Bandwidth Inc.
For the period ended Sep 30, 2026. Filed Oct 29, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Oct 29, 2026
BAND$40.34+6.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-07-29.
0001514416-26-000057
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-29.
0001514416-26-000082
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 150 previous paragraphs and 149 current paragraphs.
91 unchanged; 47 reworded; 10 added; 10 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Retirement of 2026 Convertible Notes and Repurchase of 2028 Convertible Notes
Current report
During August 2026, we repurchased approximately $21 million aggregate principal amount of the 2028 Convertible Notes in open market transactions (the “Open Market Repurchases”) for an aggregate cash price of approximately $20 million.
Current report
For the three months ended September 30, 2026 and 2025, our effective tax rate was (56.9)% and 64.8%, respectively. For the three months ended September 30, 2026 and 2025, our income tax benefit was $2 million in each period.
Current report
For the nine months ended September 30, 2026 and 2025, our effective tax rate was (112.4)% and 18.3%, respectively. For the nine months ended September 30, 2026 and 2025, our income tax benefit was $6 million and $2 million, respectively. The increase in income tax benefit is primarily due to higher pre-tax operating losses outside the U.S. in jurisdictions without a valuation allowance. These increased losses were primarily driven by higher amortization of acquired intangible assets resulting from the first-quarter 2026 change in the remaining useful life of the developed technology acquired in 2020. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to these condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We do not maintain a valuation allowance outside of the U.S. because reversal of existing deferred tax liabilities support realization of the related deferred tax assets.
Current report
For the three months ended September 30, 2026, total cost of revenue increased by$31 million compared with the same period in 2025. The increase was driven by a$25 million increase in pass-through messaging surcharges, primarily due to higher messaging activity, and a $3 million increase in amortization of acquired intangible assets, from $2 million to $5 million. The amortization increase reflects the first-quarter 2026 change in the remaining estimated useful life of the developed technology acquired in 2020, from five years to two years, due to the accelerated migration of customers to our Universal Platform. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. The combination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of$11 million, or 15% from the same period in 2025, driven byhigher cloud communications revenue.
Current report
Income Tax Benefit
Current report
Comparison of the nine months ended September 30, 2026 and 2025
Current report
For the nine months ended September 30, 2026, research and development expenses increased by$17 million, or 18%, compared with the same period in 2025, from higher headcount expenses driven by the expansion of our research and development team.
Current report
Income Tax Benefit
Current report
For the nine months ended September 30, 2026, we recognized an income tax benefit of $6 million, an increase of $4 million compared with the same period in 2025. The resulting effective tax rate for the nine months ended September 30, 2026 was (112.4)%, compared with 18.3% for the nine months ended September 30, 2025. The increase in income tax benefit is primarily due to higher pre-tax operating losses outside the U.S. in jurisdictions without a valuation allowance. These increased losses were primarily driven by higher amortization of acquired intangible assets resulting from the first-quarter 2026 change in the remaining useful life of the developed technology acquired in 2020. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to these condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We do not maintain a valuation allowance outside of the U.S. because reversal of existing deferred tax liabilities support realization of the related deferred tax assets.
Removed paragraphs (10)
Previous report
Repurchase of 2028 Convertible Notes
Previous report
For the three months ended June 30, 2026 and 2025, our effective tax rate was 693.8% and (2.8)%, respectively. For the three months ended June 30, 2026 and 2025, our income tax benefit was $3 million and our income tax expense was less than $1 million, respectively. The increase in tax benefit is primarily due to favorable U.S. federal and state tax law changes as a result of the One Big Beautiful Bill Act (“OBBBA”).
Previous report
For the six months ended June 30, 2026 and 2025, our effective tax rate was (197.0)% and (0.8)%, respectively. For the six months ended June 30, 2026 and 2025, our income tax benefit was $4 million and our income tax expense was less than $1 million, respectively. The increase in tax benefit is primarily due to favorable U.S. federal and state tax law changes as a result of the OBBBA.
Previous report
We continue to expect recurring changes to the valuation allowance as deferred tax assets within the U.S. increase or decrease in subsequent periods. We will maintain a valuation allowance against all U.S. federal and state deferred tax assets until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized.
Previous report
Comparison of the six months ended June 30, 2026 and 2025
Previous report
For the six months ended June 30, 2026, research and development expenses increased by$13 million, or 22%, compared with the same period in 2025. Our continued investment in evolving our network infrastructure was the key driver behind this increase.
Previous report
Income Tax Benefit (Provision)
Previous report
For the six months ended June 30, 2026, we recognized an income tax benefit of $4 million, an increase of $4 million compared with the same period in 2025. The resulting effective tax rate for the six months ended June 30, 2026 was (197.0)%, compared with (0.8)% for the six months ended June 30, 2025. The increase in income tax benefit was primarily due to favorable U.S. federal and state tax law changes as a result of the OBBBA.
Previous report
We continue to expect recurring changes to the valuation allowance as deferred tax assets within the U.S. increase or decrease in subsequent periods. We will maintain a valuation allowance against all U.S. federal and state deferred tax assets until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized.
Previous report
•income tax (benefit) provision;
Reworded paragraphs (47)
Previous wording
A global communications transformation is underway, and we believe Bandwidth is at the center. Our mission is to develop and deliver the power to communicate. We enable innovative organizations—from startup app developers to the world’s largest enterprises—to engage their end-users and deliver exceptional experiences everywhere people live, learn, work, and play. Backed by the Bandwidth Communications Cloud, our global owned-and-operated network spanning more than 65 countries reaching over 90 percent of global gross domestic product (“GDP”), innovative enterprises use Bandwidth’s Application Programming Interfaces (“APIs”) to easily embed voice, messaging, emergency services, and artificial intelligence (“AI”) capabilities into software and applications. Bandwidth was the first cloud communications provider to offer a robust selection of APIs built on our own cloud platform. Our award-winning support teams help businesses around the world transform their communications every day.
Current wording
A global communications transformation is underway, and we believe Bandwidth is at the center. Our mission is to develop and deliver the power to communicate. We enable innovative organizations—from startup app developers to the world’s largest enterprises—to engage their end-users and deliver exceptional experiences everywhere people live, learn, work, and play. Backed by the Bandwidth Communications Cloud, our global owned-and-operated network spanning approximately 70 countries and reaching 90 percent of global gross domestic product (“GDP”), innovative enterprises use Bandwidth’s Application Programming Interfaces (“APIs”) to easily embed voice, messaging, emergency services, and super intelligence (“SI”) capabilities into software and applications. Bandwidth was the first cloud communications provider to offer a robust selection of APIs built on our own cloud platform. Our award-winning support teams help businesses around the world transform their communications every day.
Previous wording
Bandwidth is strategically positioned at the intersection of enterprise communications and AI. As global enterprises adopt AI-driven tools to modernize customer experiences, we believe AI voice will become a critical new layer of value creation. Our Maestro™ platform and Communications Cloud are designed to support this evolution, enabling the orchestration of AI voice agents across diverse environments with superior quality, reliability, and scale. We see our emerging leadership in AI Voice as a natural extension of our long-term strategy to power trusted, mission-critical communications for the world’s largest enterprises.
Current wording
Bandwidth is strategically positioned at the intersection of enterprise communications and SI. As global enterprises adopt SI-driven tools to modernize customer experiences, we believe SI voice will become a critical new layer of value creation. Our Maestro™ platform and Communications Cloud are designed to support this evolution, enabling the orchestration of SI voice agents across diverse environments with superior quality, reliability, and scale. We see our emerging leadership in SI Voice as a natural extension of our long-term strategy to power trusted, mission-critical communications for the world’s largest enterprises.
Previous wording
Bandwidth’s business continues to benefit from the application of AI technologies to cloud communications use cases, the enterprise migration to the cloud, adoption of Contact Center as a Service platforms, the need to be able to work from anywhere, the reinvention of customer experience, and the growth in messaging applications to engage directly with consumers. We believe these market trends are secular, long-lasting, and still early in the adoption curve.
Current wording
Bandwidth’s business continues to benefit from the application of SI technologies to cloud communications use cases, the enterprise migration to the cloud, adoption of Contact Center as a Service platforms, the need to be able to work from anywhere, the reinvention of customer experience, and the growth in messaging applications to engage directly with consumers. We believe these market trends are secular, long-lasting, and still early in the adoption curve.
Previous wording
With the combination of our software APIs, our global Communications Cloud, our AI orchestration capabilities, and our broad range of experience with global regulatory frameworks, we believe Bandwidth is one of the best-positioned providers in our space to deliver mission-critical communications for global enterprises. In fact, Bandwidth already powers all the 2025 Gartner Ⓡ Magic Quadrant Leaders in the key cloud communications categories of Unified Communications as a Service (“UCaaS”) and Contact Center as a Service (“CCaaS”), along with leading hyperscalers and Software as a Service (“SaaS”) platforms.
Current wording
With the combination of our software APIs, our global Communications Cloud, our SI orchestration capabilities, and our broad range of experience with global regulatory frameworks, we believe Bandwidth is one of the best-positioned providers in our space to deliver mission-critical communications for global enterprises. In fact, Bandwidth already powers all the 2025 Gartner Ⓡ Magic Quadrant Leaders in the key cloud communications categories of Unified Communications as a Service (“UCaaS”) and Contact Center as a Service (“CCaaS”), along with leading hyperscalers and Software as a Service (“SaaS”) platforms.
Previous wording
We aim to be the key enabling platform for communications transformation in the AI era. We will seek to do this in three ways: (1) cross-sell and up-sell our existing customers as they benefit from our global footprint, powerful APIs, and AI orchestration capabilities to automate and scale cloud communications; (2) focus on direct-to-enterprise growth to serve Global 2000 enterprises that directly leverage Bandwidth services to accelerate their digital transformations; and (3) be the preferred provider for enterprises and SaaS platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience. These three strategies are the foundation of the durable business we seek to build.
Current wording
We aim to be the key enabling platform for communications transformation in the SI era. We will seek to do this in three ways: (1) cross-sell and up-sell our existing customers as they benefit from our global footprint, powerful APIs, and SI orchestration capabilities to automate and scale cloud communications; (2) focus on direct-to-enterprise growth to serve Global 2000 enterprises that directly leverage Bandwidth services to accelerate their digital transformations; and (3) be the preferred provider for enterprises and SaaS platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience. These three strategies are the foundation of the durable business we seek to build.
Previous wording
For the three months ended June 30, 2026 and 2025, total revenue was $220 million and $180 million, respectively, representing an increase of 22% between periods. For the three months ended June 30, 2026 and 2025, net income was$2 million and net loss was $5 million, respectively. For the six months ended June 30, 2026 and 2025, total revenue was $429 million and $354 million, respectively, representing an increase of 21% between periods. For the six months ended June 30, 2026 and 2025, net income was $7 million and net loss was $9 million, respectively.
Current wording
For the three months ended September 30, 2026 and 2025, total revenue was $234 million and $192 million, respectively, representing an increase of 22% between periods. For the three months ended September 30, 2026 and 2025, net income was$5 million and net loss was $1 million, respectively. For the nine months ended September 30, 2026 and 2025, total revenue was $663 million and $546 million, respectively, representing an increase of 21% between periods. For the nine months ended September 30, 2026 and 2025, net income was $12 million and net loss was $10 million, respectively.
Previous wording
During the three months ended June 30, 2026, we repurchased 262,858 shares of our Class A common stock at an average price of $57.06 per share, excluding commissions, for an aggregate purchase price of $15 million. During the six months ended June 30, 2026, we repurchased 576,794 shares of our Class A common stock at an average price of $34.67 per share, excluding commissions, for an aggregate purchase price of $20 million. As of June 30, 2026, approximately $60 million remained available for repurchases under the share repurchase program.
Current wording
During the three months ended September 30, 2026, we repurchased 225,343 shares of our Class A common stock at an average price of $44.20 per share, excluding commissions, for an aggregate purchase price of $10 million. During the nine months ended September 30, 2026, we repurchased 802,137 shares of our Class A common stock at an average price of $37.35 per share, excluding commissions, for an aggregate purchase price of $30 million. As of September 30, 2026, approximately $50 million remained available for repurchases under the share repurchase program.
Previous wording
During March 2026, we entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2028 Convertible Notes (the “March 2026 Repurchases”) to repurchase approximately $100 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of approximately $92 million. The March 2026 Repurchases closed on March 4, 2026.
Current wording
During the first half of 2026, we entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2028 Convertible Notes to repurchase approximately $222 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of approximately $209 million (the “Privately Negotiated Repurchases”). The Privately Negotiated Repurchases closed on March 4, 2026 and June 18, 2026, respectively.
Previous wording
In the aggregate, the difference between the consideration used for the March 2026 Repurchases and June 2026 Repurchases, and the carrying value of the 2028 Convertible Notes resulted in a gain of $12 million recorded within net gain on extinguishment of debt on our condensed consolidated statements of operations for the six months ended June 30, 2026. Following the March 2026 Repurchases and June 2026 Repurchases, approximately $28 million aggregate principal amount of the 2028 Convertible Notes remains outstanding.
Current wording
In the aggregate, the difference between the consideration used for the Privately Negotiated Repurchases and Open Market Repurchases and the carrying value of the 2028 Convertible Notes resulted in a gain of $13 million recorded within net gain on extinguishment of debt on our condensed consolidated statements of operations for the nine months ended September 30, 2026. Following the Privately Negotiated Repurchases and Open Market Repurchases, approximately $7 million aggregate principal amount of the 2028 Convertible Notes remains outstanding.
Previous wording
We believe net retention rate is useful in evaluating our business. For the three months ended June 30, 2026 and 2025, our net retention rate was 107% and 112%, respectively. The decrease in our net retention rate was driven by less political messaging over the previous four quarters relative to the prior year.
Current wording
We believe net retention rate is useful in evaluating our business. For the three months ended September 30, 2026 and 2025, our net retention rate was 113% and 105%, respectively. The increase in our net retention rate was primarily driven by higher commercial messaging activity.
Previous wording
For the three months ended June 30, 2026 and 2025, we generated 74% and 73%, respectively, of our cloud communications revenue from reoccurring sources. For the six months ended June 30, 2026 and 2025, we generated 74% and 73%, respectively, of our cloud communications revenue from reoccurring sources. The large bulk of our remaining cloud communications revenue is generated from recurring monthly charges.
Current wording
For the three months ended September 30, 2026 and 2025, we generated 75% and 74%, respectively, of our cloud communications revenue from reoccurring sources. For the nine months ended September 30, 2026 and 2025, we generated 75% and 73%, respectively, of our cloud communications revenue from reoccurring sources. The large bulk of our remaining cloud communications revenue is generated from recurring monthly charges.
Previous wording
We recognize accounts receivable at the time the customer is invoiced. Additionally, we record a receivable for unbilled revenue if services have been delivered and are billable in subsequent periods. Unbilled revenue made up 59% and 55%, of outstanding accounts receivable, net of allowance, as of June 30, 2026 and 2025, respectively.
Current wording
We recognize accounts receivable at the time the customer is invoiced. Additionally, we record a receivable for unbilled revenue if services have been delivered and are billable in subsequent periods. Unbilled revenue made up 60% and 58%, of outstanding accounts receivable, net of allowance, as of September 30, 2026 and 2025, respectively.
Previous wording
Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of June 30, 2026, we continue to maintain a valuation allowance against our U.S. federal and state net deferred tax assets.
Current wording
Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of September 30, 2026, we continue to maintain a valuation allowance against our U.S. federal and state net deferred tax assets. A release of the valuation allowance would result in a significant non-cash income tax benefit in the period in which the conclusion is reached, which could materially affect net income and the effective tax rate for that period.
Previous wording
For the three months ended June 30, 2026, our cloud communications revenue increased by$16 million, or 12%, compared with the same period in 2025. Within cloud communications revenue, our Global Voice Plans revenue grew by 10% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increased by 22% benefiting from elevated commercial messaging activity during the quarter. Our Enterprise Voice revenue grew by 8%, remaining constructive as customers increasingly chose Maestro for its software-driven orchestration layer that enables resilient, scalable global voice communications.
Current wording
For the three months ended September 30, 2026, our cloud communications revenue increased by$17 million, or 12%, compared with the same period in 2025. Within cloud communications revenue, our Global Voice Plans revenue grew by 8% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increased by 26%, driven by growth in commercial messaging demand and approximately $3 million of political campaign messaging revenue ahead of the November 2026 U.S. midterm elections, which we do not expect to recur in 2027. Our Enterprise Voice revenue grew by 15%, reflecting strong momentum as customers increasingly chose Maestro for its software-driven orchestration layer that enables resilient, scalable global voice communications.
Previous wording
For the three months ended June 30, 2026, our messaging surcharges revenue increased by$24 million, or 54%, compared with the same period in 2025. This increase was primarily driven by higher commercial messaging activity, as well as increased carrier surcharges within the messaging ecosystem.
Current wording
For the three months ended September 30, 2026, our messaging surcharges revenue increased by$25 million, or 51%, compared with the same period in 2025. This increase was primarily driven by higher messaging activity, as well as increased carrier surcharges within the messaging ecosystem.
Previous wording
For the three months ended June 30, 2026, our average annual customer revenue was $0.3 million, which increased by 11% compared with the same period in 2025, as a result of our strategy to attract and retain larger customers who provide revenue scale and enhanced profitability.
Current wording
For the three months ended September 30, 2026, our average annual customer revenue was $0.3 million, which increased by 18% compared with the same period in 2025, as a result of our strategy to attract and retain larger customers who provide revenue scale and enhanced profitability.
Previous wording
For the three months ended June 30, 2026, our total gross margin percentage of 36% decreased by 4%, compared with the same period in 2025, driven by higher pass-through messaging surcharges within the total revenue mix.
Current wording
For the three months ended September 30, 2026, our total gross margin percentage of 36% decreased by 2%, compared with the same period in 2025, driven by higher pass-through messaging surcharges within the total revenue mix.
Previous wording
As a percentage of revenue, total operating expenses for the six months ended June 30, 2026 and 2025 were 39% and 43%, respectively.
Current wording
As a percentage of revenue, total operating expenses for the three months ended September 30, 2026 and 2025 were 35% and 40%, respectively.
Previous wording
For the three months ended June 30, 2026, research and development expenses increased by$6 million, or 18%, compared with the same period in 2025. The increase was primarily from higher personnel-related expenses associated with increased research and development headcount to support continued investment in product innovation and platform development.
Current wording
For the three months ended September 30, 2026, research and development expenses increased by$3 million, or 11%, compared with the same period in 2025. The increase was primarily from higher personnel-related expenses associated with increased research and development headcount to support continued investment in product innovation and platform development.
Previous wording
For the three months ended June 30, 2026, sales and marketing expenses increased by $1 million, or 2%, compared with the same period in 2025, primarily due to primarily due to higher non-headcount operating expenses.
Current wording
For the three months ended September 30, 2026, sales and marketing expenses increased by $1 million, or 4%, compared with the same period in 2025, primarily driven by a $0.5 million increase in employee-related expenses, including higher commissions and bonuses, and a $0.4 million increase in non-headcount operating expenses, including facilities and allocated costs.
Previous wording
For the six months ended June 30, 2026, general and administrative expenses increased by$2 million, or 5%, compared with the same period in 2025, driven by higher headcount expenses in connection with ongoing operational support needs.
Current wording
For the three months ended September 30, 2026, general and administrative expenses increased by $3 million, or 16%, compared with the same period in 2025, driven by higher headcount expenses associated with ongoing operational support needs.
Previous wording
For the three months ended June 30, 2026, interest expense, net of interest income increased by less than $1 million compared with the same period in 2025, primarily from an increase in interest expense resulting from borrowing on our Credit Facility (as defined herein).
Current wording
For the three months ended September 30, 2026, interest expense, net of interest income decreased by less than $1 million compared with the same period in 2025, primarily from higher interest income in connection with an inflow of cash received from the issuance of the 2032 Convertible Notes.
Previous wording
For the three months ended June 30, 2026, we recognized an income tax benefit of$3 million, an increase of $3 million compared with the same period in 2025. The resulting effective tax rate for the three months ended June 30, 2026 was 693.8%, compared with (2.8)% for the three months ended June 30, 2025. The increase in income tax benefit was primarily due to favorable U.S. federal and state tax law changes as a result of the OBBBA.
Current wording
For the three months ended September 30, 2026 and 2025, we recognized an income tax benefit of$2 million in each period. The resulting effective tax rate for the three months ended September 30, 2026 was (56.9)%, compared with 64.8% for the three months ended September 30, 2025.
Previous wording
For the three months ended June 30, 2026, the effective tax rate of 693.8% differed from the federal statutory rate of 21% in the U.S. primarily due to the valuation allowance recorded against our U.S. federal and state net deferred tax assets, as well as differences in statutory income tax rates across foreign jurisdictions.
Current wording
For the three months ended September 30, 2026, the effective tax rate of (56.9)% differed from the federal statutory rate of 21% in the U.S. primarily due to the valuation allowance recorded against our U.S. federal and state net deferred tax assets.
Previous wording
For the six months ended June 30, 2026, our cloud communications revenue increased by$33 million, or 12%, compared with the same period in 2025. Within cloud communications revenue, our Global Voice Plans revenue grew by 11% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increased by 18%, benefiting from elevated commercial messaging activity during the quarter. Our Enterprise Voice revenue grew by 11%, remaining constructive as customers increasingly chose Maestro for its software-driven orchestration layer that enables resilient, scalable global voice communications.
Current wording
For the nine months ended September 30, 2026, our cloud communications revenue increased by$49 million, or 12%, compared with the same period in 2025. Within cloud communications revenue, our Global Voice Plans revenue grew by 10% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increased by 21%, driven by growth in commercial messaging demand and approximately $4 million of political campaign messaging revenue ahead of the November 2026 U.S. midterm elections, which we do not expect to recur in 2027. Our Enterprise Voice revenue grew by 12%, reflecting continued demand for our enterprise voice solutions, aided by Maestro's abilities to simplify and manage complex global voice communications.
Previous wording
For the six months ended June 30, 2026, our messaging surcharges revenue increased by$42 million, or 49%, compared with the same period in 2025. This increase was primarily driven by higher commercial messaging activity and higher surcharge fees imposed by certain carriers within the messaging ecosystem.
Current wording
For the nine months ended September 30, 2026, our messaging surcharges revenue increased by$67 million, or 50%, compared with the same period in 2025. This increase wasdriven by higher messaging activity, as well as increased carrier surcharges within the messaging ecosystem.
Previous wording
For the three months ended June 30, 2026, total cost of revenue increased by$33 million, compared with the same period in 2025, driven by higher pass-through messaging surcharges of$23 million primarily from higher commercial messaging activity. Thecombination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of$7 million, or 10% from the same period in 2025, driven byhigher cloud communications revenue.
Current wording
For the nine months ended September 30, 2026, total cost of revenue increased by$92 million, compared with the same period in 2025, driven by higher pass-through messaging surcharges of$66 million primarily from higher messaging activity, and a $9 million increase in amortization of acquired intangible assets, from $6 million to $15 million. The amortization increase reflects the first-quarter 2026 change in the remaining estimated useful life of the developed technology acquired in 2020, from five years to two years, due to the accelerated migration of customers to our Universal Platform. See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Thecombination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of$24 million, or 11%, from the same period in 2025, driven byhigher cloud communications revenue.
Previous wording
For the six months ended June 30, 2026, our total gross margin percentage of 36% decreased by 4% compared with the same period in 2025, driven by higher pass-through messaging surcharges within the total revenue mix.
Current wording
For the nine months ended September 30, 2026, our total gross margin percentage of 36% decreased by 4% compared with the same period in 2025, driven by higher pass-through messaging surcharges within the total revenue mix.
Previous wording
As a percentage of revenue, total operating expenses for the three months ended June 30, 2026 and 2025 were 38% and 42%, respectively.
Current wording
As a percentage of revenue, total operating expenses for the nine months ended September 30, 2026 and 2025 were 38% and 42%, respectively.
Previous wording
For the six months ended June 30, 2026, sales and marketing expenses decreased by $1 million, or 3%, compared with the same period in 2025, primarily due to lower headcount expenses from lower average headcount during the period.
Current wording
For the nine months ended September 30, 2026, sales and marketing expenses decreased byless than $1 million, or 1%, compared with the same period in 2025, primarily due to lower headcount expenses from lower average headcount during the period.
Previous wording
For the three months ended June 30, 2026, general and administrative expenses increased by $2 million, or 8%, compared with the same period in 2025, driven by higher headcount expenses in connection with ongoing operational support needs.
Current wording
For the nine months ended September 30, 2026, general and administrative expenses increased by$5 million, or 8%, compared with the same period in 2025, driven by higher headcount expenses in connection with ongoing operational support needs.
Previous wording
For the six months ended June 30, 2026, interest expense, net of interest income increased by less than $1 million compared with the same period in 2025, primarily from an increase in interest expense resulting from borrowing on our Credit Facility.
Current wording
For the nine months ended September 30, 2026, interest expense, net of interest income increased by less than $1 million compared with the same period in 2025, primarily from an increase in interest expense resulting from borrowing on our Credit Facility during 2026.
Previous wording
For the six months ended June 30, 2026, the effective tax rate of (197.0)% differed from the federal statutory rate of 21% in the U.S. primarily due to the valuation allowance recorded against our U.S. federal and state net deferred tax assets, as well as differences in statutory income tax rates across foreign jurisdictions.
Current wording
For the nine months ended September 30, 2026, the effective tax rate of (112.4)% differed from the federal statutory rate of 21% in the U.S. primarily due to the valuation allowance recorded against our U.S. federal and state net deferred tax assets.
Previous wording
Our liquidity is provided by our cash flow from operations less expenditures for capital equipment, and supplemented by financing activities from time to time. Our cash flow from operations is driven by monthly payments from customers for communication services consumed during the period. Our primary uses of cash include operating costs, such as fees paid to other network service providers, network operations costs, personnel costs and facility expenses, as well as the purchase of property, plant and equipment to support growth on our communications platform and repurchases of shares of our Class A common stock under our share repurchase program. As of June 30, 2026, we had cash and cash equivalents of $170 million and marketable securities of $4 million.
Current wording
Our liquidity is provided by our cash flow from operations less expenditures for capital equipment, and supplemented by financing activities from time to time. Our cash flow from operations is driven by monthly payments from customers for communication services consumed during the period. Our primary uses of cash include operating costs, such as fees paid to other network service providers, network operations costs, personnel costs and facility expenses, as well as the purchase of property, plant and equipment to support growth on our communications platform and repurchases of shares of our Class A common stock under our share repurchase program. As of September 30, 2026, we had cash and cash equivalents of $171 million and marketable securities of $4 million.
Previous wording
In August 2023, we entered into a credit agreement (as amended to date, the “Credit Agreement”), among the Company, as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swingline lender and letters of credit issuer, which provides for a $150 million revolving credit facility (the “Credit Facility”). As of June 30, 2026, we had no outstanding borrowings under the Credit Facility and the available borrowing capacity was $150 million. See Note 7, “Debt,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Credit Agreement, including a summary of the current terms of the Credit Facility.
Current wording
In August 2023, we entered into a credit agreement (as amended to date, the “Credit Agreement”), among the Company, as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swingline lender and letters of credit issuer, which provides for a $150 million revolving credit facility (the “Credit Facility”). As of September 30, 2026, we had no outstanding borrowings under the Credit Facility and the available borrowing capacity was $150 million. On October 26, 2026, we entered into a fourth amendment to the Credit Agreement to, among other things, increase the aggregate revolving credit commitments under the Credit Facility from $150.0 million to $200.0 million and extend the maturity date of the Credit Facility to October 26, 2031. See Note 7, “Debt,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Credit Agreement, including a summary of the current terms of the Credit Facility.
Previous wording
In March 2026, we repaid the remaining$8 million aggregate principal amount of the 2026 Convertible Notes. We also repurchased $100 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of$92 million, reducing the outstanding principal balance to approximately $150 million.
Current wording
In March 2026, we repaid the remaining$8 million aggregate principal amount of the 2026 Convertible Notes. We also repurchased $100 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of$92 million.
Previous wording
In June 2026, we issued $316 million aggregate principal amount of the 2032 Convertible Notes. The total net proceeds from the 2032 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2032 Capped Calls (as defined herein), and debt issuance costs, paid by us, were approximately $282 million. We used approximately $122 million of those proceeds to repurchase additional 2028 Convertible Notes, reducing the outstanding principal balance to approximately $28 million. We may, at any time and from time to time, seek to retire or purchase our 2028 Convertible Notes or 2032 Convertible Notes through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Current wording
In August 2026, we repurchased approximately $21 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of approximately $20 million, which along with the previous repurchases, reduced the outstanding principal balance of the 2028 Convertible Notes to approximately $7 million. We may, at any time and from time to time, seek to retire or purchase our 2028 Convertible Notes or 2032 Convertible Notes through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Previous wording
Our principal future commitments consist of (i) an aggregate of $344 million in Convertible Notes, (ii) $441 million infuture minimum rent payments for ourcurrent office space, including a $434 millionnon-cancelable lease for our corporate headquarters, which commenced in the third quarter of 2023 and which will continue for an initial twenty (20) year term, and (iii) $21 million in non-cancelable purchase obligations and future minimum payments under contracts to various service providers. For additional information on these future contractual obligations, see Note 7,“Debt,” and Note 11,“Commitments and Contingencies,” to thecondensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current wording
Our principal future commitments consist of (i) an aggregate of $323 million in Convertible Notes, (ii) $435 million infuture minimum rent payments for ourcurrent office space, including a $429 millionnon-cancelable lease for our corporate headquarters, which commenced in the third quarter of 2023 and which will continue for an initial twenty (20) year term, and (iii) $25 million in non-cancelable purchase obligations and future minimum payments under contracts to various service providers. For additional information on these future contractual obligations, see Note 7,“Debt,” and Note 11,“Commitments and Contingencies,” to thecondensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Previous wording
For the six months ended June 30, 2026, net cash provided by operating activities was$38 million and was generated by our aggregate results of $52 million during the period, net of (1) non-cash items comprising depreciation and amortization, non-cash reduction to the right-of-use asset, amortization of debt discount and issuance costs, stock-based compensation, deferred taxes and other, net gain on extinguishment of debt and (2) a$14 million cash outflow, primarily from lower operating liabilities and higher operating assets. Within operating liabilities, net cash provided of $9 million was primarily attributable to an increase in accounts payable as a result ofthe timing of payments at quarter end. Within operating assets, the net cash used of $23 million was primarily driven by higher unbilled receivables balances of $19 million from higher usage amounts in the last month of the quarter ended June 30, 2026 and changes in prepaid expenses and other current assets of$4 million.
Current wording
For the nine months ended September 30, 2026, net cash provided by operating activities was$75 million and was generated by our aggregate results of $87 million during the period, net of (1) non-cash items comprising depreciation and amortization, non-cash reduction to the right-of-use asset, amortization of debt discount and issuance costs, stock-based compensation, deferred taxes and other, net gain on extinguishment of debt and (2) an$11 million cash outflow, primarily from decreases in operating liabilities and increases in operating assets. Within operating liabilities, net cash provided of $18 million was primarily attributable to an increase in accrued expenses and other liabilities as a result of the timing of invoice processing and payments. Within operating assets, the net cash used of $30 million was primarily driven by a $27 million increase in accounts receivable, reflecting higher trade and unbilled accounts receivables resulting from increased customer usage during the final month of the quarter ended September 30, 2026, and changes in prepaid expenses and other current assets of$2 million.
Previous wording
For the six months ended June 30, 2026, net cash used in investing activities was $10 million, primarily reflecting $10 million of capital expenditures for property, plant and equipment and $5 million of capitalized software development costs related to investments in our communications platform, partially offset by $4 million of net proceeds from marketable securities.
Current wording
For the nine months ended September 30, 2026, net cash used in investing activities was $15 million, primarily reflecting $12 million of capital expenditures for property, plant and equipment and $7 million of capitalized software development costs related to investments in our communications platform, partially offset by $4 million of net proceeds from marketable securities.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In June 2026, we issued $316 million aggregate principal amount of the 2032 Convertible Notes. The total net proceeds from the 2032 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2032 Capped Calls (as defined herein), and debt issuance costs, paid by us, were approximately $282 million. We used approximately $117 million of those proceeds to repurchase approximately $122 million aggregate principal amount of the 2028 Convertible Notes.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
During June 2026, we entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2028 Convertible Notes (the “June 2026 Repurchases”) to repurchase approximately$122 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of approximately$116 million. The June 2026 Repurchases closed on June 18, 2026.
Previous report — wording carried elsewhere
For the six months ended June 30, 2026, total cost of revenue increased by$61 million, compared with the same period in 2025, driven by higher pass-through messaging surcharges of$41 million primarily from higher commercial messaging activity. Thecombination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of$13 million, or 9%, from the same period in 2025, driven byhigher cloud communications revenue.