Beaten-down software stocks RingCentral and Five9 rally as earnings quell some AI concerns

Shares of RingCentral and Five9 experienced a significant uptick on Friday, buoyed by positive earnings reports that alleviated concerns regarding the impact of artificial intelligence on their business models. RingCentral's stock skyrocketed by 34%, while Five9 saw a robust increase of approximately 14%, both outperforming Wall Street expectations and offering encouraging future forecasts. These companies, known for their customer service solutions including voice integration, indicated that the growing adoption of AI technology has actually enhanced demand for their services. Recent developments in AI tools, capable of rapidly creating applications and websites, had previously unsettled investors, causing a notable selloff across the software sector. There was a prevailing fear that innovations from companies like Anthropic and OpenAI could threaten traditional software-as-a-service models as businesses gravitate towards faster and more efficient AI alternatives. Year-to-date, the iShares Expanded Tech-Software Sector ETF, which tracks the software industry, has seen a decline of approximately 23%. This downturn has been largely driven by significant losses from companies such as Atlassian, Unity Software, and Rapid7, all of which have lost over half their value. In addition, major players like Salesforce and Microsoft reported declines of 30% and 18%, respectively. Despite these challenges, RingCentral has rebounded, up around 36% this year, following a 17% drop in 2025. The company views AI as a positive influence on its business, announcing that its annual recurring revenue from customers utilizing AI tools has doubled year-over-year, reaching nearly 10%. They have also integrated ChatGPT models into their voice AI offerings. Five9 also reported impressive growth, revealing that its enterprise AI bookings have more than doubled from the previous year, contributing to an increase in its backlog. The company’s AI portfolio has now surpassed $100 million in annual recurring revenue. Chairman Michael Burkland emphasized during an earnings call that while advancements in large language models (LLMs) will continue, they cannot fully replace the need for a customer service organization. Despite facing a 3% decline this year on the heels of a 51% sell-off in 2025, Five9 remains optimistic about its future prospects.