AI is becoming a major growth and upsell opportunity for RingCentral, with paid AI customers generating higher net retention and average revenue per user. Only 13% of its customer base has purchased at least one paid AI product, leaving substantial room for expansion. RingCentral is investing more than $250 million in R&D, primarily on AI, while expanding its customer-engagement strategy through RingCX and a broader partnership with NiCE to reach more enterprise customers.
The company expects durable growth as COVID-related renewal pressures ease, while maintaining roughly 80% gross margins, improving operating margins and more than $7 in free cash flow per share this year. RingCentral's Cash Flow Hit a Record—And It's Fueling Bigger Returns RingCentral (NYSE:RNG) Chief Financial Officer Vaibhav Agarwal said IT spending remains healthy, with artificial intelligence taking a growing share of both existing and incremental technology budgets as customers move beyond experimentation and focus on measurable returns. Speaking at a Piper Sandler event, Agarwal said customers are increasingly seeking AI tools that improve productivity, produce identifiable outcomes and are integrated with their existing software providers rather than assembled from multiple point solutions.
He said RingCentral's demand and sales cycles have remained stable, supported by the mission-critical nature of communications and customer-engagement software. → 2 Stocks Breaking Out Post-FOMC With One Thing in Common It's RingCentral (NYSE: RNG) You Want In Your 2021 Portfolio, Not Zoom (NASDAQ: ZM) Agarwal said RingCentral is still in the early stages of monetizing AI across its customer base of more than 600,000 customers. The company previously disclosed that customers that have purchased at least one paid AI product represented 13% of its more than $2.5 billion total base, or roughly $350 million. "There's a long runway to be had," Agarwal said, adding that customers adopting paid AI products are generating higher net retention rates and higher average revenue per user, largely due to AI-related uplift. → 3 Nimble Free Cash Flow Names With Light Assets RingCentral's core unified communications-as-a-service, or UCaaS, business accounts for about 80% of the company's business and continues to grow in line with the market, he said.
The company's AI product portfolio is growing faster, though from a smaller base. Agarwal said broader AI adoption could eventually improve the company's overall growth profile. The company is investing more than $250 million in research and development, with a large majority of that spending directed toward AI products, according to Agarwal.
RingCentral is also deploying AI internally. He said the company recently ran an OpenAI pilot involving more than 2,000 engineers, who were trained through a case study alongside OpenAI. → J.B. Hunt's Stock Plunges After Market Misprices Profit Warning RingCentral is adjusting its marketing investments as customers increasingly discover and evaluate software through AI-driven search tools.
Agarwal said the company is broadening spending beyond traditional search engine optimization and reallocating resources to make its branding and content more available for AI-led search. However, he said RingCentral's customer acquisition strategy is not dependent solely on web traffic. The company also sells directly, upsells its existing customer base and works through channel partners and global service providers.
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