Ooma (OOMA) Q2 2026: Airdial Bookings Double, Lifting Business User Mix to 41%
Airdial, Ooma’s POTS replacement solution, more than doubled bookings year-over-year, driving a step-change in business user growth and partner expansion. Operating leverage and disciplined cost control fueled record profitability, with adjusted EBITDA margin reaching 11%. Management’s focus on business solutions, AI-driven features, and partner ramp sets the tone for a margin-driven growth strategy into the second half.
Summary
- Airdial Momentum Accelerates: Doubling of bookings and expanded reseller base validate market leadership in POTS replacement.
- Margin Expansion Surpasses Targets: Operating leverage and disciplined R&D spend drive record profitability.
- Business Mix Shift Deepens: Business users now represent 41% of core users, strengthening recurring revenue visibility.
Performance Analysis
Ooma delivered a quarter marked by accelerating business mix, robust profitability, and expanding partner traction. Total revenue reached $66.4 million, up 3.5% year-over-year, with business subscription and services revenue growing 6% and accounting for 62% of total subscription revenue. Airdial, Ooma’s managed wireless POTS line replacement, was the standout, with bookings more than doubling year-over-year and a major national retailer added as the largest customer win to date. This momentum contributed to a 9,000 sequential increase in business users, now representing 41% of Ooma’s 1.23 million core users.
Profitability leapt ahead of expectations, with non-GAAP net income up 59% year-over-year to $6.5 million, and adjusted EBITDA margin hitting 11%, the low end of Ooma’s midterm target range. Operating leverage was driven by flat R&D spend, strict discipline in sales and marketing (27% of revenue), and improved product gross margin as pandemic-era component costs were fully absorbed. The company generated $6.4 million in operating cash flow and $5 million in free cash flow for the quarter, supporting $4.5 million in share repurchases.
- Business User Mix Shift: 9,000 net new business users in Q2, with business now 41% of total users, up from 40% last quarter.
- Product Margin Recovery: Product and other gross margin improved to negative 47%, a sharp recovery from negative 69% last year, as higher-cost inventory was worked through.
- ARPU Expansion: Average revenue per user (ARPU) rose 4% year-over-year to $15.68, reflecting strong uptake of higher-tier Office Pro and Pro Plus plans (61% of new Office users).
Residential subscription revenue remains in slow decline, down 2% year-over-year, but business momentum and partner-driven expansion in Airdial and 2600Hz offset this softness. Net dollar subscription retention improved to 100% as churn moderated, and annual exit recurring revenue reached $240 million, up 3% year-over-year. Ooma’s operational discipline and focus on higher-value business customers are translating into improved financial resilience and recurring revenue quality.
Executive Commentary
"User growth net of churn, average revenue per user, annual exit recurring revenue, and the take rate of our Pro and Pro Plus higher tier offerings were all up, both sequentially and year over year. We believe we executed well to achieve these results."
Eric Stang, CEO
"Q2 non-GAAP net income was $6.5 million above our guidance range of $5.6 to $5.9 million and grew 59% year-over-year, primarily driven by our improving operating leverage."
Shig Hamamatsu, CFO
Strategic Positioning
1. Airdial: Market Leadership and Channel Expansion
Airdial’s bookings more than doubled year-over-year, with the addition of a large national retailer (over 3,000 locations) and three new partner resellers, two of whom switched from competitors. Ooma now approaches 35 Airdial partners, including major names like Comcast and T-Mobile. The company is investing in further enhancements to the Airdial management portal and hardware cost reduction, positioning for scale and partner-led growth.
2. Business-Driven Recurring Revenue Model
The business segment’s share of recurring revenue and user base continues to rise, underpinned by strong ARPU growth and a 61% take rate for higher-tier Office plans. This shift supports greater revenue predictability, higher margins, and improved customer stickiness. The move to serve slightly larger businesses with advanced AI features and integrations is already showing traction, expanding Ooma’s addressable market.
3. Operational Leverage and Cost Discipline
Operating leverage is now a material earnings driver, with R&D efficiency and prudent sales and marketing spend enabling margin expansion even as the company invests in growth initiatives. The company’s ability to maintain flat or slightly lower R&D while supporting new features and platform builds is a key enabler for bottom-line growth.
4. 2600Hz Platform: Building for Future Upside
Ooma is extending its intellectual property to the 2600Hz platform, aiming to combine API-based flexibility with turnkey solutions for wholesale partners. While current ARPU is low, the platform’s strength lies in its ability to win large, flexible customers and build long-term upside as legacy platforms become obsolete.
Key Considerations
This quarter’s results underscore Ooma’s pivot to a business-first, partner-centric growth model, with Airdial and the business segment now critical to both top-line and margin expansion. Investors should weigh the following:
Key Considerations:
- POTS Replacement Market Expansion: Airdial’s rapid bookings growth and partner wins signal accelerating demand as businesses move away from legacy copper lines.
- Recurring Revenue Quality: Increased business mix and higher ARPU drive greater visibility and resilience in Ooma’s revenue base.
- Cost Structure Discipline: Margin expansion is being driven by R&D efficiency and tightly managed customer acquisition costs, not just revenue growth.
- Partner Ramp and Channel Execution: The pace at which new and existing partners ramp Airdial sales will determine the magnitude of second-half upside.
Risks
Timing of large Airdial installations and partner ramp remains variable, introducing potential quarterly revenue swings. Residential revenue continues a slow decline, and the business is exposed to competitive pressures in the high-churn small business segment. Tariffs and hardware cost volatility, though modest, could pressure margins if not offset by operational gains. Management’s guidance reflects conservatism around customer-driven installation timing rather than churn risk.
Forward Outlook
For Q3 2026, Ooma guided to:
- Total revenue of $67.2 million to $67.9 million
- Non-GAAP net income of $6 million to $6.4 million
- Non-GAAP diluted EPS of $0.22 to $0.23
For full-year 2026, management maintained revenue guidance at $267 million to $270 million, but raised non-GAAP net income guidance to $24.5 million to $25 million, reflecting tax benefits and improved R&D leverage. Adjusted EBITDA is now expected to reach $28.5 million to $29 million.
- Business subscription revenue growth of 5% to 6%, with residential down 1% to 2%
- 91% to 92% of revenue from subscription and services
Management continues to prioritize margin expansion, disciplined channel investment, and partner ramp as key levers for second-half performance.
Takeaways
Ooma’s Q2 shows a decisive shift toward business-driven recurring revenue and operational leverage, with Airdial emerging as a growth engine and margin expansion outpacing top-line growth.
- Business Segment Drives Value: Growth in business users, ARPU, and partner channel expansion underpin Ooma’s margin-led strategy and recurring revenue quality.
- Operational Execution Delivers Margin: R&D and sales discipline are translating revenue growth into record profitability and cash flow, enabling both share repurchases and strategic flexibility.
- Watch for Partner Ramp and Installation Timing: The pace at which Airdial partners ramp and large customer installations proceed will be key to achieving second-half upside and sustaining revenue momentum.
Conclusion
Ooma’s second quarter marks a clear inflection in business mix, partner ecosystem depth, and profitability. Execution around Airdial and disciplined cost management are setting the foundation for sustainable, margin-driven growth into the back half of the year and beyond.
Industry Read-Through
Ooma’s results reinforce the accelerating shift from legacy POTS lines to managed wireless and cloud-based voice solutions, a trend likely to benefit other UCaaS (Unified Communications as a Service) and CPaaS (Communications Platform as a Service) providers targeting SMB and enterprise markets. The success of partner-led channels and API-driven platforms signals that flexibility and channel breadth are becoming critical differentiators. As legacy platforms age out, vendors with modern, turnkey, and flexible solutions are positioned to capture share, particularly as large customers demand more integrated, AI-enabled communications infrastructure. Investors should monitor the pace of channel partner ramp, installation timing, and ARPU mix as leading indicators of sector performance.