Communications platform-as-a-service company Bandwidth (NASDAQ: BAND) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 3.7% year on year to $180 million. On the other hand, next quarter’s revenue guidance of $190 million was less impressive, coming in 1.1% below analysts’ estimates. Its non-GAAP profit of $0.38 per share was 14% above analysts’ consensus estimates.
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Bandwidth (BAND) Q2 CY2025 Highlights:
- Revenue: $180 million vs analyst estimates of $178.9 million (3.7% year-on-year growth, 0.6% beat)
- Adjusted EPS: $0.38 vs analyst estimates of $0.33 (14% beat)
- Adjusted EBITDA: $21.89 million vs analyst estimates of $18.91 million (12.2% margin, 15.8% beat)
- The company reconfirmed its revenue guidance for the full year of $752.5 million at the midpoint
- EBITDA guidance for the full year is $88.5 million at the midpoint, in line with analyst expectations
- Operating Margin: -2.1%, up from -3.5% in the same quarter last year
- Free Cash Flow was $25.63 million, up from -$13.3 million in the previous quarter
- Market Capitalization: $482.5 million
Company Overview
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ:BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Bandwidth grew its sales at a 13.1% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Bandwidth reported modest year-on-year revenue growth of 3.7% but beat Wall Street’s estimates by 0.6%. Company management is currently guiding for a 2% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products and services will see some demand headwinds.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Bandwidth is extremely efficient at acquiring new customers, and its CAC payback period checked in at 13.1 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 Q2 Results
We were impressed by how significantly Bandwidth blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. On the other hand, its revenue and EBITDA guidance for next quarter slightly missed. Overall, this quarter could have been better. The stock traded down 1.2% to $16.05 immediately following the results.
Bandwidth’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.