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Yahoo
4 days ago
- Business
- Yahoo
RNG Q1 Earnings Call: AI-Driven Portfolio Delivers Steady Growth and Margin Expansion
Office and call centre communications software provider RingCentral (NYSE:RNG) met Wall Street's revenue expectations in Q1 CY2025, with sales up 4.8% year on year to $612.1 million. The company expects next quarter's revenue to be around $617 million, close to analysts' estimates. Its non-GAAP profit of $1 per share was 4.2% above analysts' consensus estimates. Is now the time to buy RNG? Find out in our full research report (it's free). Revenue: $612.1 million vs analyst estimates of $610.6 million (4.8% year-on-year growth, in line) Adjusted EPS: $1 vs analyst estimates of $0.96 (4.2% beat) Adjusted Operating Income: $133.4 million vs analyst estimates of $129.7 million (21.8% margin, 2.8% beat) Revenue Guidance for Q2 CY2025 is $617 million at the midpoint, roughly in line with what analysts were expecting Management reiterated its full-year Adjusted EPS guidance of $4.20 at the midpoint Market Capitalization: $2.47 billion RingCentral's first quarter results were shaped by continued adoption of its AI-led multi-product strategy and growing customer demand in core voice communications. CEO Vlad Shmunis emphasized the company's progress in shifting traditional communications to cloud-based solutions, noting, "The early results of these new products are promising." Management highlighted strong momentum in products like RingCX and RingSense, as well as successful expansion within small business and global service provider (GSP) customer segments. President and COO Kira Makagon cited improved operational efficiency and customer outcomes, with AI tools helping to reduce manual work and drive business value for clients across healthcare, financial services, and retail. The company attributed margin improvements to disciplined sales and marketing spending and reported progress in free cash flow generation and debt reduction. Looking forward, RingCentral's outlook is anchored by ongoing investment in AI-powered solutions, expansion of its product suite, and a focus on profitable growth. CFO Abhey Lamba confirmed that the company intends to maintain operating profitability and free cash flow improvement, stating, "We are committed to further driving operational efficiencies resulting in margin expansion while enabling us to invest in growth opportunities." Management signaled cautious optimism given macroeconomic uncertainties, such as tariffs and shifting customer spending patterns, but expects continued demand for cost-saving AI products. CEO Vlad Shmunis added, "The next phase in our growth will be driven by leveraging AI throughout our growing portfolio with increased addressable market and wallet share." Management attributed the quarter's performance to adoption of new AI-enabled products, rising engagement among small businesses and GSP partners, and operational efficiencies that supported margin gains. AI product traction: The company's new AI-powered products, including RingCX (cloud contact center), RingSense (AI insights and coaching), and AIR (AI phone agent), saw rapid early adoption, especially among small businesses and GSPs. Management reported over 1,000 AIR customers and strong sequential growth in RingSense usage, with AI tools cited as drivers of measurable cost savings and productivity gains for clients. Small business momentum: ARR from customers with fewer than 100 employees grew by double digits, reaching a two-year high. These clients, often in healthcare, retail, and financial services, are adopting voice-centric AI products for customer engagement and operational efficiency, delivering higher average revenue per user and faster payback for RingCentral. GSP partnerships expanding: Global service providers accounted for over 10% of ARR, with double-digit growth and efficient customer acquisition. Major partners like AT&T, Vodafone, and Cox Communications are now reselling RingCentral's AI-powered solutions, extending reach in North America and international markets. Enterprise and channel strengths: Larger enterprises continue to adopt RingCentral, drawn to its integrations with platforms such as Microsoft Teams and Salesforce. Over half of $1 million-plus TCV deals in Q1 included multiple RingCentral products, signaling success in cross-selling and up-selling to existing accounts. Operational discipline: Operating margin improvement stemmed from efficiencies in sales, marketing, and internal use of AI, which has increased productivity in customer support, sales outreach, and product development. Record free cash flow enabled debt reduction and share repurchases, supporting a stronger balance sheet. RingCentral's forward guidance rests on expanding its AI-first portfolio, disciplined cost management, and continued growth in core markets despite macroeconomic uncertainties. AI-led product expansion: Management expects ongoing adoption of new AI-powered offerings—such as AIR and RingCX—to drive higher average revenue per user and open new customer segments. These products are positioned as cost-saving and productivity-boosting solutions for both existing and new clients. Go-to-market leverage: The company plans to deepen relationships with GSPs and channel partners, using these alliances to efficiently access international markets and supplement direct sales, particularly as cloud adoption accelerates among businesses replacing legacy systems. Macro environment monitoring: While not seeing immediate headwinds, management remains cautious regarding tariffs, interest rates, and broader economic conditions. The company aims to maintain flexibility in its approach, emphasizing prudent financial management and readiness to adjust strategy if customer demand or deal cycles shift. In the coming quarters, StockStory analysts will be watching (1) sustained adoption and revenue contribution from AI-powered products like AIR and RingCX, (2) the pace of expansion among small business and GSP customer segments, and (3) progress toward free cash flow and margin targets through operational efficiency. The ability to maintain growth despite macroeconomic fluctuations will also be an important marker of execution. RingCentral currently trades at a forward price-to-sales ratio of 1×. In the wake of earnings, is it a buy or sell? See for yourself in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
Yahoo
25-04-2025
- Business
- Yahoo
Winners And Losers Of Q4: RingCentral (NYSE:RNG) Vs The Rest Of The Video Conferencing Stocks
The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let's take a look at how RingCentral (NYSE:RNG) and the rest of the video conferencing stocks fared in Q4. Work is becoming more distributed, both across geographies and devices. In order for businesses to keep functioning efficiently, they need to be able to communicate as well as they did when the teams were co-located, which drives the demand for integrated communication platforms. The 4 video conferencing stocks we track reported a mixed Q4. As a group, revenues beat analysts' consensus estimates by 1.1% while next quarter's revenue guidance was in line. Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 25.9% since the latest earnings results. Founded in 1999 during the dot-com era, RingCentral (NYSE:RNG) provides software as a service that unifies phone, text, fax, video calls and chat in one platform. RingCentral reported revenues of $614.5 million, up 7.6% year on year. This print was in line with analysts' expectations, but overall, it was a slower quarter for the company with EPS guidance for next quarter missing analysts' expectations and a miss of analysts' annual recurring revenue estimates. "We had a good fourth quarter, capping a strong year,' said Vlad Shmunis, RingCentral's founder and CEO. The stock is down 20% since reporting and currently trades at $24.61. Read our full report on RingCentral here, it's free. Started in 2001, Five9 (NASDAQ: FIVN) offers software-as-a-service that makes it easier for companies to set up and efficiently run call centers to offer more tailored customer support. Five9 reported revenues of $278.7 million, up 16.6% year on year, outperforming analysts' expectations by 4%. The business had a strong quarter with an impressive beat of analysts' EBITDA estimates and a solid beat of analysts' billings estimates. Five9 delivered the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The stock is down 40.4% since reporting. It currently trades at $24.93. Is now the time to buy Five9? Access our full analysis of the earnings results here, it's free. Founded in 1987, 8x8 (NYSE:EGHT) provides software for organizations to efficiently communicate and collaborate with their customers, employees, and partners. 8x8 reported revenues of $178.9 million, down 1.2% year on year, in line with analysts' expectations. It was a slower quarter as it posted a slight miss of analysts' billings estimates. 8x8 delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 36% since the results and currently trades at $1.83. Read our full analysis of 8x8's results here. Started by Eric Yuan who once ran engineering for Cisco's video conferencing business, Zoom (NASDAQ:ZM) offers an easy to use, cloud-based platform for video conferencing, audio conferencing and screen sharing. Zoom reported revenues of $1.18 billion, up 3.3% year on year. This number was in line with analysts' expectations. Zooming out, it was a mixed quarter as it also logged accelerating growth in large customers but full-year EPS guidance missing analysts' expectations. Zoom had the weakest full-year guidance update among its peers. The company added 93 enterprise customers paying more than $100,000 annually to reach a total of 4,088. The stock is down 7.2% since reporting and currently trades at $75.22. Read our full, actionable report on Zoom here, it's free. The Fed's interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump's presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025. Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate. Join Paid Stock Investor Research Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here. Sign in to access your portfolio
