Shares of communications platform-as-a-service company Bandwidth (BAND 0.07%) were rocketing higher on Thursday, with shares up 14.5% as of 3:37 p.m. EDT.
Bandwidth reported fourth-quarter earnings today, delivering mixed results, with a revenue miss but a profit beat. However, as is the case with most earnings reports, investors focused on guidance, which forecast an acceleration in revenue for 2026, along with margin expansion.
NASDAQ: BAND
Key Data Points
Bandwidth's AI-enabled voice applications gain traction
In the fourth quarter, Bandwidth's revenue declined slightly, by 1.1%, to $208 million, while adjusted (non-GAAP) earnings per share of $0.35 fell by 5%, but beat expectations by $0.02.
A decline in revenue may seem like grounds for a sell-off rather than a rally, but Bandwidth's voice and messaging business benefits a lot in election years, and 2025 was an off-year. Management noted on the conference call with analysts that, on an organic basis, stripping out the effect of political revenue in 2024, revenue actually grew 12%.
Looking ahead to 2026, management also forecasts a reacceleration to 16% full-year revenue growth, with adjusted EBITDA expected to grow an even higher 29%, and 19% adjusted EPS growth.
What also might have gotten investors excited; management noted that the number of third-party voice AI developers building on Bandwidth's platform had more than quadrupled in the past six months.
Image source: Getty Images.
Bandwidth looks extremely cheap even after today's rise
As of this writing, Bandwidth's share price is $14.88, which means shares are only trading at 8.8 times the recent 2026 adjusted earnings guidance.
While that may seem extremely cheap, there are a few caveats. Bandwidth's stock-based compensation is a bit high for its size, at $54 million, which ate up more than 100% of 2025 adjusted EPS. Furthermore, the company has about $254 million of convertible debt as well, on top of the $454 million market cap. So, the "cheapness" of the stock may be a bit misleading.
Still, Bandwidth believes it can grow its cloud communications business by double-digits into the future, outside of cyclical political spending. That makes it a small-cap stock to watch in the communications space.
