AudioCodes Voice AI Surges 50% While Legacy Business Stalls

Voice AI division outpaces stagnant core business

AudioCodes reported second-quarter revenue of $63 million on August 4, representing 3.1% growth from the prior year's $61.1 million, according to details first disclosed by the company. The communications technology provider also announced a 20-cent semi-annual dividend paid in early September. But the headline figure masks a sharp internal divide: the company's Conversational AI unit is expanding at more than 50% annually while its traditional hardware operations deliver minimal growth.

The Conversational AI business maintained its blistering 50%-plus year-over-year expansion in the second quarter, matching the pace set in the first quarter. Combined with the Live suite of managed services for Microsoft Teams and similar collaboration platforms, these newer segments drove annual recurring revenue to $84 million as of June 30—a 20% increase from the year-earlier period.

Services revenue reached $34.6 million, climbing 6.2% year over year and outpacing total company growth by more than two-to-one. That shift signals subscriptions and managed offerings are capturing a larger share of the business mix relative to one-time hardware transactions.

Microsoft Teams-related sales grew 5% year over year from an established customer base. Voice AI Connect and Live Hub, products targeting contact centers, posted what AudioCodes described as record bookings during the quarter, fueled by both new customer acquisitions and expansion within existing accounts. Meeting Insights, a newer meeting-intelligence offering, remains in early-stage adoption but shows expanding pipeline activity.

Why it matters

AudioCodes illustrates a common challenge for legacy technology vendors attempting to pivot toward recurring-revenue models: the transition creates a two-speed company where high-growth AI and services segments must eventually compensate for stagnant legacy operations. The 20% recurring revenue growth provides a foundation for more predictable cash flow, but the company's current profitability and capital allocation raise questions about whether it can sustain both shareholder returns and the investment required to accelerate the transformation.

Profitability pressure and shrinking cash reserves

GAAP operating margin stood at 5.1% for the quarter, with GAAP net income of just $500,000—two cents per share on $63 million in revenue. Non-GAAP net income declined to $3.9 million from $4.1 million in the prior-year quarter, though per-share earnings edged higher due to share count reduction.

AudioCodes spent $8.9 million repurchasing 950,133 shares during the quarter. Cash, deposits, and investments fell to $64.2 million at June 30 from $75.7 million at year-end 2025. Operating cash flow of $6.1 million failed to cover the buyback expenditure, forcing the company to draw down reserves while simultaneously funding its dividend program.

The financial profile reveals a company generating thin margins while allocating capital to shareholder returns rather than fully reinvesting in the high-growth segments that represent its future. With the legacy hardware business contributing little to topline expansion, AudioCodes faces mounting pressure to accelerate its AI and services transition before cash reserves diminish further.

These details were first reported by AudioCodes in its second-quarter earnings release.