- Revenue Growth: Total revenue grew 4.8% to $644M in Q4 and 4.8% to $2.52B for full-year 2025, driven by 5.6% subscription revenue growth to $2.43B.
- Free Cash Flow Record: Achieved $530M in free cash flow in 2025, up 32% YoY, with per-share free cash flow exceeding $5.80 and targeting $590M in 2026.
- AI-Driven ARR Growth: AI-led products drove pure AI ARR to nearly triple YoY, with RCAI ARR approaching 10% of total ARR and net retention over 100%.
- Debt Reduction & Capital Allocation: Reduced gross debt by $275M, ending at 1.7x net leverage, while repurchasing $334M in shares and authorizing a $500M buyback plan.
- AI Investment & Margin Expansion: Allocated over $250M to AI products, targeting 20% GAAP operating margin in 3-4 years and GAAP margins of 9% in 2026 via gross margin leverage and reduced SBC.
AI-Led Product Portfolio Driving Growth
The company's AI-led product portfolio is a key driver of growth, with pure AI ARR revenues almost tripling year-over-year and ARR from customers utilizing at least one AI product (RCAI) more than doubling and approaching 10% of overall ARR. This is a significant development, as RCAI utilizing customers have higher ARPU and are stickier, with a net retention rate exceeding 100%. The company's investment in AI-led products is expected to continue, with over $250 million spent in 2025.
Guidance and Outlook
RingCentral provided guidance for Q1 and 2026, with subscription revenue growth expected to be between 4.5-5.5%, and total revenue growth between 4-5%. The company expects GAAP operating margin to reach 8.6-9.6% and free cash flow to be between $580-600 million. Non-GAAP operating margin is expected to be 23-23.5%, and non-GAAP EPS is expected to be between $4.76-4.97. Analysts estimate next year's revenue growth to be around 4.5%, in line with the company's guidance.
Valuation and Return Metrics
RingCentral's current valuation metrics indicate a premium, with a P/E Ratio of 78.38 and an EV/EBITDA of 13.34. However, the company's Free Cash Flow Yield is attractive at 18.0%, suggesting that the stock may be undervalued on a cash flow basis. The company's ROIC is 10.98%, indicating a decent return on invested capital, while the ROE is negative at -8.9% due to accounting losses. The Net Debt / EBITDA ratio is 3.69, which is manageable given the company's strong free cash flow generation.
Shareholder Returns and Capital Allocation
The company announced its first-ever quarterly dividend of $0.075 per share, indicating a commitment to returning capital to shareholders. RingCentral also has a share repurchase plan, with a $250 million increase, bringing the total authorization to $500 million. The company used $334 million for share repurchases in 2025, demonstrating its focus on returning value to shareholders.