TipRanks Smart Growth Portfolio #47: Talk the Stack
Dear Investors,
Dear Investors,
Welcome to the 47th edition of the Smart Growth Portfolio and Newsletter, where we spotlight an AI-driven communications layer sitting beneath everyday business conversations. But first, some news and updates.
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Portfolio News
❖ MKS Inc. (MKSI) has seen another batch of price-target upgrades – from BofA, Needham, TD Cowen, and others – after the company updated its outlook for the quarter ended December 31, 2025, and outlined a leverage-neutral refinancing plan.
The company raised its Q4 2025 revenue guidance to $1.03 billion at the midpoint, up from a prior outlook of $990 million and compared to the analyst consensus of about $995 million. The upgrade was driven by stronger demand across all MKS’s markets and divisions, indicating broad-based strength rather than a single-segment driver. The company said it also expects gross margin, Non-GAAP net earnings, GAAP net income per diluted share, and Non-GAAP net earnings per diluted share for the quarter to exceed the midpoint of the previously issued guidance. MKS is slated to publish its Q4 results on February 11.
Additionally, MKS management presented a plan to optimize its capital structure in a leverage-neutral way, i.e., without increasing overall debt levels relative to earnings. The main components are issuing up to EUR 1 billion in new euro-denominated unsecured debt and borrowing a new $900 million term loan maturing in 2033. Using these proceeds plus cash on hand, the company will refinance its existing $2.2 billion and EUR 600 million term loans, extending debt maturities to 2033 and reducing interest expenses. Besides these loans, MKS plans to expand the revolving credit facility from $675 million to $1 billion while extending its maturity to 2031.
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❖ Applied Digital Corporation (APLD) saw its stock drop despite breaking ground on Delta Forge 1, a 430 MW AI Factory campus in a southern U.S. market with initial operations expected in mid-2027. The reaction appears driven by profit-taking after strong gains (nearly 40% YTD and about 260% over the past year), combined with the absence of a signed hyperscale customer – the company only noted “ongoing discussions” with a prospective investment-grade hyperscaler. However, Roth Capital said it expects a formal lease in the coming months, maintaining APLD as its top pick.
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❖ ACM Research (ACMR) is slated to release its Q4 and full-year 2025 earnings on February 20, but has already preannounced revenue results and outlook. The company narrowed its 2025 revenue view to $885-900 million from the previous guidance range of $875-$925 million, compared to the consensus of approximately $905 million.
Managements said it expects stronger revenue growth in 2026, driven by continued investments in production capacity – specifically accelerated investments in Oregon to support domestic semiconductor production – and market share gains from the newer products. As such, 2026 revenue guidance was lifted to $1.08-1.18 billion (versus the Street view of about $1.05 billion). At the midpoint, this represents about 25% growth from the updated 2025 forecast.
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❖ Innodata (INOD) secured a prime position on the U.S. Missile Defense Agency’s Scalable Homeland Innovative Enterprise Layered Defense (SHIELD) indefinite-delivery/indefinite-quantity (IDIQ) contract. The SHIELD program is designed to drive rapid innovation and deliver next-generation capabilities that strengthen the nation’s multi-layered homeland defense architecture. Although the award itself does not guarantee immediate revenue, the selection positions Innodata to compete for future task orders across research, development, engineering, prototyping, and operations of critical Missile Defense Agency systems that support U.S. national security objectives within the broader Golden Dome strategy.
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This Week’s Top Growth Pick: Crexendo (CXDO)
Crexendo, Inc. is a cloud software company providing unified communications as a service (UCaaS), focused on modernizing how businesses connect, collaborate, and engage with customers. Its platform brings together voice, messaging, contact center functionality, and network services within a single, cloud-native environment built for flexibility and scale. By centering its model on subscription software and recurring revenue, Crexendo moves away from legacy telecom economics toward application-driven communications. The company operates at the intersection of UCaaS and customer engagement – enabling organizations to replace fragmented tools with integrated, software-first solutions. As enterprise communications continue shifting toward cloud delivery, Crexendo targets businesses seeking scalable, adaptable alternatives to traditional phone systems.
Source: Crexendo, Inc. Investor presentation, November 2025
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Line to Cloud
Crexendo’s evolution into its current form is the result of a deliberate, multi-year transformation rather than a single pivot. While the company’s roots stretch back decades through earlier internet and telecom ventures, the version of CXDO that matters to today’s growth story has largely taken shape over the past five years – as cloud communications moved from discrete features to full-fledged platforms.
The defining moment came in October 2021, when Crexendo acquired the NetSapiens communications platform. More than an expansion of product scope, the deal reshaped the company’s identity. NetSapiens provided a modern, multi-tenant, cloud-native foundation capable of supporting unified communications, contact center functionality, and API-driven customization at scale. That shift moved CXDO away from being primarily a UCaaS brand and toward owning the underlying software layer that other providers could build on.
From that point forward, growth was driven by platform scale rather than incremental feature additions. Over the following years, the NetSapiens platform expanded rapidly, surpassing several major user milestones and extending its reach across North America and international markets. This adoption reflected both the flexibility of the platform and its ability to support diverse deployment models – from direct UCaaS offerings to fully white-labeled solutions sold by service providers under their own brands.
Technology investment remained central throughout this period. Crexendo steadily enhanced its cloud stack with automation and AI-enabled capabilities, including intelligent call handling, conversational AI, and workflow orchestration designed to modernize front-office communications. Rather than treating voice as a standalone utility, these upgrades increasingly positioned communications as a programmable layer embedded directly into business operations – aligning the platform with how modern enterprises expect software to function.
Equally transformative was the company’s infrastructure strategy. Over the past several years, CXDO has migrated its platform away from legacy, self-managed data centers and onto Oracle Cloud Infrastructure (OCI), completing international migrations and progressing toward full U.S. migration by early 2026. This shift provided greater scalability, improved reliability, and structurally lower operating costs, while preserving the platform’s flexibility for service providers that host NetSapiens in their own environments. Unlike bundled UCaaS offerings tied to a single ecosystem, Crexendo’s OCI-anchored but application-agnostic architecture supports both hosted and self-managed deployments without forcing partners into a rigid cloud stack.
Today, Crexendo serves a diverse set of end markets – from small and mid-sized businesses replacing legacy phone systems, to larger distributed enterprises managing multi-location communications, and, critically, to service providers and telecom resellers that license the NetSapiens platform as the foundation of their own UCaaS offerings. The company’s recent history is best understood as a shift from selling communications services to enabling communications at scale, a transition that defines how CXDO grew into the company it is today.
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Calling The Shots
Crexendo is a cloud software company providing unified communications as a service (UCaaS), built around a simple but strategically powerful idea – owning the platform layer rather than merely reselling communications services. At the center of its business sits the NetSapiens platform, a multi-tenant, cloud-native communications engine that supports voice, messaging, contact center, and programmable communications through open APIs. This ownership model shapes how CXDO makes money, how it scales, and why it competes differently from many UCaaS peers.
The company operates through two complementary revenue streams. Roughly 57% of revenue comes from Telecom Services, where Crexendo sells UCaaS solutions directly to end customers, primarily small and mid-sized businesses replacing legacy phone systems. The remaining 43% is generated by Software Solutions, where NetSapiens is licensed to service providers, MSPs, telecom resellers, and technology partners that deploy the platform under their own brands. This second stream is structurally higher quality – subscription-based, recurring, and scalable without linear increases in sales or support costs – and it is the primary driver of CXDO’s long-term growth profile.
What differentiates Crexendo in the UCaaS market is not just what it sells, but how it enables others to sell. The NetSapiens platform supports session-based billing rather than rigid per-seat pricing, allowing partners to charge customers based on actual usage. This model resonates with service providers serving dynamic or distributed workforces and has helped NetSapiens scale to more than 235 licensees and over 7 million end users globally. The platform’s flexibility also supports a wide range of deployment models, from fully hosted UCaaS to white-labeled solutions embedded inside partner offerings.
AI has become a core growth lever rather than a marketing overlay. Crexendo has embedded AI directly into the communications stack, offering tools such as Voice AI Studio, AI-powered call recording with sentiment analysis, contact center automation, and, most recently, CAIRO, an always-on AI receptionist launched in January 2026. CAIRO is designed to handle inbound calls, automate workflows, and escalate intelligently to live agents, helping customers improve front-office efficiency while creating a natural upsell path for CXDO.
Infrastructure choices reinforce this model rather than define it. With the heavy lifting of international migrations largely complete and U.S. migration nearing the finish line, OCI now functions as an execution layer – enabling faster customer launches, consistent performance across regions, and regulatory compliance at scale. That foundation supports partner-led expansion, including global carrier integrations such as the NUSO alliance, which extends NetSapiens-powered services into more than 40 countries without requiring licensees to build local infrastructure.
The UCaaS market itself remains large and expanding, driven by cloud adoption, remote work, and AI-enabled communications. Industry estimates place the addressable market in the tens of billions of dollars, with mid-teen growth rates. Despite its growing footprint, Crexendo still holds a modest share – leaving meaningful room for expansion as legacy platforms are retired and partners seek modern, programmable alternatives.
Policy tailwinds add incremental support. The Trump administration’s renewed emphasis on domestic software innovation – including restored immediate R&D expensing under the latest budget framework – improves cash efficiency for companies like CXDO that invest heavily in platform development and AI capabilities.
Taken together, Crexendo’s business is best understood as an enablement engine. By owning the software layer, distributing through partners, and embedding AI into everyday communications, CXDO is positioning itself not just as a UCaaS provider, but as infrastructure for how modern business conversations happen – at scale, and increasingly without human friction.
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Cash Comes Calling
Crexendo’s financial trajectory over the past several years tells a clear story of execution improving quarter by quarter, with growth increasingly supported by higher-quality revenue and operating discipline. The most recent results reinforce that trend.
In Q3 2025, Crexendo delivered 12% year-over-year revenue growth to $17.5 million, while continuing to outpace analyst expectations. The company has beaten consensus adjusted EPS in every quarter since Q1 2022 and has exceeded revenue expectations in at least eight consecutive quarters, an unusually consistent record for a small-cap tech platform. The latest quarter again reflected that pattern, with GAAP net income of $1.5 million and non-GAAP net income of $3.0 million, both ahead of Street forecasts.
Growth quality continues to improve beneath the headline numbers. Software Solutions revenue rose 28% year-over-year, significantly faster than the 8% growth posted by Telecom Services, reinforcing the ongoing shift toward subscription-based platform revenue. That mix is translating into better profitability. Consolidated gross margin expanded to 63%, with Software Solutions margins reaching 74%, while services margins remained competitive at 57%. The decline in product revenue – down 25% year-over-year – reflects the intentional exit from lower-margin hardware sales rather than weakening demand, further cleaning up the margin profile.
Profitability is now established. Crexendo has posted nine consecutive quarters of GAAP profitability, placing the inflection point in 2023, while non-GAAP profitability dates back to Q3 2021, underscoring a multi-year trend rather than a recent anomaly. EBITDA in Q3 reached $2.1 million, with adjusted EBITDA of $2.9 million, reflecting growing operating leverage as software revenue scales. Adjusted EPS surged 67% year-over-year to $0.10, notably accelerating from the previous two quarters’ growth of around 30%. That acceleration reflects operating leverage taking hold as AI-driven features and platform upgrades scale across the installed base.
Cash generation supports that picture. Operating cash flow for the first nine months of 2025 totaled $7.0 million, and Crexendo exited the quarter with $28.6 million in cash and equivalents. Importantly, the balance sheet carries only negligible debt, giving the company flexibility to invest in technology, complete its Oracle Cloud Infrastructure migration, and pursue acquisitions without financial strain.
Looking ahead, management has reiterated confidence in continued double-digit growth through 2026, supported by accelerating software adoption, AI-driven upsell, and cost efficiencies tied to the completion of the U.S. portion of the OCI migration, which are expected to begin contributing in early 2026. Remaining performance obligations continue to rise, improving revenue visibility. Analysts broadly expect continued margin expansion alongside mid-teens revenue growth, and given Crexendo’s execution track record, there is a credible case for continued upside versus expectations.
There are risks. UCaaS pricing remains intensely competitive, with ongoing price pressure from bundled enterprise suites and larger platform vendors; international revenue is still a small portion of the mix; and regulatory and cybersecurity costs are expected to continue rising. But these pressures are being outweighed by improving margins, recurring revenue visibility, strong cash generation, and a balance sheet that provides room to maneuver.
Taken together, Crexendo’s financials no longer describe a speculative platform searching for scale. They describe a growth company that has already crossed into sustained profitability – and is now improving the quality and durability of its earnings as it scales.
Source: Crexendo, Inc. Investor presentation, November 2025
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Crescendo Dynamics
Crexendo operates within a narrow slice of the public cloud communications universe that sits between end-user UCaaS applications and underlying communications infrastructure. Its most relevant public peers are software-led communications small- and mid-cap companies selling voice, contact center, and programmable communications platforms to SMBs, enterprises, and service providers. Ooma and 8×8 represent the closest functional UCaaS comparisons, offering cloud-based solutions with subscription-heavy revenue models and similar customer segments. Sangoma adds context as a channel-driven communications software provider blending UCaaS with platform licensing, while Bandwidth provides an infrastructure-layer reference point for how the market values usage-driven cloud communications platforms. A much larger peer, RingCentral, serves mainly as a benchmark for how UCaaS platforms are valued once scale, bundling pressure, and margin ceilings become dominant constraints.
Over the past year, CXDO’s share price has moved sharply against the rest of the public UCaaS group. While peers such as 8×8, Ooma, Sangoma, Bandwidth, and RingCentral all saw their stocks fall, Crexendo rose nearly 30%. That gap isn’t a coincidence, and it isn’t about size. It reflects how the market has started to rethink what CXDO actually is. Most UCaaS peers are still viewed as vendors selling seats in a crowded market, where growth tends to slow once scale becomes meaningful and margins face natural ceilings. Crexendo, by contrast, is increasingly being valued as a platform owner – one that is already profitable, software-led, and benefiting from operating leverage rather than fighting price pressure. As that distinction became clearer through repeated earnings beats, margin expansion, and AI-driven upsell, the stock was re-rated even as the broader UCaaS sector was de-rated.
Wall Street analysts now project nearly 20% upside for the “Strong Buy”-rated stock; however, its re-rating appears structural, which opens the door for further price-target hikes. Moreover, CXDO has unusually strong analyst coverage for a company of its size, with five analysts actively publishing ratings and targets. This growing attention supports the constructive outlook for the stock – provided execution continues – as CXDO’s convexity comes from narrative reclassification, and each incremental data point can shift the valuation framework, including analyst outlooks and earnings revisions.
As a result of its strong gain over the past year, Crexendo appears more richly valued than its peers, even if most of its metrics still compare extremely well to IT sector medians. CXDO trades at a discount to the sector on trailing and forward non-GAAP P/E, EV/Sales, and Price/Sales, while carrying a clear premium to UCaaS peers on the same multiples. And that premium is earned: Crexendo stands out as best-in-class on net margins, return on equity, and both past and expected growth rates. In short, it’s not that CXDO is expensive – its peers are cheap. Moreover, CXDO’s forward PEG of 1.07x sits well below the IT sector median of 1.64x, implying that the market is still applying a more conservative growth multiple despite sustained profitability, margin expansion, and double-digit earnings growth expectations. If execution continues to narrow the remaining perception gap, valuation has room to migrate closer to broader sector norms over time.
Taken together, CXDO’s recent outperformance does not signal excess optimism – it reflects a business being repriced as fundamentals, mix quality, and earnings durability converge. If that convergence continues, the stock’s reclassification story may still be in its early innings.
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To Sum It All Up
Crexendo is a growth story shaped by the quiet re-plumbing of how businesses communicate. What began as a UCaaS provider has evolved into a software-led communications platform that sits beneath service providers, enterprises, and increasingly AI-driven workflows. Its transformation is structural, not cosmetic – shifting from selling seats to enabling ecosystems, from services to software, and from scale chasing to margin expansion. Recent execution shows the inflection is real: profitability is established, platform adoption is accelerating, and AI is becoming a monetizable layer rather than a roadmap promise. Yet the market still values Crexendo as part of a pressured UCaaS cohort instead of a platform owner benefiting from consolidation and migration. With rising operating leverage, expanding partner reach, and a balance sheet built for growth, Crexendo appears positioned for the next phase of compounding rather than a fleeting rerating.
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Smart Growth Portfolio
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Disclaimer
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