AudioCodes Q1 2025: Conflicting Signals on Operator Connect, CCaaS Demand, and Manufacturing Strategy

Operator Connect trends, CCaaS demand and market opportunity, manufacturing strategy and tariff burden, go-to-market strategy with Cisco, and move of manufacturing out of China are the key contradictions discussed in AudioCodes' latest 2025Q1 earnings call.



Revenue and Service Growth:
- AudioCodes reported revenue of $60.4 million for Q1 2025, an increase of 0.5% over the previous year.
- The growth in services revenue, which was $32.6 million, up 3.4% year-over-year, accounted for 54% of total revenues.
- This growth was attributed to the company's focus on expanding AI-powered voice services and maintaining a strong connectivity business.

Impact of Tariffs and Cost Management:
- The impact of new tariffs on AudioCodes in Q1 2025 was approximately $350,000, with a total cost burden of $3 million to $4 million estimated for the full year.
- The company plans to mitigate this impact by relocating a majority of its manufacturing out of China to other countries within the next three to six months.
- This proactive measure aims to lower the tariff burden significantly, from a potential impact of $10 million to $12 million without action.

Microsoft and Cisco Opportunities:
- AudioCodes' Microsoft Teams business grew 7% year-over-year, with total contract value signed in Q1 reaching $18 million, growth of about 5%.
- The company was selected as one of four enablement partners for Cisco's Cloud Connect Enablement program, with an estimated opportunity of $5 million in the next three years.
- These strategic partnerships and market expansions are expected to expand the potential for connectivity business and contribute to future growth.

Conversational AI and Voice AI Expansion:
- The conversational AI business grew above 10% year-over-year, with a strong pipeline and healthy rate of new wins and bookings.
- The Voice AI Connect solution reported a high number of new logo wins and significant expansions, supporting the company's 2025 target of growing by 30%.
- This growth is attributed to superior SBC and voicebot technologies and increased customer interest in using voice as a natural interface for inbound calls.