German cloud communications firm NFON AG reported a 3.8% year-on-year decline in first-half revenue to EUR 42.5 million, prompting a downward revision to its 2026 outlook.
Total revenue for the six months ended June 30 fell to EUR 42.5 million from EUR 44.2 million in the same period last year, with recurring revenue accounting for 94.1% of the total, up from 93.4%. Adjusted EBITDA decreased 22.8% to EUR 4.4 million, while the adjusted EBITDA margin contracted to 10.4% from 12.9%. Gross profit declined 4.2% to EUR 36.4 million, with gross margins at 85.6%, compared with 86.1% a year earlier.
The company’s seat base contracted 4.2% year-on-year to 629,869, though average revenue per user remained broadly stable at EUR 9.98, up 0.2%. Operating cash flow rose to EUR 2.8 million from EUR 2.5 million, while free cash flow increased to EUR 0.8 million from EUR 0.7 million. Adjusted operating expenses totaled EUR 13.7 million, with the adjusted cost ratio improving to 30.3% from 33.1%.
NFON cited slower demand in core business telephony, portfolio streamlining, and underperformance in the U.K. market as key drivers behind the revenue decline. The company also highlighted a challenging macro environment, including weak euro-area growth, subdued digital sector sentiment in Germany, elevated corporate insolvencies, and prolonged decision-making cycles among corporate clients.
On the AI front, recurring revenue from the Intelligent Assistant and Customer Engagement segments grew 39% and 11.7% respectively, though these segments still represent about 10% of total revenue. CEO Andreas Wesselmann emphasized the shift toward AI-driven business communications, noting that 38% of organizations are piloting agentic AI solutions while only 11% have deployed them in production.
In response to the first-half performance, NFON revised its full-year 2026 guidance. Total revenue is now expected between EUR 84.5 million and EUR 86.0 million, down from prior expectations of low-to-mid-single-digit growth. Adjusted EBITDA is targeted at EUR 9.5 million to EUR 10.5 million, reduced from a previous forecast slightly above EUR 12 million.
Shares of NFON were unchanged at $3.67, with a market capitalization of $71 million and a P/E ratio of 44. The company maintained 427 employees, a modest increase from 422 a year earlier.
