Ooma (OOMA) revenue up 25%. The copper phone line is dying and that's the whole story.

Most coverage of Ooma describes it as a small VoIP company competing with the big telecom carriers. That framing misses what's actually happening. The story right now is about infrastructure decay — specifically, AT&T and Verizon are decommissioning the copper phone lines that have run under American streets and buildings for a century. Every business that has a fire alarm, elevator emergency phone, fax machine, or security system connected to one of those copper lines now needs to replace it. Ooma built a product specifically for that market, and it's growing 75% year-over-year. That's the story.

What they reported

Q2 fiscal year 2027 revenue of $83.2 million, up from $66.4 million a year ago. The 25% top-line growth was driven primarily by AirDial and the two acquisitions completed late last year, FluentStream and Phone.com. Excluding acquisitions, organic revenue grew 8%. Business subscription and services revenue hit $52.9 million, up 38%, now representing 70% of total subscription revenue. Product and other revenue: $7.6 million, up 46%, driven almost entirely by AirDial hardware installations. Non-GAAP net income: $10.2 million, up 58%, or $0.35 per diluted share. Adjusted EBITDA: $12.4 million, a record, and now 15% of revenue. That EBITDA margin was 10% just six quarters ago. Record Q2 operating cash flow of $13.1 million. Free cash flow of $10.8 million in the quarter and $30.2 million on a trailing twelve-month basis.

Beat or miss

Beat on both top and bottom line, and management raised full-year guidance. Revenue guidance now $332M to $333.5M. EBITDA guidance $47.5M to $48.3M. EPS guidance $1.35 to $1.38. The raise was driven by AirDial outperformance and residential user trends better than expected following MyPhone's launch. This is the sixth consecutive quarter of EBITDA margin expansion. One analyst on the call called it "the strongest quarter and outlook I've seen in five to six years covering the company."

The POTS replacement wave — why AirDial keeps accelerating

POTS stands for Plain Old Telephone Service. It's the analog copper wire network. AT&T and Verizon received FCC approval to retire their copper infrastructure, which means the physical lines that power elevator emergency phones, building fire alarms, credit card terminals, and fax machines are being disconnected. Businesses don't have a choice. They have to replace the connection.

AirDial is Ooma's hardware-and-service solution for that replacement. It connects legacy devices to cellular networks with features like multipath connectivity, remote device management, and customer alerts. The CEO described winning a large hospital system in Q2 that purchased close to 200 AirDial lines plus over 1,000 UCaaS seats. That's a $200,000 to $400,000 initial deal from a single customer — the scale of individual wins is growing as awareness of the copper sunset spreads through enterprise procurement teams.

The partner network now exceeds 40 resellers including T-Mobile and Comcast, with a Verizon Platinum partner added in Q2. The CEO explicitly said some carrier partners are maintaining their own existing POTS lines and actively need to help their customers transition. That's a structural referral channel — the same companies sunsetting copper are helping route customers to Ooma's replacement product. Around 8 million POTS lines are estimated to still need replacement in the US. AirDial's current installed base is a fraction of that. The runway is long.

There's a useful comparison to the Napco Security flywheel covered in our NSSC analysis: hardware sold today converts to recurring monthly service revenue tomorrow, at dramatically higher margins. AirDial hardware margins are negative, as expected. AirDial service revenue compounds at 75% growth with near-zero incremental cost per installed unit. The same dynamic that makes Napco's recurring revenue so valuable applies here.

MyPhone — the residential surprise nobody expected

Ooma's residential user base had been slowly declining for years. That's the expected trajectory for a home landline business in the smartphone era. In Q2, residential users grew by 3,000 net, reversing the trend. The cause: MyPhone, a residential landline product launched in June targeting families with young children who want an alternative to giving kids smartphones. Trusted Circle limits who can call. Quiet Hours limits when. The product is now available at Costco, Amazon, Best Buy, Walmart, and Target online, with in-store placement expected at one major retailer this fall.

Full-year residential subscription guidance was revised from down 1–3% to flat or up 1%. That's a small absolute change but a significant directional reversal. Management also announced StarDial, launching in Q3: a landline product specifically designed for Starlink satellite internet users, using Ooma's proprietary adaptive redundancy technology to maintain call quality over high-latency satellite connections. One major retailer has already committed to in-store placement. Rural Starlink adopters with poor cell coverage and a genuine need for reliable voice communication are the target. It's a specific, underserved niche rather than a mass market play.

The AI monetization plan — specific and believable

Ooma launched AI Transcriptions and AI Insights as Pro Plus features, plus two standalone services — AI Answering and AI Receptionist — at the end of Q2. No meaningful adoption data yet, too early. But the Q3 launch of the "AI Productivity Pack" is the more interesting development: approximately 10 individual features covering customer tracking, SMS drafting, payment tracking, and similar small business workflow automations, priced with a base monthly fee and usage-based upcharges. The CEO explicitly targeted double-digit percentage adoption among new customers in Q3.

The unit economics are straightforward. Pro Plus costs $5 to $10 more per user per month than the standard tier. Standalone AI services run $15 to $50 per month per account. Ooma has 703,000 business users. At even 10% AI tier adoption, that's 70,000 users contributing additional revenue that has near-zero incremental cost since AI runs on Ooma's own infrastructure rather than outsourced LLM API calls. The CFO explicitly confirmed this at the end of the call. The cost structure is sustainable at scale specifically because Ooma runs its own models rather than paying per-token API fees.

The one thing beginners should take away

Ooma is a recurring revenue business whose growth accelerator is regulatory infrastructure decay rather than product innovation. AT&T and Verizon are being required to retire copper phone lines. That's creating mandatory replacement demand for approximately 8 million connections across American businesses. Ooma built the leading product for that replacement. AirDial growing at 75% in a market with 8 million units still to replace, with a 40-partner reseller network including T-Mobile and Verizon, is a structural growth story that doesn't require predicting technology trends or consumer behavior. The copper lines are coming down. The question is only how fast Ooma can capture the replacement installs.