AudioCodes Q3 2026 Earnings Call Transcript

AudioCodes (NASDAQ:AUDC) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://www.webcaster5.com/Webcast/Page/1995/54393

Summary

AudioCodes reported Q3 2026 revenues of $64.1 million, a 4.2% increase from the previous year, with services revenue rising 19.9% and comprising 57.8% of total revenues.

GAAP gross margin was 65.7%, with operating income at $3.4 million and net income at $3.6 million, showing improvement in net income compared to Q3 2025.

The company maintained its 2026 revenue guidance of $251 million to $256 million and a non-GAAP EPS target of $0.60 to $0.75.

Strategically, AudioCodes focuses on connectivity for UCaaS and CCaaS, and Voice AI, with significant growth in annual recurring revenues from these segments.

Voice AI business grew 40-50% year over year, supporting the target of $25 million in 2026 and $50 million by 2028.

The Microsoft Teams business represents a substantial portion of revenue, with ongoing growth and new opportunities in the pipeline.

AudioCodes continues to invest in intelligent voice solutions, leveraging trends in GenAI and conversational AI to enhance enterprise communication.

Operational highlights include strong growth in Live Managed Services and Voice AI applications, with notable contract wins in the VoiceAI Connect and Voca CIC segments.

Full Transcript

OPERATOR (Moderator)

Greetings, and welcome to the AudioCodes third quarter 2026 earnings conference call. At this time, all participants are in listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Itamar Rosen, Chief Legal Officer at AudioCodes.

Sir, please go ahead.

Itamar Rosen (Chief Legal Officer and Company Secretary)

Thank you, Operator. Hosting the call today are Shabtai Adlersberg, President and Chief Executive Officer, and Niran Baruch, Vice President of Finance and Chief Financial Officer. Before we begin, I’d like to remind you that the information provided during this call may contain forward-looking statements relating to AudioCodes’ business outlook, future economic performance, product introductions, plans and objectives related thereto, and statements concerning assumptions made or expectations as to any future events, conditions, performance, or other matters, as the term is defined under U.S. federal securities laws. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those stated in such statements.

These risks, uncertainties, and factors include, but are not limited to, the effect of global economic conditions in general and conditions in AudioCodes’ industry and target markets in particular, including governmental undertakings to address such conditions; shifts in supply and demand; market acceptance of new products and the demand for existing products; the impact of competitive products and pricing on AudioCodes and its customers, products, and markets; timely product and technology development and upgrades; the advent of artificial intelligence and the ability to manage changes in market conditions and evolving regulatory regimes as applicable; possible need for additional financing; the ability to satisfy covenants in AudioCodes’ financing agreements; possible impacts and disruptions from AudioCodes’ acquisitions, including the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes’ business; possible adverse impacts attributable to any pandemic or other public health crisis on our business and results of operations; the effect of the current and any future hostilities involving Israel, including in the regions in which we or our counterparties operate, which may affect our operations and may limit our ability to produce and sell our solutions; any disruption in our operations by the obligations of our personnel to perform military service as a result of current or future military actions involving Israel; and any other factors described in AudioCodes’ filings made with the U.S. Securities and Exchange Commission from time to time. AudioCodes assumes no obligation to update the information.

In addition, during the call, AudioCodes will refer to non-GAAP net income and net income per share. AudioCodes has provided a full reconciliation of the non-GAAP net income and net income per share to its net income and net income per share, according to GAAP, in the press release that is posted on its website. Before I turn the call over to management, I would like to remind everyone that this call is being recorded. An archived webcast will be made available on the Investor Relations section of the company’s website at the conclusion of the call. With all that said, I would like to turn the call over to Shabtai. Shabtai, please go ahead.

Shabtai Adlersberg (Chief Executive Officer)

Thank you, Itamar. Good morning and good afternoon, everybody. I would like to welcome all to our third quarter 2026 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of AudioCodes. Niran will start off by presenting a financial overview of the quarter. I will then review the business highlights and summary for the quarter and discuss trends and developments in our business and industry. We will then turn it into the Q&A session.

Niran Baruch (Chief Financial Officer)

Thank you, Shabtai. Before I start my formal remarks, I would like to remind everyone that in conjunction with our earnings release this morning, we will post shortly on our Investor Relations website an earnings supplemental deck. On today’s call, we will be referring to both GAAP and non-GAAP financial results. The earnings press release that we issued earlier this morning contains a reconciliation of the supplemental non-GAAP financial information that I will be discussing on this call.

Revenues for the third quarter were $64.1 million, an increase of 4.2% over the $61.5 million reported in the third quarter of last year. Services revenues for the third quarter were $37.1 million, an increase of 19.9% over the year-ago period. Services revenues in the third quarter accounted for 57.8% of total revenues. Revenue by geography was: North America 47%, EMEA 34%, Asia Pacific 16%, and Central and Latin America 3%. Our top 15 customers represented an aggregate of 56% of our revenues in the third quarter, of which 35% was attributed to our 10 largest distributors.

GAAP results are as follows. Gross margin for the quarter was 65.7%, compared to 65.5% in Q3 2025. Operating income for the third quarter was $3.4 million, or 5.3% of revenues, compared to operating income of $4.1 million, or 6.6% of revenues in Q3 2025. Net income for the quarter was $3.6 million, or $0.15 per diluted share, compared to net income of $2.7 million, or $0.10 per diluted share for Q3 2025. Non-GAAP results are as follows. Non-GAAP gross margin for the quarter was 65.8%, compared to 65.8% in Q3 2025. Non-GAAP operating income for the third quarter was $4.8 million, or 7.4% of revenues, compared to $5.8 million, or 9.5% of revenues in Q3 2025. Non-GAAP net income for the third quarter was $4.0 million, or $0.16 per diluted share, compared to $4.9 million, or $0.17 per diluted share in Q3 2025.

At the end of September 2026, cash, cash equivalents, short-term bank deposits, short-term marketable securities, and long-term financial investments totaled $47.1 million. Net cash provided by operating activities was $4.1 million for the third quarter of 2026. Days sales outstanding as of September 30, 2026 were 109 days. On August 4, 2026, we declared a semiannual cash dividend of $0.20 per share. The aggregate amount of the dividend was approximately $4.8 million. In September 2026, we received court approval in Israel to purchase up to an aggregate amount of $30 million of our ordinary shares. The court approval also permits us to declare a dividend out of any part of this amount. The approval is valid through March 9, 2027. During the quarter, we acquired $1.5 million of our ordinary shares for a total consideration of approximately $15.1 million.

Now, to provide an update on our guidance, we reiterate our guidance for revenues for 2026 to be in the range of $251 million to $256 million, and non-GAAP earnings per share of $0.60 to $0.75. I will now turn the call over to Shabtai.

Shabtai Adlersberg (Chief Executive Officer)

Thank you, Niran. Third quarter 2026 delivered solid financial results and healthy operating performance with both core businesses. Business areas moving forward: connectivity for UCaaS and CCaaS is an established, profitable, market-leading activity. Voice AI is a younger business, started back in 2018, continues to expand, and is projected to become a major growth driver over the coming years. Two primary growth engines continue to propel revenue: Live Managed Services and Voice AI applications aimed at the emerging intelligent voice enterprise.

By the end of Q3 2026, they jointly represented $87 million in annual recurring revenues, a 16% increase from the prior year, which highlights how much high-quality recurring revenue now contributes to the business model. Over the last three years, annual recurring revenue has expanded by almost 90%, providing a solid base for further growth. Results from both primary businesses matched expectations. Connectivity held its leading position in the UCaaS and CCaaS market, and Voice AI kept growing at 40% to 50% year over year. As a result, the company remains on course for its stated Voice AI revenue target of $25 million in 2026 and its goal of $50 million by 2028.

Now to some of the financial highlights. Core year-over-year revenue growth picked up to 4.2%. Over 90% of revenue came from the enterprise segment, with the Microsoft Teams Phone business expanding 4%. Connectivity covering the SBC, gateways, and CPE business lines has kept its revenue steady. The SBC business line has had a good year so far. Revenue is up 8.2% year to date versus the first three quarters of 2025, and full-year revenue is on track to exceed $135 million, which would set a record above the prior high of $131 million back in 2024.

Among gateway sales, third quarter ’26 was the best quarter of the year to date, and the full year is projected to roughly $50 million. 2026 will mark a second consecutive year of stability and modest growth following the gateway revenue decline of 2023 and 2024. Service revenue rose 19.8% year over year and now makes up about 58% of total revenues. Headcount stood at 992 full-time employees at the close of the third quarter, nine fewer positions than in the prior quarter.

Operating activities generated $4.1 million in net cash during the quarter. All those represent great financial performance in the third quarter. So, to business strategy. What is driving our new growth story? What gives us the confidence that our strategic direction is the right one, and that we are well positioned to capitalize on the opportunities ahead? Several durable industry trends underpin the growth strategy, reshaping enterprise communication through the adoption of new intelligent voice technologies. Central to this shift is the fast growth of GenAI, which is altering how people engage with computers, machines, and intelligent systems.

Voice is quickly becoming one of the most natural, intuitive, and capable interfaces linking people and machines. Advances in speech recognition, natural language processing and understanding, and real-time conversational AI make interactions with intelligent systems feel increasingly human. These advances also carry Voice AI beyond basic human–machine interaction. They open the way to intelligent automation of conversations, communications, and business workflows throughout the enterprise.

Taken together, these developments strengthen the view that intelligent voice for the enterprise is a major growth opportunity, and they underline the decision to speed up investment in intelligent voice solutions for the enterprise. AudioCodes has invested in the UCaaS world for more than 25 years now, which places us in a strong position to pursue this opportunity: a customer base that has grown over several decades in voice communication to thousands of accounts for both voice communication infrastructure, together with longstanding leadership in voice systems and solutions, supports the company’s ability to lead this space.

Now let’s move to some of the actual business lines. Let’s talk first about Microsoft. Microsoft is practically delivering close to 66% of our overall business. Third quarter 2026 revenue came to $43 million, up 4% year over year. Over the first nine months of 2026, revenue from the Microsoft business rose 5.2% year over year to $125 million, which keeps the company on course for its stated full-year revenue goal of above $170 million. Newly created opportunities in the space reached $90 million, a 9.4% increase over the prior year, that points to a healthy demand environment ahead.

Bookings of new contract value linked to Microsoft Teams Phone activity climbed 61% year over year to more than $20 million. The quarter marks the second consecutive record quarter, which is solid evidence of this segment’s potential and our leadership in the space. Momentum built in the third quarter on the opportunity that’s above $10 million that we reported in the previous quarter. After starting at a monthly recurring revenue of only tens of dollars in the second quarter, the forecast is now for an MRR of several hundred thousand by mid-2027.

As reported earlier, the project is expected to contribute several million dollars of product revenue annually over the next three years, on top of the annual gateway sales. The Microsoft Teams Voice ecosystem is healthy. Overall, Teams Phone represents only a small share of the more than 320 million monthly active Teams users, and with voice becoming more central to Microsoft’s enterprise strategy and for the AI-driven Copilot workplace, the long-term outlook for this market looks favorable.

A key component of our sales in the Microsoft space is the Live Platform for Live Teams. Sales of Live Platform made good headway in the third quarter, as the platform serves as the core underlying technology for the Live Teams solution portfolio. Enterprises, service providers, and partners use AudioCodes’ Live Platform, a cloud-based voice service delivery platform, to deploy, manage, and scale enterprise voice communications and AI-powered voice services comprising voice connectivity, centralized management, and automation.

AudioCodes’ Live Platform kept up its strong growth in the third quarter. September monthly recurring revenue came close to half a million, an increase of roughly 35% year over year. A new large customer in Asia Pacific signed in 3Q26 helped push Live Platform services beyond $5.5 million in annualized recurring revenues. This adds to the momentum behind the cloud-based intelligent voice services strategy. Now to the conversational AI business at AudioCodes. The Voice AI growth strategy was carried out successfully in the third quarter, adding one more quarter of growth. Voice AI revenue rose by nearly 50% year over year in the first nine months of 2026 compared to the first nine months of 2025. That result moved the business nearer to its stated annual goal of 50% growth year over year and $25 million in revenue for the full year of 2026.

Strength in Voice AI technologies, combined with a distinctive mix of expertise in telephony, networking, security, management, and orchestration for intelligent voice in business applications across cloud and edge computing, underlines the success in the conversational AI segment. The discussion now moves to business lines within that category in more detail. Let’s begin with VoiceAI Connect. AudioCodes’ VoiceAI Connect technology and solution link enterprise telephony networks with the fast-growing ecosystem of Voice AI business applications. Drawing on AudioCodes’ deep experience in voice communication and SBC technology, VoiceAI Connect lets enterprises and solution providers join existing telephony infrastructure such as the PSTN, SIP trunk, PBX, UCaaS, and WebRTC to advanced conversational AI solutions.

Large enterprise and service provider customers, among them Deutsche Telekom, Vodafone, Rabobank, and others, are planning to build tens of distinct Voice AI agents across their operations. All would be VoiceAI Connect target markets. Connectivity is only one part of the offering. VoiceAI Connect also supplies a flexible orchestration layer that integrates and coordinates best-of-breed AI technologies, including speech-to-text, text-to-speech, large language models, speaker identification and authentication, real-time translation, and voice analytics and recording.

Above these layers sit enterprise applications such as integration with CRMs, contact centers, databases, and business workflows. Now, VoiceAI Connect and Live Hub operations advanced significantly over the course of third quarter ’26. An accelerating pipeline, steady flow of new logos, and substantial expansion with the existing customer base made the momentum broad-based. Invoicing revenues grew by close to 40% in the first nine months of 2026. A 60% increase in bookings was recorded for the first nine months of 2026 versus the prior-year period. The number of new opportunities created was more than 40% higher than in the same period of 2025.

Notable wins with large enterprises in North America and Europe are also worth mentioning, including a major multi-million-dollar and 24-month contract from a very large network operator in North America. What was unique in this quarter is that usually VoiceAI Connect opportunity wins are confidential, usually not allowed to be talked about. But there was one unique announcement that was published in the third quarter. Deutsche Telekom announced that they selected AudioCodes VoiceAI Connect for their AI-powered mobile services.

So in October 2026, Deutsche Telekom announced the deployment of AudioCodes’ VoiceAI Connect to power its new Mobile AI Notes mobile service for business customers, providing automatic recording, transcribing, and summarization for mobile conversations. VoiceAI Connect serves the connectivity and orchestration layer between Deutsche Telekom’s mobile network and Mistral AI, a French company, demonstrating its ability to enable scalable, network-integrated Voice AI services.

This deployment represents an important strategic validation of VoiceAI Connect’s potential as an enabling platform for telecom operators seeking to introduce and monetize a broad-based range of AI-powered voice services. Now to Voca CIC, our AI-first contact center solution for Microsoft Teams. Voca CIC kept up its strong operational momentum during the quarter, fueled by new customer wins in education, financial services, and large enterprises, along with growing adoption of AI capabilities. Revenue in the third quarter grew according to plan. Let me dwell on some unique wins in that quarter. We see deeper traction in education mainly. Another major U.S. higher education institution chose Voca CIC this quarter as part of a project that also covers AudioCodes Live for Microsoft Teams.

The deal additionally covered omnichannel capabilities with Agent Insights, the automated conversation summarization for agents. Dozens of universities and colleges worldwide are now customers, reflecting both the depth and the potential of the education vertical for Voca CIC. Next, let’s talk about financial services. After the Swiss and the Asian banking wins for Voca CIC noted in earlier quarters, a major German insurance company chose Voca CIC this quarter to replace its legacy contact center. That makes three quarters in a row in which a major financial institution has selected Voca CIC.

Then let’s talk about partner-driven wins. Voca CIC is bundled with AudioCodes Live for Microsoft Teams migration projects, and the same approach applies with AT&T and its AT&T Cloud Voice offering for Teams Phone. In the third quarter, that partnership produced a win with a Fortune 500 global enterprise which chose Voca CIC through AT&T.

OPERATOR (Moderator)

Apologies for interrupting. Sorry, Mr. Adlersberg, your line has just gone robotic for a moment. Apologies.

Shabtai Adlersberg (Chief Executive Officer)

Okay, can I continue?

OPERATOR (Moderator)

Yes, sir. If you keep talking, I’ll let you know once it’s cleared up.

Shabtai Adlersberg (Chief Executive Officer)

Fine. Okay, so let’s move on to the next Voice AI area of activity, which is Meeting Insights. Talking about Meeting Insights Cloud Edition, strong momentum carried Meeting Insights Cloud Edition through the quarter as key operating metrics kept growing. Meeting volume climbed 90% year over year. Monthly recurring revenue more than doubled, and the active number of users set new records with 50% year-over-year growth. By the end of the third quarter of 2026, Meeting Insights had become a mature, field-proven cloud platform shaped by years of innovation and customer deployments.

A significant rise in the use of Meeting Insights’ mobile client recording ranked among the main developments of the third quarter. Beginning in the third quarter of 2026, a shift in the go-to-market approach towards specific verticals has noticeably improved the success rate in winning new accounts. Customized, tailored workflow solutions for these verticals formed the basis of the strategy, which keeps gaining traction and is producing meaningful commercial and operational momentum.

Moving to the last business line in the Voice AI business. Moving on to MiaEdge. MiaEdge is our next-generation Meeting Insights on-prem solution, which provides secure meeting analysis and intelligent extraction. Interest in air-gapped solutions, which operate without access to the Internet and/or to cloud services, has been rising in recent years. Secure Meeting Insights and intelligent extraction are what MiaEdge offers, with government and defense use cases as the main target.

Growing worldwide emphasis on data sovereignty has produced comparable needs in verticals such as healthcare and finance. More than 25 accounts were active as of the second quarter, according to our previous reporting. Ten were in production and the rest in pilots and implementation. A new advanced solution launched in the third quarter brought in 11 new customers across defense, healthcare, security, infrastructure, and government in Israel. The quarter saw the first development and deployment in Israel of a real-time translation application for asylum seekers, adopted by the State Population and Immigration Authority.

It provides live translation in intensive interview rooms daily. It is now in full use. Evaluation of this solution is now underway at two comparable European authorities. Other public organizations, including police and further public service entities, are also evaluating the real-time translation application as a way to simplify the typically complex job of serving foreign citizens and visitors in a given country. And with that, I’ve pretty much concluded my presentation. Just to wrap up, operational momentum was good in the third quarter of 2026, driven especially by continued strong growth in two primary engines: the Live family of managed services and Voice AI business applications. Steady gains in recurring revenue, operations, and services keep the company on track to meet its business target for the full year of 2026. And with that, I’ve concluded my presentation, and I’ll open the session for question and answer.

OPERATOR (Moderator)

Thank you, sir. Ladies and gentlemen, at this time we will be conducting our question-and-answer session. If you wish to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star two if you wish to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions. Thank you. We have a question from Joshua Riley with Needham. Your line is live.

Joshua Riley (Analyst)

All right, thanks for taking my questions. Starting off on Voice AI Connect, you’ve positioned it as a vendor-neutral orchestration layer that keeps enterprises from being tied to a single AI vendor. At the same time, Microsoft, Zoom, NICE, and other cloud communication vendors are all bundling their own AI agents into their platforms. In your recent wins and pipeline, how often are customers choosing a best-of-breed, multi-vendor approach versus just using the AI that comes with their phone or contact center platform?

And what’s typically driving that choice?

Shabtai Adlersberg (Chief Executive Officer)

Okay, thank you, Josh. Well, as we all know, Voice AI is making advances at a very fast pace. And actually, we all know that large enterprises prefer a best-of-breed approach, meaning they would like to choose a different LLM that’s adapted to their specific needs, a different speech-to-text, and a few more. So yes, it’s true that traditionally, I would say, you see providers such as Microsoft and others offering a complete set of functionalities.

But when we work with large enterprises, and talking to enterprises that have hundreds of employees, they prefer to work with some of the more advanced frameworks, some of those from Google or from others, and usually the flexibility. Just assume that you’ve been working with an LLM and there’s a new one that comes out more accurate, cheaper; you would like to be able to switch to that new LLM in a matter of simple development. And that is the value that Voice AI Connect offers, as it is providing full flexibility in moving and evolving their solutions with different components that may appear at a very fast pace.

Joshua Riley (Analyst)

Great. On MiaEdge, you’ve described strong interest from government, defense, healthcare, and finance customers that can’t use AI on public clouds. How eager are these regulated customers to adopt AI in closed or air-gapped environments today? And are they moving from pilots to production or still mostly evaluating?

Shabtai Adlersberg (Chief Executive Officer)

Well, actually the need is very kind of urgent, you know, especially when you’re talking about defense applications. They need to move fast because we all understand that use of meeting intelligence and the ability to, you know, transcribe, generate summaries, and a few more applications is ramping very fast. Think about, you know, organizations which are in need to respond to new threats in very fast pace. So yes, I think, usually and substantially different than what we see in networking and telecom, the move is pretty fast.

They test the application fairly fast, respond on what needs to be fixed and/or improved, and then they move very fast to production. And this is an increasing trend today in the world. Everybody kind of starts—well, big organizations, enterprises, and governments feel the need to go completely off the public Internet or clouds. And therefore, talking about organizations in Europe, we know that they are very anxious to be using their own technology and they do not want to go to the cloud.

So it’s a fast-growing trend.

Joshua Riley (Analyst)

Great. Thanks for taking my questions.

Shabtai Adlersberg (Chief Executive Officer)

Sure. You’re most welcome.

OPERATOR (Moderator)

Thank you. If there will be any final questions, please indicate so now by pressing star one on your telephone keypad. Okay. As we have no further questions on the lines at this time, I would like to turn the call back over to Mr. Adlersberg for any closing remarks.

Shabtai Adlersberg (Chief Executive Officer)

Thank you, operator. I would like to thank everyone who attended our conference call today. With continued solid performance in our UCaaS and CCaaS operations and rapid growth in the Voice AI business, we believe we are on track to grow and expand our business in the next coming years. We look forward to your participation in our next public conference call. Thank you all. Have a nice day.

OPERATOR (Moderator)

Thank you. Ladies and gentlemen, this does conclude today’s conference. You may disconnect your lines at this time, and we thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.