On August 26, Ooma Inc. (NYSE:OOMA) reported second-quarter fiscal 2027 revenue of $83.2 million, up 25% year over year, as the slow shutdown of copper phone lines kept turning into new business. Business subscription and services revenue climbed 38%, adjusted EBITDA jumped 74% to $12.4 million, and the company rolled out products aimed at everyone from Starlink subscribers to kids who need a phone without needing a smartphone. It reads like a breakout quarter, but a meaningful share of that growth came from the checkbook rather than the customer base.
Copper’s Slow Death, Ooma’s Gain
AirDial, Ooma’s replacement for old analog phone lines, is the engine here. Services revenue from that business grew 75% year over year while installations rose 50%, and the company now counts more than 40 resale partners after adding two in the quarter, including a Verizon Platinum partner. A single competitive win in Q2, a hospital system that bought close to 200 AirDial lines along with more than 1,000 UCaaS seats and internet backup, shows the kind of large, sticky accounts the product can land.
Ooma is also layering AI onto its office platform to squeeze more revenue per customer. AI Transcriptions and AI Insights landed inside the Pro Plus tier, and two standalone tools, an AI Answering Service and an AI Receptionist, launched at the end of the quarter with monthly fees ranging from single digits to $50 depending on usage. A ten-feature AI Productivity Pack is due out in the third quarter. Meanwhile, MyPhone, a landline built for younger kids, helped add 3,000 net new residential users after years of slow decline, and it is already sold through Costco, Amazon, Best Buy, Walmart and Target. A companion product for Starlink users, StarDial, arrives in the third quarter too. Profitability is following the top line: non-GAAP net income rose 58% to $10.2 million, operating cash flow hit a record $13.1 million, and the debt balance fell to $47 million after a $6.5 million repayment.
The Growth That Acquisitions Bought
Strip out the FluentStream and Phone.com acquisitions and the picture changes. Total revenue would have grown just 8% instead of the reported 25%, and business subscription and services revenue would have grown 8% rather than 38%. Most of the headline acceleration this quarter came from deals closed last year, not from organic demand.
Business user counts tell a similar story. The company added a net 4,000 business users in the quarter, but that figure absorbed 4,000 users lost to churn from IWG plus a one-time count correction, meaning underlying growth was closer to 11,000 once those items are set aside. On the hardware side, CFO Shig Hamamatsu flagged that “memory costs have gotten more expensive,” pressuring margins on residential devices, and product and other gross margin remains negative 25%, or closer to negative 30% without a one-time tariff recovery. Residential subscription revenue itself was flat year over year despite MyPhone’s early traction, and full-year guidance calls for it to stay flat to up just 1%, leaving the residential turnaround still unproven at scale.
Wall Street Splits The Difference
Hedge fund ownership rose to 24 funds from 21 in the prior quarter, which points to institutions warming up rather than backing away. Short interest sits at 4.74% of the float, enough to signal a real bear camp but nowhere near crowded territory. A forward P/E of 15.85 is a modest multiple for a company guiding to 32% business subscription growth for the full year, which suggests that the market isn’t yet pricing in much of the AirDial or AI story. That gap between a cautious multiple and an improving business is the tension running through this quarter’s numbers.
What Happens Once Copper Runs Out
Ooma’s quarter leaves two numbers pulling against each other: 25% headline growth and 8% organic growth once the acquisitions are stripped out. For the AirDial and AI story to carry the stock, resale partnerships and the new productivity features need to keep expanding the business base without leaning on deal-making to hit guidance. For the skeptical read to hold, memory cost pressure and a still-negative product margin would need to keep eating into the profitability gains management has posted for six straight quarters.
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