Since July 2025, Bandwidth has been in a holding pattern, floating around $15.84. The stock also fell short of the S&P 500’s 11.3% gain during that period.
Is now the time to buy Bandwidth, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Bandwidth Not Exciting?
We're swiping left on Bandwidth for now. Here are three reasons why BAND doesn't excite us and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within software, a stretched historical view may miss recent innovations or disruptive industry trends. Bandwidth’s recent performance shows its demand has slowed as its annualized revenue growth of 12.9% over the last two years was below its five-year trend. 
2. Low Gross Margin Reveals Weak Structural Profitability
For software companies like Bandwidth, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.
Bandwidth’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 38.8% gross margin over the last year. That means Bandwidth paid its providers a lot of money ($61.19 for every $100 in revenue) to run its business.
The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Bandwidth has seen gross margins decline by 1.5 percentage points over the last 2 year, which is poor compared to software peers.
3. Operating Margin Rising, Profits Up
Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.
Over the last two years, Bandwidth’s expanding sales gave it operating leverage as its margin rose by 2.2 percentage points. Its operating margin for the trailing 12 months was negative 1.7%, and it must keep making strides to one day reach sustainable profitability.
Final Judgment
Bandwidth isn’t a terrible business, but it doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 0.6× forward price-to-sales (or $15.84 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere. We’d suggest looking at a top digital advertising platform riding the creator economy.
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