Ooma's Q2 2026 Earnings Call: Contradictions Emerge on AirDial Growth, Sales Strategy, Partner Revenue Ramp, and 2600Hz Market Potential

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 26, 2025

Financials Results

• Revenue: $66.4M, up 3% YOY
• EPS: $0.23 non-GAAP diluted EPS, compared to $0.15 in the prior year
• Gross Margin: 62%, compared to 62% in the prior year

Guidance:

- Q3 revenue expected at $67.2M–$67.9M; product revenue $5.7M–$6.2M.- Q3 non-GAAP net income $6.0M–$6.4M; EPS $0.22–$0.23; 27.9M diluted shares.- FY26 revenue $267M–$270M (unchanged).- FY26 mix: 91%–92% subscription & services.- FY26 Business subscription/services +5%–6% YOY; Residential -1% to -2% YOY.- FY26 non-GAAP net income raised to $24.5M–$25.0M (includes ~ $0.5M tariffs).- FY26 adjusted EBITDA $28.5M–$29.0M.- FY26 non-GAAP EPS $0.87–$0.89; 28.2M diluted shares.

Business Commentary:

• Revenue Growth and Profitability:
• Ooma, Inc. reported revenue of $66.4 million for Q2, up 3% year-over-year.

• The growth was driven by the expansion of Ooma Business, including AirDial, and improved operating leverage leading to record non-GAAP net income of $6.5 million.

• AirDial Performance and Expansion:

• AirDial more than doubled new bookings year-over-year and secured the largest national retailer with over 3,000 locations.

• The success was attributed to its leadership in the POTS replacement market and strategic partnerships that accelerated sales.

• Product Revenue and Gross Margin:

• Product and other revenue reached $5.2 million, up 15% year-over-year, primarily due to growth in AirDial installations.

• The year-over-year improvement in product and other gross margin was primarily due to consuming higher cost components procured during the pandemic.

• Operating Expenses and Efficiency:

• Total operating expenses were $35.1 million, down year-over-year, with a notable reduction in R&D expenses of 6%.

• Efficiency gains and headcount management were key factors in reducing expenses while maintaining growth and innovation.

• Dividend and Share Repurchase:

• Ooma generated $6.4 million in operating cash flow and $5 million in free cash flow, enabling a share repurchase program of $4.5 million in Q2.
• The company's strong free cash flow generation and strategic use of capital were drivers for shareholder value.

Sentiment Analysis:

• Record adjusted EBITDA of $7.2M (11% margin), up 27% YOY; revenue $66.4M, up 3% YOY; Business subscription and services revenue grew 6% YOY; raised FY26 non-GAAP net income guidance to $24.5M–$25.0M; AirDial bookings more than doubled YOY and won a large national retailer with rollout starting in 2H.

Q&A:

• Question from Michael Joshua Nichols (B. Riley Securities): Is AirDial contributing meaningfully to ARR, and when will you provide more granularity?
  Response: AirDial is now materially contributing to ARR, drove a significant share of 9k Business user adds, and doubled bookings YOY, supporting stronger 2H.

• Question from Michael Joshua Nichols (B. Riley Securities): Update on AirDial partner ramp, including Comcast and CLECs?
  Response: Nearly 35 resellers; two switched from competitors; Comcast orders have begun but ramp is gradual; T-Mobile strongest to date; CLEC starting to scale; expect back-half acceleration.

• Question from Eric Martinuzzi (Lake Street Capital Markets): Are buybacks replacing M&A, or just better use of cash now?
  Response: Buybacks are sensible at current valuation, but the company continues to pursue small, user-accretive tuck-in M&A without overpaying.

• Question from Eric Martinuzzi (Lake Street Capital Markets): Is the 5%–6% Business growth outlook conservative due to churn?
  Response: No incremental churn expected; variability reflects customer-driven timing of AirDial installations, prompting conservative ranges.

• Question from Kincaid LaCorte (Citizens): What won the large national retailer and when will revenue show?
  Response: Won after extensive trials with T-Mobile’s support; rollout has started with installs expected through 2H; pace uncertain.

• Question from Kincaid LaCorte (Citizens): What revenue per location should we model?
  Response: Use AirDial ARPU of about $25 per line per month; no customer-specific disclosures.

• Question from Matthew Joseph Harrigan (The Benchmark Company): What is 2600Hz’s growth trajectory and monetization plan?
  Response: 2025 focus is adding Ooma IP to deliver turnkey apps while keeping API flexibility; a handful of wins (incl. ServiceTitan); more meaningful growth expected next year.

• Question from Matthew Joseph Harrigan (The Benchmark Company): Any plans to expand AirDial beyond North America?
  Response: Only with a lead carrier or similar anchor customer; existing Ooma services in 32 countries provide a head start, but focus remains North America.

• Question from Alinda Li (William Blair): What drove NRR to 100% and what’s the outlook?
  Response: Churn improved after lapping IWG impact; expect NRR to remain around 99%–100%.

• Question from Alinda Li (William Blair): Why raise net income guidance while keeping revenue unchanged?
  Response: U.S. tax-law benefit plus operating efficiencies—especially R&D leverage and disciplined S&M—lift profitability.

• Question from Kevin for Brian Kinstlinger (Alliance Global Partners): Trends with your largest UCaaS customer over the next 12–18 months?
  Response: IWG/Regus rollout is complete; expect stability rather than material growth.