RingCentral delivered a stronger-than-expected first quarter, beating analyst estimates on both earnings and revenue while posting record profit margins and raising its full-year outlook.
The cloud communications firm reported Q1 2026 revenue of $644 million, up 5.3 percent year over year and at the top end of its guidance range.
Non-GAAP EPS came in at $1.20 – 20 percent higher than the same period last year and slightly ahead of consensus. Subscription revenue, which makes up 97 percent of the total, grew 5.6 percent to $623 million.
Profitability at record levels
The standout story this quarter was margins.
GAAP operating margin hit 7.8 percent – a company record – improving by more than 600 basis points year over year, driven largely by a sharp reduction in stock-based compensation, which fell to 9 percent of revenue from 13 percent a year ago.
Non-GAAP operating margin reached 23 percent, while free cash flow came in at $140.65 million for the quarter, up 8 percent.
RingCentral raised its full-year free cash flow outlook to approximately $600 million – close to $7 per share – and paid its first-ever quarterly dividend of $0.075 per share during the period, alongside $81 million in share buybacks.
The company also addressed a $609 million convertible note maturity and now has no debt maturities until 2030.
CFO Vaibhav Agarwal described the free cash flow improvement as structural, pointing to the leverage inherent in a high recurring revenue model at scale, combined with disciplined hiring, expanded offshoring and vendor consolidation.
AI adoption accelerating
RingCentral has been investing heavily in artificial intelligence, and Q1 showed continued momentum.
Customers using at least one paid AI product now represent more than 10 percent of the base, having doubled year over year and grown double digits sequentially. Those customers are showing higher average revenue per user and net retention rates above 100 percent.
The company’s AI lineup centres on three products. AIR – an AI receptionist that handles inbound voice and text without requiring developer input – ended the quarter with over 11,800 paying customers, up 40 percent quarter over quarter.
ACE, a post-call analysis and agent coaching tool, surpassed 5,200 customers, up 85 percent year over year.
A more advanced tier, AIR Pro, which handles complex multi-step workflows across more than 100 prebuilt integrations including CRM, EHR and scheduling systems, has entered early access with its first paying customers, with healthcare emerging as an early fit.
The products are showing tangible results for customers. Excelsior Orthopaedics, a New York-based provider, cut its call abandonment rate from 22 percent to 8 percent and reduced average hold times from 30 minutes to three minutes after deploying RingCX and ACE.
California automotive broker Cartelligent, which deployed the full AI stack, reduced lead abandonment to zero and achieved an 85 percent lead-to-sign-up rate.
Total ARR reached $2.707 billion, up 7 percent year over year, with AI product ARR more than doubling in the same period. RingCentral is investing over $250 million annually in R&D, with an increasing share directed toward its AI portfolio.
New products and the Microsoft Teams play
The quarter also saw the launch of the Customer Engagement Bundle – a lighter-weight contact centre offering built into RingCentral’s core RingEX platform – which reached over 5,000 customers since launch, with nearly 40 percent attaching at least one paid AI product.
The bundle is now available as a Microsoft Teams integration, embedding voice, call queues, SMS and analytics directly inside Teams.
Other launches included branded messaging via RCS – delivering verified business identity into customers’ native messaging apps – enterprise branded calling, and an extension of SMS support to 190 countries.
On the formal contact centre side, RingEX now counts over 1,700 contact centre customers, up 70 percent year over year, with more than half using AI products.
The quarter saw a number of significant migrations from legacy on-premise systems, including the New York Mets, Coca-Cola United – one of the largest Coca-Cola bottlers in the US – and a major Fortune 500 insurer expanding its RingCentral deployment enterprise-wide.
Global service provider partners including Cox Communications, TELUS and Spectrum Business have also begun extending RingCentral’s AI products to their own customer bases, though management noted that meaningful GSP contributions to AI revenue are more likely to materialise in 2027 and 2028.
Outlook
On the earnings call, CEO Vladimir Shmunis pointed to the hybrid AI-and-human model as RingCentral’s core differentiator – the ability to handle both automated and human-assisted interactions on a single platform, without relying on third-party integrations.
“RingCentral has a deep and defensible moat in an expanding market,” he said.
For Q2, the company guided total revenue of $648 million to $653 million and non-GAAP EPS of $1.15 to $1.17. For the full year, RingCentral raised revenue guidance to $2.62 billion to $2.64 billion, with non-GAAP EPS projected at $4.85 to $5.01 – up 13 percent year over year.
