Key Points
RingCentral's voice and agentic AI technology is making it easier for businesses to communicate with customers.
The cloud pioneer is generating bountiful free cash flow.
Shares of RingCentral (NYSE:RNG) rose 5% on Friday after the communications software provider raised its full-year free cash flow forecast.
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AI-fueled growth
RingCentral's revenue grew 5.9% year over year to $676 million in the third quarter.
During a conference call with analysts, CEO Vlad Shmunis said artificial intelligence (AI) represents an even larger opportunity for RingCentral than the shift from traditional communication systems to the cloud.
"We are leading this next transformation with agentic voice AI, making customer interactions more efficient, intelligent, and actionable," Shmunis said.
Customers using at least one AI product now account for about 15% of RingCentral's total annual recurring revenue, or over $400 million. These sales are also growing rapidly, with AI-based ARR doubling compared to the prior-year period.
Rising cash profits
Better still, the communications specialist is becoming more profitable as it scales its business. Adjusted operating margin increased by 1.9 percentage points to 24.7%.
All told, RingCentral's adjusted earnings jumped 18% to $1.33 per share, while its free cash flow rose 21% to $157 million.
For the full year, RingCentral expects revenue of more than $2.65 billion, earnings per share of $5.07 to $5.12, and free cash flow of roughly $625 million.
This strong cash generation is enabling RingCentral to pay down debt and return capital to shareholders via dividends and stock buybacks.
"These results underscore the strength of our financial model and our focus on driving profitable growth and long-term shareholder value," chief financial officer Vaibhav Agarwal said.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.