Bandwidth (NASDAQ: BAND) reported record third-quarter revenue and adjusted EBITDA, supported by growth across all three cloud communications customer categories and wider margins. The company also raised the midpoints of its 2026 guidance across revenue, adjusted EBITDA and non-GAAP earnings per share, while forecasting double-digit cloud communications revenue growth in 2027.
Revenue for the quarter ended September 30 rose 22% year over year to $234.0 million. The total included an $11 million benefit from political campaign activity. Cloud communications revenue, which excludes pass-through messaging surcharges, increased 12% to $158.5 million and included a $3 million political campaign contribution. Messaging surcharge revenue was $75.6 million.
GAAP net income was $5.2 million, compared with a $1.2 million loss a year earlier. GAAP diluted earnings were $0.13 per share. Non-GAAP net income climbed 73% to $19.9 million, while non-GAAP diluted earnings per share increased to $0.50 from $0.36.
Margins and cash generation strengthen
Adjusted EBITDA rose 43% to $34.8 million, or approximately $35 million, from $24.3 million in the prior-year period. Adjusted EBITDA margin, calculated against cloud communications revenue, expanded to a record 22% from 17%.
Non-GAAP gross profit increased 18% to $96.1 million. Non-GAAP gross margin reached 60.6%, reported on a rounded basis as 61%, compared with 58% a year earlier. That measure also uses cloud communications revenue rather than total revenue as its denominator.
Free cash flow increased to $33.0 million from $13.1 million, representing 151% year-over-year growth and a 21% margin against cloud communications revenue. For the first nine months of 2026, free cash flow totaled $56 million, up 120% from $25 million in the comparable 2025 period.
Growth spans customer categories
Enterprise Voice, which accounted for 69% of cloud communications revenue, grew 15% year over year. Global Voice Plans represented 10% and increased 8%, while Programmable Messaging contributed 21% and grew 26%, including the $3 million political campaign benefit.
Average annual customer revenue advanced 18% to $273,000. Adjusted net retention, which excludes political campaign revenue from the relevant periods, was 114%, up from 107% a year earlier. Bandwidth also reported customer name retention above 99% and a median tenure of 13 years among its 20 largest customers.
The company signed four strategic customer agreements worth at least $1 million during the quarter. The wins covered financial services, enterprise communications, consumer technology and global communications, with customers selecting Bandwidth’s owned network, voice infrastructure, application programming interfaces and routing capabilities. Management said the deployments reflected demand for communications infrastructure capable of supporting super intelligence, or SI, applications.
2026 outlook raised
Bandwidth now expects fourth-quarter revenue of $242 million to $247 million, adjusted EBITDA of $36 million to $37 million, and non-GAAP earnings of $0.52 to $0.58 per share.
For all of 2026, the company projects revenue of $905 million to $910 million and adjusted EBITDA of $124 million to $125 million. The respective guidance midpoints of about $908 million and $125 million imply year-over-year growth of 20% and 34%. Full-year non-GAAP earnings are expected to range from $1.73 to $1.79 per share.
The outlook assumes an adjusted tax rate of 20% to 22%, approximately 39 million average diluted shares and capital expenditures of $24 million to $26 million. Bandwidth did not reconcile its adjusted EBITDA and non-GAAP earnings guidance to the corresponding GAAP measures because stock-based compensation cannot be reasonably calculated or predicted.
Bandwidth also repurchased $21 million of convertible notes due in 2028 at a discount and spent $10 million on share repurchases during the quarter, taking year-to-date share buybacks to $30 million.
The outlook remains subject to risks including competition, macroeconomic conditions, the company’s ability to sustain growth and manage expansion, cybersecurity threats, regulatory compliance and its ability to use SI successfully in its operations and services.
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