AUDC — AudioCodes Ltd.

Summary of AudioCodes Ltd. Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Q4 Revenues: $62.6 million, up 1.7% from $61.6 million in Q4 2024.
• Full Year 2025 Revenues: $245.6 million, a 1.4% increase from $242.2 million in 2024.
• Q4 Services Revenues: $34.6 million, representing 55.3% of total revenues, a 1% increase year-over-year.
• Gross Margin: Q4 gross margin at 65.6%, down from 66.2% in Q4 2024; non-GAAP gross margin at 65.9%.
• Operating Income: $3.7 million (6% of revenues) in Q4, down from $4.1 million (6.7%) in Q4 2024; full year operating income decreased to $14 million from $17.2 million in 2024.
• Net Income: Q4 net income at $1.9 million ($0.07 per diluted share), down from $6.8 million ($0.22) in Q4 2024; full year net income at $9 million ($0.31 per diluted share), down from $15.3 million ($0.50).
• Cash Position: Cash and equivalents totaled $75.7 million; net cash provided by operating activities was $4.1 million for Q4 and $29.4 million for the full year.

2. Strategic Updates and Business Highlights:

• Transition to AI-Driven Business: AudioCodes is focusing on becoming an AI-driven hybrid cloud software and services company, with a strong emphasis on Voice AI and managed services.
• Growth Engines: The company reported $79 million in annual recurring revenue from managed services and Voice AI, with a 22% year-over-year growth.
• Voice AI Business: Revenues grew by 35% year-over-year, reaching nearly $17 million, accounting for 7% of total revenues.
• Customer Base Expansion: The company is investing in sales and marketing to enhance market awareness and drive customer acquisition, particularly in the Voice AI segment.

3. Forward Guidance and Outlook:

• 2026 Revenue Guidance: Expected revenues between $247 million and $255 million, with non-GAAP EPS projected between $0.60 and $0.75.
• Voice AI Growth: Anticipated continued strong growth of 40-50% in the Voice AI business, with a target of reaching $50 million in revenue by 2028.
• Annual Recurring Revenue: Expected to grow from $79 million in 2025 to between $92 million and $98 million in 2026.

4. Bad News, Challenges, or Points of Concern:

• Declining Profitability: Both GAAP and non-GAAP operating income and net income declined compared to the previous year, indicating profitability pressures.
• Tariff Impact: Tariff-related costs amounted to $2.7 million in 2025, expected to decrease slightly to $2.3 million in 2026, but still represent a headwind.
• Market Conditions: The company faces uncertainties related to global economic conditions, competitive pressures, and potential disruptions from geopolitical issues, particularly in Israel.

5. Notable Q&A Insights:

• Conversational AI Growth Drivers: Management indicated that growth in the conversational AI segment will come from both acquiring new customers and increasing spend per existing customer.
• Pipeline Visibility: There is improved visibility and size in the sales pipeline as market expectations around AI shift from experimentation to broader adoption.
• Gross Margin Outlook: Management expects gross margins to improve as the product mix shifts more towards software and services, maintaining a target range of 65-68%.

Overall, AudioCodes demonstrated stability in revenue growth amidst profitability challenges, with a clear strategic pivot towards AI-driven solutions and managed services, while navigating potential market headwinds.