RingCentral's Q3 2025 Earnings Call Contradictions: SBC Strategy, GSP Growth, AI Pricing, and RingCX Momentum

Date of Call: November 3, 2025

Financials Results

• Revenue: $639M total revenue, up 5% YOY (subscription revenue $616M, up 6% YOY)
• EPS: $1.13 non-GAAP diluted EPS, up 19% YOY
• Gross Margin: Subscription gross margin ~81%
• Operating Margin: 22.8% non-GAAP operating margin, up 180 bps YOY

Guidance:

• Q4 subscription revenue expected $618M–$626M; total revenue $638M–$646M.
• Q4 non-GAAP operating margin ~22.8%; non-GAAP EPS $1.12–$1.15; SBC $64M–$69M.
• FY2025: subscription revenue growth ~5.5%–6%; total revenue growth ~4.5%–5%; non-GAAP EPS $4.29–$4.33; operating margin ~22.5%; SBC $275M–$280M; FCF per share ~$5.71–$5.79 (≈92M shares).
• Capital: target gross debt ~$1B by end-2026; share repurchases opportunistic with ~$384M remaining authorization.

Business Commentary:

• Revenue Growth and AI Integration:
• RingCentral reported total revenue of $639 million, up 5% year-over-year, with subscription revenue growing 6% to $616 million.

• This growth was driven by the strong execution in the core business coupled with the progress from its AI-led new product portfolio, which is growing in strong double digits sequentially.

• Margin and Free Cash Flow Expansion:

• The company achieved non-GAAP operating margin of 22.8%, up 180 basis points year-over-year, with free cash flow reaching $130 million, up 23% year-over-year.

• This expansion was due to disciplined cost management, hiring discipline, increased use of offshoring, vendor consolidation, and improved efficiencies through AI internally.

• AI Product Adoption:

• RingCentral's AI portfolio, including products like AIR, AVA, and ACE, is contributing meaningfully to growth, with over 5,800 paying customers for AIR and more than 4,300 customers for ACE.

• Strong adoption is driven by the ability of these AI agents to enhance customer experiences and automate routine tasks, leading to improved operational efficiency and customer satisfaction.

• GSP Partnership Success:

• The company's GSP business, exceeding 10% of revenues, is growing in double digits, which is higher than the company overall growth rate.
• GSPs are increasingly adopting RingCentral's new product portfolio, including AI capabilities, which is contributing to the growth and revenue stability.

Sentiment Analysis:

Overall Tone: Positive

• "We delivered another strong quarter in Q3 with subscription revenue growth at 6% year-over-year."; "we drove record margins and free cash flow per share." Management highlighted double-digit sequential growth in AI products, rising margins and raised FCF outlook, supporting a positive tone.

Q&A:

• Question from Kasthuri Rangan (Goldman Sachs): As you project RingCentral 3.0, if a large Fortune 500 customer implemented your full portfolio, what business benefits would they get that they couldn't with RingCentral 1.0 or 2.0?
  Response: RingCentral 3.0 provides agentic voice AI across the entire customer journey (AIR, AVA, ACE), leveraging RingCentral's massive voice/text footprint to automate routing, assist agents in real time and generate insights, creating a feedback loop that improves AI performance and customer outcomes.

• Question from Elizabeth Elliott (Morgan Stanley): Which GSP products are gaining the most traction and is that growth durable/predictable; as partners scale, how should we think about revenue mix and margin vs direct sales?
  Response: GSPs (already >10% of revenue) are growing double digits and adopting RingCX plus the 3A AI portfolio (notably AIR); management says GSP revenue is SaaS-recurring and predictable, with strong unit economics (time to breakeven <18 months).

• Question from Brian Peterson (Raymond James): Thoughts on the durability of free cash flow and long-term drivers or targets for FCF?
  Response: FCF durability driven by cost discipline (hiring, offshoring, vendor consolidation), internal AI efficiencies, working-capital gains and lower SBC plus buybacks; management expects continued FCF and stronger FCF per share given these levers and recurring revenue.

• Question from Sitikantha Panigrahi (Mizuho): How is contact center momentum post-NICE renewal and RingCX performance in different markets; and how should we think about capital allocation given debt paydown and buybacks?
  Response: NICE resale extended but long sales cycles persist; RingCX is accelerating (double-digit sequential growth) and AI applies across EX/CX; capital allocation prioritizes innovation and M&A, deleveraging to $1B gross debt by 2026, with opportunistic buybacks (≈$384M authorization remaining).

• Question from Ryan MacWilliams (Wells Fargo): What advantages does RingCentral have vs startups for voice AI and AI receptionist use cases?
  Response: Scale and incumbency: decades of telephony/data, global network, large engineering/R&D spend, extensive reseller/GSP GTM and proven telephony infrastructure provide a material advantage over startups for high-volume voice-AI.

• Question from Peter Levine (Evercore ISI): How does the CommunityWFM acquisition strengthen RingCX vs stand-alone offerings, and can you walk through the Q4 guide and reasons for the slight full-year tick down?
  Response: CommunityWFM completes an integrated WEM offering (WEM Power) within RingCX, available a la carte or bundled; management provided Q4 numeric guidance ranges but did not attribute the guide change to a single macro factor on the call (emphasized product/seasonality and deal timing).

Contradiction Point 1

Stock-Based Compensation (SBC) Reduction Strategy

It involves changes in the company's strategy regarding stock-based compensation, which impacts financial forecasts and employee incentives.

How durable is free cash flow and what are the long-term goals? - Brian Peterson (Raymond James & Associates, Inc., Research Division)

2025Q3: We expect net new stock grants to be around 6% of revenue. We will continue to focus on helping shareholders with a disciplined approach to stock compensation. - Vaibhav Agarwal(CFO)

What internal changes are causing the reduction in SBC expenses? - William Fitzsimmons (Jefferies)

2025Q2: Stock grants remain a key tool for incentivizing employees, but we are disciplined in new grant activity, with net new grants expected to be around 6% of revenue. - Vaibhav Agarwal(CFO)

Contradiction Point 2

Global Service Provider (GSP) Revenue and Contribution

It involves the company's revenue mix and growth strategy, particularly the role of global service provider partnerships, which is a key revenue driver.

What drives the growth of your global service provider partnerships, which products are gaining traction, and how does this affect revenue mix and margins versus direct sales? - Elizabeth Elliott (Morgan Stanley, Research Division)

2025Q3: RingCentral's GSP business is growing in double digits, which is higher than the overall company growth, and contributes over 10% of revenues. - Vladimir Shmunis(CEO)

What was the sequential and year-over-year growth in total revenue for the quarter? - James Eugene Faucette (Morgan Stanley)

2025Q2: Our recurring revenue grew to over $1.4 billion, representing annual growth of 18%. - Vladimir G. Shmunis(CEO)

Contradiction Point 3

Strength and Growth of Global Service Providers (GSP)

It involves the growth and impact of GSPs on the company's revenue mix and margins, which are crucial for understanding the strategic direction and financial health of the company.

Can you discuss the strength of your global service provider partnerships, which products are gaining traction, and how this affects revenue mix and margins compared to direct sales? - Elizabeth Elliott (Morgan Stanley, Research Division)

2025Q3: RingCentral's GSP business is growing in double digits, which is higher than the overall company growth, and contributes over 10% of revenues. - Vladimir Shmunis(CEO)

What is the expansion potential for new products among existing customers? Are there international opportunities? - Jessica Wang (Raymond James)

2025Q1: Our GSP business is doing great. It's a growing part of our revenue, over 10%, and it's a growing part of our customer base. - Kira Makagon(COO)

Contradiction Point 4

Impact of AI on Pricing and ARR Growth

It involves the impact of AI on the company's pricing power and ARR growth, which are critical for understanding the company's financial and strategic direction.

Can you explain the sustainability of free cash flow and your long-term targets? - Brian Peterson (Raymond James & Associates, Inc., Research Division)

2025Q3: AI now replaces human labor, not IT, offering greater savings. - Vladimir Shmunis(CEO)

How much pricing power does the company have from AI-driven cost savings? Is ARR growth a leading indicator? - Kash Rangan (Goldman Sachs)

2025Q1: AI now replaces human labor, not IT, offering greater savings. As AI matures, it will positively impact ARPUs and overall profitability. - Vlad Shmunis(CEO)

Contradiction Point 5

RingCX Momentum and Product Ease of Deployment

It highlights differing perspectives on the ease of deployment and traction of RingCX, which are crucial factors for market adoption and competitive positioning.

How is RingCentral's contact center momentum, especially with NICE and RingCX, progressing? - Sitikantha Panigrahi (Mizuho Securities USA LLC, Research Division)

2025Q3: RingCX is showing strong double-digit sequential growth. RingCX momentum is supported by product ease of deployment and cost-effectiveness. - Vladimir Shmunis(CEO)

What are RingCX's key e-sales features and how does it compete with NICE? - Sitikantha Panigrahi (Mizuho)

2024Q4: RingCX is designed to be seamlessly integrated, AI-first, easy to deploy, and priced aggressively. It excels in the mid-market and has seen adoption by major companies like Genpact. - Vladimir Shmunis(CEO)