RNG Q1 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Gain

RingCentral RNG reported that in the first quarter of 2025, non-GAAP earnings were $1 per share, surpassing the Zacks Consensus Estimate by 4.17% and increasing 14.9% year over year.

Total revenues of $612.1 million beat the consensus mark by 0.22% and increased 4.8% year over year. RingCentral’s steady top-line growth has been driven by the continued expansion of its high-margin subscription business and the growing adoption of artificial intelligence-driven solutions.

Following a strong first-quarter 2025, RNG shares rose 0.49% to $26.80 in the pre-market trading.

RNG’s Q1 Quarterly Details

Software subscription revenues (96.4% of total revenues) increased 5.9% year over year to $590.1 million, beating the Zacks Consensus Estimate by 0.03%.

Ringcentral, Inc. Price, Consensus and EPS Surprise

 

Ringcentral, Inc. price-consensus-eps-surprise-chart | Ringcentral, Inc. Quote

Other revenues (3.6% of total revenues) decreased 17.9% year over year to $21.9 million but beat the Zacks Consensus Estimate by 6.8%.

Annualized Exit Monthly Recurring Subscriptions (ARR) increased 7% year over year to $2.53 billion, driven by strong demand for AI-powered multi-product offerings.

Enterprise ARR increased 6% year over year to $1.08 billion.

RingCentral’s Operating Details

The first-quarter 2025 non-GAAP gross margin contracted 130 basis points (bps) from the year-ago quarter to 76.9%.

On a non-GAAP basis, research and development expenses increased 6.3% year over year to $61.7 million.

Sales and marketing expenses decreased 0.6% to $233.3 million. General and administrative expenses moved down 1.1% to $42.6 million in the reported quarter.

On a non-GAAP basis, operating income was $133.4 million, up 10.2% year over year. The operating margin expanded 110 bps from the year-ago quarter to 21.8%.

The non-GAAP EBITDA margin was 25.3%, expanding 90 bps year over year.

RNG’s Balance Sheet & Cash Flow Details

As of March 31, 2025, cash and cash equivalents were $154.4 million compared with $242.8 million as of Dec. 31, 2024.

Cash flow from operations was $149.7 million in the first quarter of 2025 compared with $132.9 million in fourth-quarter 2024.

In the first quarter of 2025, RNG bought shares worth $50 million. The current remaining repurchase authorization is $218 million.

The non-GAAP free cash flow was $130.2 million compared with $111.8 million in the previous quarter. The non-GAAP cash flow margin was 21.3% in the first quarter.

RNG Issues Q2 View

For the second quarter of 2025, RingCentral expects revenues of $614-$620 million, indicating year-over-year growth of 4-5%.

Subscription revenues are expected to be $594-$600 million, indicating year-over-year growth of 5-6%.

The non-GAAP operating margin is expected to be 22-22.5% in the second quarter of 2025. Non-GAAP earnings are expected to be $1.00-1.04 per share.

Share-based compensation is anticipated to be $70-$73 million in the second quarter of 2025.

For 2025, RingCentral projects year-over-year revenue growth of 4-6% on a reported basis. Year-over-year Subscriptions revenue growth is expected to be 5-7%.

The non-GAAP operating margin is expected to be 22.5%, up 150 basis points year over year.

Non-GAAP earnings for 2025 are expected to be $4.13-$4.27 per share, and share-based compensation is likely to be $300-$310 million. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Zacks Rank & Stocks to Consider

Currently, RingCentral has a Zacks Rank #4 (Sell).

UiPath PATH, Broadcom AVGO and WidePoint WYY are some better-ranked stocks in the broader Zacks Computer and Technology sector.

UiPath sports a Zacks Rank #1 (Strong Buy) at present, and Broadcom and WidePoint carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UiPath is slated to report first-quarter fiscal 2026 results on May 29, followed by Broadcom’s second-quarter fiscal 2025 results on June 5 and WidePoint’s first-quarter 2025 results on May 15.

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This article originally published on Zacks Investment Research (zacks.com).

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