What Happened?
Shares of business communications software company 8x8 (NYSE: EGHT) fell 10.6% in the afternoon session after the company reported fiscal first-quarter results that revealed declining profitability and provided a weak outlook for future quarters. The company posted a GAAP net loss of $4.3 million. While revenue narrowly beat analyst expectations, key profit metrics faltered. Non-GAAP gross margins tightened, as they fell to 67.8% from 70.6% in the same period last year. Cash flow from operations also decreased. Management attributed the margin pressure to a higher mix of usage-based offerings which carried lower profitability. Looking ahead, the company projected continued challenges and guided for lower gross margins for the remainder of the fiscal year. This outlook overshadowed the revenue figures, as investors focused on the deteriorating profitability.
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What Is The Market Telling Us
8x8’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. But moves this big are rare even for 8x8 and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 4.4% on the news that the White House announced a new round of steep global tariffs, sparking concerns of a trade war and its impact on the U.S. and global economies. This move creates significant uncertainty for businesses and investors. The new tariffs, with rates of up to 41% on imports from 68 countries and the European Union, prompted a broad market sell-off, with the tech-heavy Nasdaq index showing notable weakness. Adding to the bearish sentiment was a weaker-than-expected July jobs report, which revealed that employers created only 73,000 jobs, far below economists' expectations. This combination of trade fears and signs of a slowing labor market has created a "risk-off" environment, leading investors to pull back from growth-oriented sectors like software and technology.
8x8 is down 34.3% since the beginning of the year, and at $1.75 per share, it is trading 49.7% below its 52-week high of $3.47 from February 2025. Investors who bought $1,000 worth of 8x8’s shares 5 years ago would now be looking at an investment worth $106.76.
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