Cloud communications provider Bandwidth (NASDAQ: BAND) met Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 1.1% year on year to $207.7 million. The company expects next quarter’s revenue to be around $201.5 million, coming in 2.9% above analysts’ estimates. Its non-GAAP profit of $0.35 per share was 4.8% above analysts’ consensus estimates.

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Company Overview

Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Bandwidth grew its sales at a 17% annual rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the software sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Bandwidth’s recent performance shows its demand has slowed as its annualized revenue growth of 12% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

This quarter, Bandwidth reported a rather uninspiring 1.1% year-on-year revenue decline to $207.7 million of revenue, in line with Wall Street’s estimates. Company management is currently guiding for a 15.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 15.2% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will spur better top-line performance.

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Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Bandwidth is extremely efficient at acquiring new customers, and its CAC payback period checked in at 14.4 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 Q4 Results

We were impressed by Bandwidth’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. On the other hand, its revenue was in line. Zooming out, we think this quarter featured some important positives. The stock remained flat at $12.99 immediately following the results.

So do we think Bandwidth is an attractive buy at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).