Cloud communications provider Bandwidth (NASDAQ: BAND) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 1% year on year to $191.9 million. The company expects the full year’s revenue to be around $753.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.36 per share was 3.2% below analysts’ consensus estimates.
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Bandwidth (BAND) Q3 CY2025 Highlights:
- Revenue: $191.9 million vs analyst estimates of $190 million (1% year-on-year decline, 1% beat)
- Adjusted EPS: $0.36 vs analyst expectations of $0.37 (3.2% miss)
- Adjusted EBITDA: $24.33 million vs analyst estimates of $20.3 million (12.7% margin, 19.9% beat)
- The company slightly lifted its revenue guidance for the full year to $753.5 million at the midpoint from $752.5 million
- EBITDA guidance for the full year is $90.5 million at the midpoint, above analyst estimates of $88.95 million
- Operating Margin: -1%, in line with the same quarter last year
- Free Cash Flow Margin: 6.8%, down from 14.2% in the previous quarter
- Market Capitalization: $505.5 million
Company Overview
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Bandwidth’s sales grew at a decent 21% compounded annual growth rate over the last five years. Its growth was slightly above the average software company and shows its offerings resonate with customers.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Bandwidth’s recent performance shows its demand has slowed as its annualized revenue growth of 12.9% over the last two years was below its five-year trend. 
This quarter, Bandwidth’s revenue fell by 1% year on year to $191.9 million but beat Wall Street’s estimates by 1%.
Looking ahead, sell-side analysts expect revenue to grow 9.1% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Bandwidth is extremely efficient at acquiring new customers, and its CAC payback period checked in at 14.6 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments. 
Key Takeaways from Bandwidth’s Q3 Results
We were impressed by how significantly Bandwidth blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 7.2% to $18 immediately following the results.
Indeed, Bandwidth had a rock-solid quarterly earnings result, but is this stock a good investment here? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
