RingCentral, Inc. (RNG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company's earnings call reveals strong financial performance with record free cash flow, improved operating margins, and significant AI revenue growth. The expansion of the partnership with AT&T and increased share repurchase plan further boost sentiment. Positive Q&A insights highlight robust demand and strategic AI adoption. Given the company's small-cap status, the strong financial results and optimistic outlook suggest a likely stock price increase of over 8% in the next two weeks.
Key Financial Performance
Total Revenue Total revenue for the year grew nearly 5%.
Subscription Revenue Subscription revenue grew just over 5.5%.
Free Cash Flow Generated record free cash flow of more than $0.5 billion, up 32% versus 2024. This translates to over $5.80 of free cash flow per share in 2025.
GAAP Operating Margin Achieved nearly 5% GAAP operating margin in 2025, which is expected to approximately double in 2026.
AI ARR Revenues Pure AI ARR revenues have almost tripled year-over-year and contributed significantly toward the stated goal of $100 million ARR from new products in 2025.
RCAI Utilizing Customers ARR from customers who utilize at least one monetized AI product has more than doubled year-over-year and is now approaching 10% of overall ARR.
Subscription Revenue (Q4) Subscription revenue was $622 million, up 5.5% year-over-year.
Total Revenue (Q4) Total revenue was $644 million, up 4.8% year-over-year.
Non-GAAP Operating Margin (Q4) Non-GAAP operating margin reached 22.8%, up more than 140 basis points year-over-year.
Free Cash Flow (Q4) Generated $126 million of free cash flow, up 13% year-over-year.
Non-GAAP EPS (Q4) Non-GAAP EPS increased more than 20% to $1.18, above the high end of guidance.
GAAP EPS (Q4) GAAP EPS of $0.26, up about 4 points year-over-year.
Free Cash Flow (Full Year 2025) Record $530 million in free cash flow, up 32% year-over-year, representing a 21% margin.
Non-GAAP Operating Margin (Full Year 2025) Improved 150 basis points to 22.5% or $566 million of operating profit.
GAAP Operating Margin (Full Year 2025) Achieved a full year of GAAP operating profitability with GAAP operating margin of 4.8%.
Non-GAAP EPS (Full Year 2025) Non-GAAP EPS grew 18% to $4.36, above the high end of guidance.
Free Cash Flow Per Share (Full Year 2025) Increased 36% to $5.81.
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Operating Highlights
Agentic Voice AI: The company is focusing on agentic voice AI as a strategic priority, delivering clear ROI. AI solutions like AIR, AVA, and ACE are driving automation, productivity, and insights across customer interactions. AIR customer count grew 44% sequentially in Q4, and ACE customer count increased 144% year-over-year.
AI Product Revenue: Pure AI ARR revenues nearly tripled year-over-year, contributing significantly to achieving $100 million ARR from new products in 2025. Customers using at least one AI product now represent nearly 10% of overall ARR.
Customer Engagement Bundle (CEB): Introduced in November 2025, CEB has already crossed 1,000 customers, showing strong demand for this AI-powered solution for businesses with non-dedicated agents.
Global Platform Reach: RingCentral's platform supports over 0.5 million businesses and 8 million end users globally, handling billions of calls and SMS messages annually.
AI Adoption in New Logos: New logo acquisitions show a higher AI attach rate, creating a long-term tailwind for market expansion.
Revenue Growth: Total revenue grew nearly 5% in 2025, with subscription revenue increasing by 5.5%. Q4 subscription revenue was $622 million, up 5.5% year-over-year.
Profitability Improvements: Achieved nearly 5% GAAP operating margin in 2025, expected to double in 2026. Free cash flow reached a record $530 million, up 32% year-over-year.
Stock-Based Compensation (SBC) Reduction: Reduced SBC by over 35% year-over-year, with a target of 3%-4% of annual revenue in the next 3-4 years.
AI-Led Transformation: The company is transitioning into an AI-led business communications platform, leveraging its carrier-grade, secure, and scalable infrastructure to integrate AI into customer interactions.
Capital Allocation Strategy: Announced the first-ever quarterly dividend of $0.075 per share and increased share repurchase authorization to $500 million.
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Risk or Challenges
Market Conditions: The company faces potential challenges from economic uncertainties and market conditions that could impact revenue growth and customer spending.
Competitive Pressures: The competitive landscape in AI and cloud-based communication platforms is intensifying, which may pressure RingCentral to continuously innovate and maintain its market position.
Regulatory Hurdles: The company operates in a highly regulated environment, requiring compliance with global security and regulatory standards, which could pose operational risks.
Supply Chain Disruptions: No explicit mention of supply chain disruptions was made in the transcript.
Strategic Execution Risks: The company’s transformation into an AI-led platform involves significant investments and strategic shifts, which carry execution risks, including the potential for delays or underperformance of new AI products.
Economic Uncertainties: Broader economic uncertainties could affect customer budgets and spending, impacting the adoption of new AI products and services.
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Guidance & Outlook
GAAP Operating Margin: Expected to approximately double in 2026, targeting approximately 20% GAAP operating margin in the next 3 to 4 years.
Quarterly Dividend: Announced first-ever quarterly dividend of $0.075 per share.
Agentic Voice AI: Positioned to transform into a leading agentic voice AI platform, leveraging AI to enhance customer interactions and drive growth. AI-related ARR revenues have tripled year-over-year, with RCAI utilizing customers approaching 10% of overall ARR.
AI Product Portfolio: Investing over $250 million annually in AI-led product innovation, focusing on AIR, AVA, and ACE solutions to drive automation, productivity, and insights.
Revenue Growth: Subscription revenue growth of 4.5% to 5.5% and total revenue growth of 4% to 5% expected for 2026.
Free Cash Flow: Expected to reach $580 million to $600 million in 2026, up 11% at the midpoint.
Stock-Based Compensation (SBC): Targeting a reduction to 3% to 4% of annual revenue over the next 3 to 4 years, with annual grants expected to decline to approximately $150 million in 2026.
Debt Reduction: Committed to reducing gross debt to $1 billion by the end of 2026, with a goal of achieving investment-grade credit rating.
Share Repurchase Plan: Board approved a $250 million increase in share repurchase plan, bringing total authorization to $500 million.
Q1 2026 Guidance: Subscription revenue expected to be $622 million to $625 million; total revenue of $640 million to $645 million; GAAP operating margin of 7.1% to 8.2%; non-GAAP operating margin of 22.8% to 22.9%; non-GAAP EPS of $1.16 to $1.19.
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Shareholder Return Plan
Quarterly Dividend Announcement: RingCentral announced its first-ever quarterly dividend of $0.075 per share, reflecting confidence in the company's future business performance and long-term cash flow generation.
Share Repurchase Program: In 2025, RingCentral repurchased approximately 5 million shares for $135 million. Additionally, the Board approved a $250 million increase in the share repurchase plan, bringing the total authorization to $500 million.
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Key Q&A
Q:What are the capital allocation priorities for 2026 and beyond?
A:The priorities include investing in business growth, reducing leverage to achieve investment-grade status, paying down gross debt to $1 billion by the end of 2026, refinancing a $609 million convert due in March with undrawn Term Loan A facilities, and returning additional capital through share buybacks and dividends. The company has repurchased $300 million of stock, authorized an additional $250 million, and initiated its first quarterly dividend.
Q:How is the demand environment across enterprise, mid-market, and SMB segments?
A:Demand remains strong across all segments. Small business is growing in double digits and has accelerated year-over-year, while enterprise faces pricing pressures due to COVID lapping contracts. The company expects these headwinds to subside by 2027.
Q:What are the levers for achieving further profitability and reducing stock-based compensation (SBC)?
A:Profitability is driven by strong gross margins above 80%, disciplined spending, operating leverage, and increased use of AI internally. SBC is being reduced from 11% to 9% this year, with a medium-term target of 3%-4% in the next 3-4 years. Operating margin expansion is balanced with reinvestment in innovation and growth.
Q:What is the average contract value for AI-related customers, and how does it compare to non-AI customers?
A:AI-related customers contribute significantly to revenue, with $100 million ARR from new products, including AI offerings. AI customers show better retention rates and contribute to 10% of ARR, approximately $250 million. AI-related revenue has a direct and indirect impact on overall revenue growth.
Q:How is the uptake of AI across different go-to-market channels and customer segments?
A:AI uptake is strong across segments and channels. The AIR product is popular among smaller customers, AVA with mid-sized customers, and ACE across all segments. GSPs like AT&T and TELUS are also adopting AI products. AI products improve customer revenue profiles, quality monitoring, and strategic goals.
Q:How has the partner program been adjusted to reflect AI priorities?
A:The partner program focuses on partners catering to key verticals like healthcare, financial services, and SLED. AI products, especially AIR, are performing well in SMBs and with GSP partners, who are deploying or planning to deploy these solutions.
Q:What does the integration with OpenAI's 5.2 voice model bring to the platform?
A:The integration enhances voice offerings by optimizing accuracy, latency, and cost-effectiveness. The platform is model-agnostic and uses different models based on transaction needs, whether real-time or post-processing.
Q:Review of Unclear Management Responses
A:No questions were identified where management avoided giving a direct answer or lacked clarity in their responses.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
AIR ACE
AIR AVA
AIR receptionist
ARR
AVA ACE
CEB
Patient Connect
RCAI
RingCX
RingCentral platform
RingCentral voice
SBC
Vice President
business call
care provider
carrier grade
communication
connection
conversation
customer experience
insight
intelligence
interaction
investment
minute
moat
point
product
retention
service
statement
tailwind
time
voice AI
RNG Transcript
RingCentral, Inc. (RNG) Q4 2025 Earnings Call Transcript
Positive2-19
The company's earnings call reveals strong financial performance with record free cash flow, improved operating margins, and significant AI revenue growth. The expansion of the partnership with AT&T and increased share repurchase plan further boost sentiment. Positive Q&A insights highlight robust demand and strategic AI adoption. Given the company's small-cap status, the strong financial results and optimistic outlook suggest a likely stock price increase of over 8% in the next two weeks.
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Positive12-1
The earnings call shows strong financial improvements with positive net income and EBITDA, driven by Bitcoin mining. Despite Bitcoin's price volatility, the company maintains a strategic 'mine and hold' approach, ensuring liquidity and flexibility. Strategic asset management, including debt optimization and site acquisition, aligns with long-term goals. The Q&A section indicates confidence in handling market risks and efficient capital allocation. With a market cap of approximately $2.56 billion, these factors suggest a positive stock price movement in the coming weeks, likely in the 2% to 8% range.
RingCentral, Inc. (RNG) Presents at UBS Global Technology and AI Conference 2025 Transcript
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RNG Slides
RNG Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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