Key Highlights

  • BAND shares trading down 14.39% today to $45.47
  • Third-quarter Revenue was a record $234 million, up 22% year over year
  • Adjusted EBITDA reached $35 million, up 43%, a 22% margin
  • Free Cash Flow was $33 million, up from $13 million
  • Full-year 2026 revenue guidance is $905 million to $910 million

Shares Fall Even as Third-Quarter Revenue Climbs 22% to a Record

Bandwidth (NASDAQ:BAND) shares are trading down 14.39% today at $45.47, following its third-quarter report this week. Revenue reached a record $234 million, up 22% from $192 million a year earlier. The sources reviewed did not state a specific reason for the drop.

Bandwidth runs a cloud communications platform that provides voice and messaging services to enterprises, and it owns its own U.S. carrier network. The company has been positioning its platform for AI-driven voice traffic.

The prior quarter's report on July 29 also drew a gap-down reaction in shares, according to market data, even though second-quarter revenue of $219.9 million beat estimates and grew 22.2%.

Profit Growth, Margins and Free Cash Flow Strengthen

Adjusted EBITDA rose 43% to $35 million, a 22% margin. GAAP Net Income was $5 million, or $0.13 per diluted share, against a loss of $1 million a year earlier. Non-GAAP Earnings were $0.50 per diluted share, up from $0.36.

Non-GAAP gross Margin improved to 61% from 58%, while GAAP gross margin was 36%. Operating Cash Flow was $38 million, and free cash flow was $33 million versus $13 million a year ago.

At September 30, Bandwidth held $171.3 million in cash and equivalents and $4.5 million in marketable securities, against $310.6 million in convertible senior notes.

Third-quarter non-GAAP net income totaled $20 million. The company's earlier third-quarter earnings guidance had been $0.45 to $0.49 per share, so the $0.50 result sits above that range.

Full-Year Guidance Given, but No Fourth-Quarter Outlook

Bandwidth guided to 2026 revenue of $905 million to $910 million, adjusted EBITDA of $124 million to $125 million and non-GAAP earnings of $1.73 to $1.79 per share. It did not provide fourth-quarter guidance. After $663 million in nine-month revenue, the full-year range implies roughly $242 million to $247 million for the quarter, by simple arithmetic.

Management cited Demand tied to AI agents, a digital bank customer win for its contact center offering, and Salesforce (NYSE:CRM) certifying it as its first international carrier for contact center in more than 25 countries. It also cited four new or expanded customer wins of at least $1 million and expects double-digit cloud communications revenue growth in 2027.

The AI-related demand theme is central to the growth story, as management argues that AI agents acting for businesses and consumers will need reliable voice and text reach.

Valuation Reset and Fourth-Quarter Delivery Are the Next Tests for BAND

Before this decline, the company had a market cap near $1.69 billion in early October, when shares were around $52. The stock carried a consensus hold rating and an average price target of $59.83 at that time, according to market data.

The next dated item is the fourth-quarter report, which will test whether results land in the range implied by full-year guidance.

Bank of America began coverage in September with a neutral rating and a $60 price target, while the high target in early October was $86, per market data.

Full-year earnings guidance of $1.73 to $1.79 per share assumes about 38.7 million diluted shares.