidth Inc. (NASDAQ:BAND) reported third quarter 2026 revenue of USD 234.02 million, up 22% from USD 191.90 million a year earlier and slightly above the consensus estimate of USD 233.15 million. Non GAAP earnings per diluted share were USD 0.50 against a consensus estimate of USD 0.47, and GAAP net income was USD 5.2 million, or USD 0.13 per diluted share, compared with a net loss of USD 1.2 million a year earlier.

Chief Executive Officer David Morken called it a record revenue quarter and said the fourth quarter marks the turning point for growth rates, with momentum building through 2027 on the strength of 11 deals above USD 1 million of annual contract value signed since the start of the year.

Surcharges Lift Revenue While Margins Split

Cloud communications revenue, which excludes messaging surcharges, rose 12% to USD 158.5 million, while messaging surcharge revenue jumped 51% to USD 75.6 million. Programmable Messaging revenue grew 26% to USD 33 million, including about USD 3 million from political campaign activity. Voice revenue of USD 125 million rose 9%, with Enterprise Voice up 15%. Software services revenue reached USD 7 million, up 68%, and exited the quarter at an annualized rate above USD 30 million.

The surcharge mix pulled GAAP gross margin down 200 basis points to 36%, while non GAAP gross margin improved nearly 300 basis points to 60.6%. Non GAAP gross profit of USD 96 million grew 18%. The reported net retention rate was 113%, and average annual revenue per customer reached a record USD 273,000.

Guidance and Balance Sheet Moves

The Chief Financial Officer said full year 2026 guidance was narrowed, with total revenue of USD 905 million to USD 910 million, cloud communications revenue of USD 624 million to USD 626 million, and adjusted EBITDA of USD 124 million to USD 125 million. Political campaign revenue in the outlook was trimmed by USD 3 million to USD 10 million, while commercial cloud communications revenue was lifted by USD 4 million. Modeling inputs include capital expenditures of USD 24 million to USD 26 million, depreciation of USD 39 million to USD 41 million and an adjusted tax rate of 20% to 22%.

Cash and marketable securities stood at USD 176 million. The company repurchased 225,000 shares for USD 10 million at an average price of USD 44.20 and retired USD 21 million of principal on its 2028 convertible notes, leaving about USD 7 million outstanding. Net leverage fell to 1.3x from 1.6x in the prior quarter, and the revolving credit facility was upsized to USD 200 million with maturity extended to October 26, 2031, with nothing drawn.

Signposts for the Fourth Quarter and 2027

Several dated and measurable items frame the next report. Management targets double-digit cloud communications revenue growth in fiscal 2027 even as political messaging revenue rolls off, against the 12% growth posted this quarter. The full year political revenue assumption stands at USD 10 million, with about USD 3 million earned in the third quarter, and the Salesforce collaboration, now extended to more than 25 countries, is not part of the 2026 outlook.

Other markers include software services ARR, which stood above USD 30 million, the count of USD 1 million plus deals at 11, and net leverage of 1.3x. The company holds its Reverb 2026 customer and product event in Raleigh on November 10.