8x8 (EGHT): Loss Reduction Continues, but Persistent Unprofitability Challenges Value Narrative

8x8 (EGHT) remains unprofitable, but over the past five years, the company has steadily reduced its losses by 34.4% per year. Its valuation stands out in the crowded software space, trading at a Price-To-Sales Ratio of just 0.4x. This figure is significantly below both the peer average of 15.9x and the US software industry average of 5.1x. While this low multiple may attract value-oriented investors, the share price has displayed notable volatility recently, and the lack of accelerating profitability continues to shape how investors interpret the results.

See our full analysis for 8x8.

Next, we will see how these reported figures compare with the broader narrative, examining where the numbers reinforce expectations and where they might challenge the consensus view.

See what the community is saying about 8x8

Margins Feeling Pressure as Usage-Based Revenue Grows

• Gross margin dropped to 67.8% in Q1, with management guiding to further contraction for the year as usage-based (CPaaS) revenue makes up 17% of total service revenue. This provides top-line visibility but at a lower gross margin.
• Consensus narrative notes that while expanding usage-based revenue supports scalable, recurring growth, this margin compression highlights the tension between sustainable growth and actual earnings power.
  • Consensus view flags that compressing margins could cap future cash flow, even as the revenue mix signals long-term stability.
  • What is surprising is that operational streamlining and international expansion have yet to offset this margin drag in analyst forecasts. This keeps predicted profitability out of reach for at least three more years.

Revenue Projected to Dip Despite Market Tailwinds

• Analysts expect annual revenue to decline by 0.1% for the next three years, diverging from bullish talk of industry tailwinds and market share gains from cloud and AI integration.
• Consensus narrative underlines that even with digital transformation increasing demand, intense competition and customer concentration create enough headwinds that top-line contraction is the base case.
  • Increasing churn in the legacy Fuze business and limited AI product differentiation are identified as factors preventing meaningful upside from these secular market shifts.
  • Average analyst price targets now require a strong leap of faith on both revenue stability and margin recovery, which are not supported by current management guidance or analyst forecasts.

Trading Below Peers but Above DCF Fair Value

• The share price is $2.20, well below the peer average Price-To-Sales Ratio of 15.9x and the software industry average of 5.1x, but modestly above the DCF fair value estimate of $2.20. This raises questions for value investors.
• Consensus narrative explains that while the discounted valuation appears attractive on the surface, the persistent gap between current price and DCF fair value ($2.20) reinforces a cautious outlook.
  • Despite a nominal 16% gap to analyst targets (using allowed target of $2.50), the price lag and lack of profitability acceleration tempers enthusiasm for a re-rating.
  • Value is a draw, but consensus warns the core investment case hinges on evidence that deeper margin or revenue issues will materially improve.

If you want the full detail on how the company's fundamentals stack up to market consensus and divergent analyst narratives, check the complete breakdown in the consensus narrative for a more nuanced view. 📊 Read the full 8x8 Consensus Narrative.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for 8x8 on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your 8x8 research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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Revenue and margins are both under pressure, with analysts expecting top-line declines and no clear path to sustained profitability in the near term.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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