What happened

Shares of RingCentral (RNG -0.79%) surged as much as 10.7% higher on Wednesday morning, lifted by a robust earnings report. The cloud-based communications and collaboration specialist beat analyst estimates across the board. Management also offered mixed guidance for the next quarter and boosted the earnings target for the full year. The stock had cooled down to a 6.5% gain as of 11:50 a.m. ET.

So what

In the second quarter of 2022, RingCentral's sales rose 28% year over year to $487 million. Within that total haul, subscription revenue increased by 32% to $463 million. Adjusted earnings rose from $0.32 to $0.45 per diluted share. Six percent of the incoming revenue was kept as free cash flows, up from 3.8% in the year-ago period.

The average Wall Street analyst would have settled for earnings near $0.40 per share on sales in the neighborhood of $479 million. Management's third-quarter guidance pointed to year-over-year revenue growth of roughly 21% and an earnings boost of approximately 42%. The top-line target stopped short of current analyst estimates while the earnings guidance exceeded the Street's consensus.

For the full year, RingCentral held its revenue target steady and in line with analyst estimates at $2.01 billion. The midpoint of the yearly earnings range rose from $1.85 to $1.93 per share, well above the Street view of $1.86 per share.

Now what

Many analysts lowered their price targets on RingCentral's stock after this report, though even the lowest of the new targets sits 21% above Tuesday's closing price and 13% above share prices at the time of writing. RingCentral is proving its command of the unified communications as a service (UCaaS) market, having reached 5 million paid user seats in this quarter, with strong growth in the cloud-based call center sector.

The idea of cloud-based communications continues to grow, long after the initial burst of excitement during the early COVID-19 lockdowns. As a leader in that exciting space, RingCentral is going places. And the stock looks cheap, trading 72% lower year to date. If you want to invest in cloud-based software and services at a reasonable price, RingCentral just made a solid case for itself in this impressive earnings report.