Why RingCentral Stock Rocketed Higher Today
Key Points
Demand for RingCentral's artificial intelligence (AI)-powered products is rising.
The company's profitability is rapidly improving.
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Shares of RingCentral (NYSE: RNG) surged on Friday after the cloud communications specialist delivered a solid fourth-quarter financial report.
By the close of trading, RingCentral's stock price was up more than 34%.
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AI-driven gains
RingCentral's revenue rose 5% year over year to $644 million in the fourth quarter.
The business messaging platform's investments in artificial intelligence (AI) are bearing fruit. The number of customers using its AI Receptionist offering jumped 44% sequentially to over 8,000.
In all, RingCentral's AI-powered products now generate more than $100 million in annual recurring revenue (ARR).
"AI is proving to be a strong tailwind, with ARR from customers who utilize at least one of our monetized AI products more than doubling year over year and now approaching 10% of our overall ARR," CEO Vlad Shmunis said in a press release.
Better still, RingCentral is becoming more profitable as it scales its business. Its operating income checked in at $42 million, up from $16 million in the prior-year quarter, as its operating margin improved to 6.6% from 2.5%.
All told, RingCentral's adjusted earnings per share increased 20% to $1.18. That topped Wall Street's estimates, which had called for per-share profits of $1.13.
Paying dividends
For 2026, RingCentral expects revenue to grow by 4% to 5%, with its free cash flow rising by 11% to roughly $590 million.
This strong cash production is enabling RingCentral to initiate a quarterly cash dividend of $0.075 per share, payable on March 16 to shareholders of record as of March 9.
"We're confident in the future of our business, and are excited to initiate our first-ever dividend," Shmunis said.
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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.
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