Ooma stock ripped higher, jumping 12.2% to about US$23 after its second quarter report, as investors reacted to a clean beat on the software communications story. The headline was clear. Revenue reached US$83.2m while non GAAP net income came in at US$10.2m, with adjusted earnings before interest, tax, depreciation and amortization at US$12.4m.

That is the short term snapshot. The bigger question now is whether this improving earnings power can support Ooma’s rich 57.9x trailing P/E and the wide gap to a discounted cash flow estimate that currently sits far above the market price.

Love the clean revenue and earnings beat from Ooma but unsure what to make of a 57.9x trailing P/E and a big gap to discounted cash flow estimates? Compare it with: 46 high quality undervalued stocks.

Q2 2027 Earnings Summary

• Revenue, Q2 2027 vs. Q2 2026: US$83.228 million vs. US$66.364 million (up about 25%)
• Net Income, Q2 2027 vs. Q2 2026: US$3.004 million vs. US$1.255 million (up about 139%)
• Basic EPS, Q2 2027 vs. Q2 2026: US$0.1090 vs. US$0.0455 (up about 140%)
• Trailing 12 Month Revenue, Q2 2027 vs. Q2 2026: US$306.586 million vs. US$261.617 million (up about 17%)

Prefer clean charts over scrolling through another wall of earnings tables and ratios? See Ooma’s full valuation picture presented in a simple visual dashboard in the company report for Ooma.

Ooma bull case: AirDial, AI and M&A milestones

Bulls argue that Ooma can compound through AirDial growth, AI upsell and effective use of acquisitions. This quarter gives some concrete proof points. Revenue grew 25% YoY to US$83.2m, with business subscription and services up 38% including FluentStream and Phone.com and about 8% organically. That suggests the acquired platforms are contributing while the legacy base still moves forward. AirDial product and other revenue rose 46% on 50% more installs, which supports the view that copper line migration is translating into real deployments. Average revenue per user, or ARPU, increased 8% to US$16.95, helped by mix shift to business customers. Non GAAP net income of US$10.2m and adjusted EBITDA of US$12.4m at a 15% margin, plus US$10.8m of free cash flow with US$6.5m of debt paydown, all point to the earnings and cash flow flywheel that bulls want to see.

Ooma bear case: integration, ARPU and channel risks

The bear story around Ooma focuses on integration risk, POTS timing and dependence on resellers and price increases. Some fears look less supported, others remain untested. On integration, business subscription growth of 38% including FluentStream and Phone.com with subscription gross margin at 72% suggests acquired revenue is not clearly dragging profitability. Free cash flow of US$30.2m over 12 months and reduction of the term loan to US$47m indicate debt repayment is progressing rather than stalling. However, the business user base grew only 4k sequentially, or 11k excluding churn from one customer, which shows that channel driven volume is still lumpy. ARPU at US$16.95 is higher, yet management still flags the risk that customers resist higher tier and AI pricing. Product and other revenue tied to devices like MyPhone and AirDial also carries margin pressure that could tighten earnings if service upsell does not keep pace.

After thin business user growth, heavier reliance on price increases and hardware margin adds another layer of execution risk. Review our independent risk analysis for Ooma which shows 1 important warning sign.

Take Control Of Your Next Move

If the mix of Ooma’s high P/E, discounted cash flow gap and recent earnings beat has your attention, register for free with Simply Wall St and add it to a Watchlist to track share price against fair value and watch for a potential entry point. Once you decide to take a position, manage Ooma alongside your other holdings in the Portfolio Command Center so you only see the most important developments, not every headline. Over the longer term, compare your thinking on Ooma with other investors inside the Community and see how sentiment and thesis quality evolve over time. By spotting hidden catalysts and risks early, you give yourself a better chance to stay ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.