AudioCodes Q3 2026: Services Surge Masks Margin Squeeze

AudioCodes reported Q3 2026 revenue of $64.1 million, exceeding the $63.4 million consensus and a 4.2% gain from a year earlier. Non-GAAP earnings per share came in at $0.16, in line with estimates, continuing a pattern of modest but reliable delivery after the company missed in Q1 and Q2 of 2026.

The split between the company's two revenue lines is widening. Services revenue climbed 19.9% year over year to $37.1 million, while product revenue fell to $27.0 million from $30.6 million a year ago. That shift reflects AudioCodes' deliberate push away from hardware toward managed cloud services and voice AI, and it is accelerating: VoiceAI revenue grew 50% through the first three quarters of 2026 on a year-over-year basis, with VoiceAI Connect and Live Hub each recording their best-ever booking quarters.

The combined annual recurring revenue for the Live managed services and VoiceAI segments reached $87 million, up 16% year over year. CEO Shabtai Adlersberg noted that the Microsoft Teams business also continued to grow, rising 4% year over year, underscoring that the legacy connectivity business remains a stable foundation even as the AI-driven lines attract most of the attention.

Higher selling and marketing expense of $21.2 million pushed the non-GAAP operating margin down to 7.4% from 9.5% in the year-ago period. Net income did rise 33% year over year to $3.6 million on a GAAP basis, helped by favorable foreign exchange differences, though that gain came without improved operating leverage.

AudioCodes repurchased 1,517,568 shares for $15.1 million during the quarter under a $30 million program approved by an Israeli court in September 2026, with $26.7 million still available as of September 30. The company also paid a $0.20 per share cash dividend in September. Management offered no numerical guidance for the coming quarters but said ongoing investment in Live services and VoiceAI positions the company for healthy top-line growth through 2027.