AudioCodes Earnings Call: Mixed Sentiment Amid Growth

Audiocodes ((AUDC)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for AudioCodes presented a mixed sentiment, highlighting both growth and challenges. The company reported notable progress in its Microsoft Teams business and conversational AI segment, yet faced financial hurdles due to increased tariff-related costs and a decline in operating income.

Microsoft Teams Business Growth

The Microsoft Teams business experienced a 6.5% year-over-year growth, bolstered by the launch of Cisco WebEx Cloud Connect enablement and an increased attach rate of Voca CIC. The Live Managed Services annual recurring revenues reached an impressive $70 million, marking a 25% growth year-over-year, showcasing the company’s strength in connectivity services.

Conversational AI Segment Demand

AudioCodes is optimistic about its conversational AI segment, projecting a 40% to 50% growth by 2025. The demand for AI-powered business applications and voice services remains robust, with significant interest in the Meeting Insights On-Prem service, particularly from regulated industries.

Cash Flow and Financial Position

The company reported net cash provided by operating activities of $7.7 million for the quarter, with total cash, cash equivalents, and financial investments amounting to $95.3 million. Additionally, a cash dividend of $0.20 per share was declared, reflecting AudioCodes’ commitment to returning value to shareholders.

Tariff-Related Cost Increase

AudioCodes faced increased expenses due to new tariffs on U.S. imports, which added approximately $1 million in additional costs. This impacted both GAAP and non-GAAP results, with a full-year 2025 cost burden expected to be between $3 million and $4 million.

Decline in Operating Income

The company’s GAAP operating income for the quarter was $2.6 million, or 4.3% of revenues, down from $4.9 million or 8.2% of revenues in Q2 2024. This decline in profitability was mirrored in the non-GAAP operating income, which fell from $7.2 million to $4.4 million.

Gross Margin Contraction

AudioCodes reported a non-GAAP gross margin of 64.5% for the quarter, down from 65.8% in Q2 2024. This contraction was attributed to tariff-related cost headwinds and currency fluctuations, which have pressured margins.

Forward-Looking Guidance

Looking ahead, AudioCodes reported revenues of $61.1 million for the second quarter of 2025, a 1.3% increase from the previous year. Services revenues rose by 1.9%, accounting for 53.3% of total revenues. The company anticipates continued demand in its conversational AI segment, supporting a 40% to 50% growth outlook for 2025. The Microsoft Teams business is expected to maintain its growth trajectory, driven by strong connectivity services and new AI-driven business applications.

In summary, AudioCodes’ earnings call reflected a mixed sentiment, with growth in key segments like Microsoft Teams and conversational AI, but challenges due to increased tariff costs and declining operating income. The company remains optimistic about its future prospects, supported by robust demand in its AI segment and strategic initiatives in connectivity services.