Editor's note: After this article was published, S&P Global Market Intelligence reached out to note that it had supplied an incorrect sales estimate for Ooma, overstating the estimate by $23 million. So the company actually slightly beat the correct estimate.
VoIP telephone company Ooma (OOMA +1.63%) stock tumbled 11.7% through 12:35 p.m. ET Tuesday after reporting fiscal Q3 2026 earnings last night. Analysts forecast Ooma would earn $0.22 per share, but Ooma actually earned $0.27. Investors might also have been working on an incorrect revenue estimate, which could have colored how they saw results.
Image source: Getty Images.
Ooma Q3 earnings
Not all the news was bad. Ooma grew sales 4% year over year, and flipped its profits as calculated according to generally accepted accounting principles (GAAP) from negative $0.09 a year ago to $0.05 per share this time around.
Still, there's a world of difference between $0.05, GAAP, and the $0.27 per share Ooma earned as a non-GAAP (adjusted) number. Ooma CEO Eric Stang described the Q3 results as "strong," but they weren't really impressive.
NYSE: OOMA
Key Data Points
Is Ooma stock a buy?
Nor do I love the company's guidance. Looking ahead through the end of fiscal 2026, Ooma projects between $270.3 million and $270.9 million, with earnings between $1 and $1.02 per share.
With Ooma stock costing only $11 a share, that may not sound bad. But recall that the $1-ish Ooma will earn this year is a non-GAAP number. Considering how much lower Q3 GAAP profit was compared to non-GAAP, I think it's safe to assume GAAP earnings for the whole year will end up looking similarly weak. Indeed, analysts polled by S&P Global Market Intelligence see Ooma earning no more than $0.20.
On an $11 stock, that's a rich 55 times earnings multiple. In my book, that makes Ooma stock a sell.
