RingCentral’s AI Push Drives 10% ARR Growth, But Enterprise Pressure Looms

Date of Call: Feb 19, 2026

Financials Results

• Revenue: Q4 total revenue $644M, up 4.8% YOY; full year $2.52B, up 4.8% YOY
• EPS: Q4 GAAP EPS $0.26; Q4 non-GAAP EPS $1.18, up >20% YOY; full year non-GAAP EPS $4.36, up 18% YOY
• Gross Margin: Q4 subscription gross margin above 80%; full year 80.5%
• Operating Margin: Q4 non-GAAP operating margin 22.8%, up >140 bps YOY; full year non-GAAP operating margin 22.5%, improved 150 bps YOY; Q4 GAAP operating margin 6.6%, up ~4 points YOY

Guidance:

• Full year 2026 subscription revenue growth 4.5% to 5.5%, total revenue growth 4% to 5%.
• GAAP operating margin 8.6% to 9.6%, expanding ~430 bps at midpoint; non-GAAP operating margin 23% to 23.5%, expanding ~75 bps at midpoint.
• Free cash flow $580M to $600M, up 11% at midpoint; SBC $240M to $250M, ~9% of revenue at midpoint.
• Non-GAAP EPS $4.76 to $4.97, up 11% at midpoint.
• Q1 2026 subscription revenue $622M to $625M; total revenue $640M to $645M; non-GAAP operating margin 22.8% to 22.9%.

Business Commentary:

Revenue and Financial Performance:

• RingCentral reported total revenue of $2.52 billion for 2025, with subscription revenue growing by 5.6%.
• The company achieved record free cash flow of over $0.5 billion, up 32% versus 2024.
• Revenue growth was driven by stable monthly net retention rates above 99% and strong demand across customer cohorts, particularly in small business and global service provider segments.

AI Product Growth and Customer Utilization:

• ARR from customers utilizing at least one monetized AI product (RCAI utilizing customers) approached 10% of overall ARR, more than doubling year-over-year.
• This growth was driven by higher AI product adoption across all customer cohorts, with new logo acquisitions showing a higher AI attach rate, contributing to increased ARPU and retention.

Operating Margin and Profitability Improvement:

• Non-GAAP operating margin for 2025 improved to 22.5%, a 150 basis points increase year-over-year, and GAAP operating margin turned positive at 4.8%.
• Improvements were attributed to operating leverage, disciplined spending, and a significant reduction in stock-based compensation (SBC), which decreased by 340 basis points as a percentage of revenue.

Capital Allocation and Shareholder Returns:

• RingCentral announced its first-ever quarterly dividend of $0.075 per share and increased its share repurchase plan by $250 million.
• These actions were supported by strong free cash flow generation and a commitment to balance growth investment, deleveraging, and returning capital to shareholders.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated: 'We had a strong Q4 capping a solid 2025, in which we met or exceeded all our key operating metrics.' CFO noted: 'Q4 was a strong finish to a good year.' Management announced first-ever quarterly dividend and expressed confidence in AI growth drivers and capital return strategy.

Q&A:

• Question from Brian Peterson (Raymond James): Congrats on that above consensus free cash flow outlook for '26. Just maybe double-clicking on that and with that cash flow, I'd love to understand what are your capital allocation priorities as we think about 2026 and beyond...
  Response: Capital allocation priorities are: (1) investing in AI-led growth (over $250M R&D), (2) deleveraging to achieve investment-grade rating (gross debt to $1B by end of 2026), and (3) returning capital via buybacks (total authorization $500M) and a new quarterly dividend.

• Question from Brian Peterson (Raymond James): Great to hear. And maybe just following up. I would love to understand how you would characterize the demand environment versus enterprise, mid-market, SMB...
  Response: Demand remains strong across all segments. SMB and global service providers are growing in double digits with strong unit economics. Enterprise faces pricing pressure due to COVID contract lapping, expected to subside in 2027.

• Question from Sitikantha Panigrahi (Mizuho Securities): I want to dig into a little bit on your profitability. That's impressive, seeing the GAAP profitability and the target for further expansion...
  Response: Operating margin expansion driven by strong gross margins (>80%), disciplined spending, operating leverage (revenue growth outpacing expense growth), and SBC reduction. Long-term goal: 3-4% SBC of revenue and 20% GAAP operating margin in 3-4 years.

• Question from Sitikantha Panigrahi (Mizuho Securities): Okay. That's helpful. And then a quick follow-up on AIR that grew 8,000 customer plus. So that's pretty good. But what's the average contract value for those AIR customers? Are you seeing the ARPU for AI-related customer different?
  Response: Customers using paid AI products represent nearly 10% of total ARR (~$250M), with significantly higher ARPU and net retention rates exceeding 100%. AI products are a key driver of revenue growth and retention.

• Question from James Faucette (Morgan Stanley): This is Jamie on for Elizabeth. Would be great to just get a sense on how you're seeing the different uptake of AI across different go-to-market channels, maybe like thinking about the GSP space or sort of verticals...
  Response: AI product uptake is good across segments. AIR is particularly strong in SMB for easy setup; AVA in mid-market; ACE across board. GSP partners (e.g., AT&T, TELUS) are also adopting AI products for their SMB user bases.

• Question from Andrew King (Rosenblatt Securities): Just wanted to get some extra color on how you might have adjusted your partner program in order to reflect the company's new AI priorities?
  Response: Engaging key partners in verticals like healthcare, financial services, and SLED. AI is especially resonating with SMB customers via GSP partners, with many already deploying or planning to deploy AIR.

• Question from Ryan MacWilliams (Wells Fargo) [via Cyrus]: With the recent announced integration with OpenAI's like 5.2 voice model, what are OpenAI's models bringing specifically to the Ring platform that are enhancing your voice offering?
  Response: The platform is model-agnostic, selecting the best model (like 5.2) for each scenario based on accuracy, latency, and cost. It tests all models and uses arbitration to apply the most suitable one for real-time or post-processing needs.

Contradiction Point 1

Demand Environment and Pricing Pressure in Enterprise

Contradiction on the severity and expected duration of pricing pressure in the enterprise segment.

What did Brian Peterson say about Raymond James' earnings? - Brian Peterson (Raymond James)

2025Q4: Pricing pressure is more pronounced in enterprise due to COVID contract lapping, but this headwind is expected to subside in 2026. - Vladimir Shmunis(CEO)

How is demand across enterprise, mid-market, and SMB segments? - Elizabeth Porter (Morgan Stanley)

20251104-2025 Q3: The GSP business is growing in double-digits, faster than the company's overall growth. It is as predictable as the direct business... GSP partners are readily adopting the new AI product portfolio. - Vladimir Shmunis(CEO), Vaibhav Agarwal(CFO)

Contradiction Point 2

Stock-Based Compensation (SBC) as a Percentage of Revenue

Contradiction on the near-term trajectory for SBC relative to revenue.

What is your question, Sitikantha Panigrahi from Mizuho Securities? - Sitikantha Panigrahi (Mizuho Securities)

2025Q4: SBC as a percentage of revenue is expected to decline from ~11% in 2025 to ~9% in 2026, with a medium-term target of 3-4% in 3-4 years. - Vaibhav Agarwal(CFO)

What are the key drivers of profitability and GAAP operating margin expansion, and how is SBC expected to evolve? - Peter Levine (Evercore ISI)

20251104-2025 Q3: The focus was on the strategic benefits of the WFM acquisition and the ongoing momentum of the AI product suite. The company did not provide a detailed breakdown of the Q4 guide adjustment. - Kira Makagon(COO)

Contradiction Point 3

Capital Allocation Priorities and Gross Debt Target

Contradiction on the timeline for achieving the gross debt target.

What are your earnings call highlights, Brian Peterson (Raymond James)? - Brian Peterson (Raymond James)

2025Q4: The company is prioritizing investment in growth (AI-led products), deleveraging to achieve an investment-grade rating (targeting $1 billion gross debt by end of 2026)... - Vaibhav Agarwal(CFO)

Given the above-consensus 2026 free cash flow outlook, what are your capital allocation priorities, including long-term strategies for debt payback and dividends? - Sitikantha Panigrahi (Mizuho Securities USA LLC, Research Division)

2025Q3: The company is committed to reducing gross debt to $1B by 2026... - Vaibhav Agarwal(CFO)

Contradiction Point 4

Growth Predictability of Global Service Provider (GSP) Business

Contradiction on the predictability of GSP growth.

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2025Q4: Demand remains strong across all segments... Pricing pressure is more pronounced in enterprise due to COVID contract lapping... - Vladimir Shmunis(CEO)

How would you describe the demand across enterprise, mid-market, and SMB segments? - Elizabeth Elliott (Morgan Stanley, Research Division)

2025Q3: The GSP business is already over 10% of revenue, growing in double-digits, and as predictable as the direct SaaS business. - Vladimir Shmunis(CEO)

Contradiction Point 5

Capital Allocation Strategy Post-Debt Reduction

Contradiction on the capital allocation priorities following debt reduction.

Can you provide an update on the company's current financial performance? - Brian Peterson (Raymond James)

2025Q4: The company is prioritizing investment in growth (AI-led products), deleveraging to achieve an investment-grade rating (targeting $1 billion gross debt by end of 2026), and returning capital via dividends and buybacks. - Vaibhav Agarwal(CFO)

Given the above-consensus 2026 free cash flow outlook, what are your capital allocation priorities for 2026 and beyond, including long-term debt payback and dividend strategies? - Catharine Anne Trebnick (Rosenblatt Securities Inc.)

2025Q2: The company will be opportunistic. Uses include: (1) continued debt repayment (net debt at $1.1B, leverage at 1.8x), (2) stock buybacks (current authorization increased to $500M), (3) investing in innovation and M&A that makes sense. - Vaibhav Agarwal(CFO)