Hello, and welcome to Zoom's Q1 FY '26 Earnings Release Webinar. As a reminder, today’s webinar is being recorded. I’ll now hand things over to Charles Eveslage, Head of Investor Relations. Charles, over to you.

Thank you, Megan. Hello, everyone, and welcome to Zoom's earnings video webinar for the first quarter of fiscal year 2026. I’m joined today by Zoom’s Founder and CEO, Eric Yuan, and Zoom’s CFO, Michelle Chang. Our earnings release was issued today after the market closed and may be downloaded from the Investor Relations page at investors.zoom.com. Also, on this page you'll be able to find a copy of today's prepared remarks and a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the second quarter and full fiscal year ‘26; our expectations regarding financial and business trends; impacts from the macroeconomic environment, our market position, stock repurchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations; and product initiatives, including future product and feature releases, and the expected benefits of such initiatives. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Zoom assumes no obligation to update any forward-looking statements we may make on today’s webinar. And with that, let me turn the discussion over to Eric, who will be debuting his new Custom Avatar for Zoom Clips. Over to you, Eric.

Thank you, Charles. Thank you everyone for joining us. Today, I’m using our new Custom Avatars for Zoom Clips with AI Companion to share my part of the earnings report. I’m proud to be among the first-ever CEOs to use an avatar in an earnings call. It’s just one example of how Zoom is pushing the boundaries of collaboration and communication. At the same time, we know trust and security are essential. We take AI-generated content seriously and have built in strong safeguards to prevent misuse, protect user identities, and ensure avatars are used responsibly. Now, let's get into it. We delivered another solid quarter, showcasing the power of our platform and innovation engine in helping customers navigate short-term challenges with greater efficiency while positioning them for long-term success. Through AI-powered innovation, Zoom is redefining modern work and delivering major cost savings and productivity gains for our customers. We had a tremendous quarter of innovation and launched several agentic AI innovations that advance our vision of intelligent productivity. Zoom Tasks helps surface, manage and complete tasks across Zoom Workplace to get more done, bringing tasks together in a centralized management tab. Our new calendar manager allows you to ask AI Companion to schedule meetings on your behalf. Soon, it will be able to optimize scheduling by suggesting time slots, resolving conflicts, managing meeting updates, and proactively blocking focus time. We also made Custom AI Companion, Zoom Workplace for Frontline and Zoom Workplace for Clinicians generally available in Q1. Adoption of Zoom AI Companion continues to grow, with monthly active users up nearly 40% quarter over quarter. Just last week, Raymond James shared in a press release how they are rolling out AI Companion meeting summaries firm wide. Zoom's cutting-edge AI capabilities will enable financial advisors to offload time-consuming administrative work, allowing them to dedicate more time to what truly matters, nurturing client relationships and delivering strategic financial guidance. AI Companion usage is quickly expanding far beyond summarizing your meetings to helping you answer questions, schedule and prepare for meetings, search through information, build content, and catch up, freeing you up to focus on higher-impact work. While we continue providing tremendous AI value at no additional cost to users with a paid license, we're now monetizing through Custom AI Companion. Though only weeks in market, we're seeing strong enthusiasm from several Global 2000 trial customers, who are especially excited about features like Bring Your Own Dictionary and Index, meeting summary templates, and our Jira integration. We're also rolling out Custom AI Companion internally to allow Zoomies to get immediate answers from our custom knowledge bases, and empower them across a range of skills specific to their function. These milestones in our agentic vision exemplify how we're helping customers stay ahead through continuous innovation focused on delivering real business value. Zoom Workplace continues to drive value for customers and drive customers to adopt other solutions within our growing platform. In Q1, the 2024 NBA Champion Boston Celtics doubled down on Zoom. As long-time Zoom Meetings users, the Celtics appreciated Zoom's unique balance between simplicity and rapid innovation and chose to upgrade to Zoom Workplace Enterprise Plus, including Zoom Phone. And the game didn’t end there; in overtime, the Celtics decided to modernize their employee intranet with a custom-branded Workvivo employee experience solution, designed just for their organization. And we also landed a leading financial institution who selected the Zoom collaboration experience platform in an over $1 million ARR deal. This allowed them to simplify their tech stack and reduce costs by moving away from Teams and other third-party solutions. And beyond costs, they bought into our better-together vision that unites the customer experience and collaboration experience under one AI-first platform, and discussions are well underway to upsell them to the Zoom Customer Experience platform. Zoom Phone continues to perform strongly, with revenue growing in the mid-teens. It is also opening new markets for Zoom by integrating seamlessly with other productivity suites and delivering a best-in-class, AI-first voice experience. The adoption of Zoom Phone integration with Microsoft Teams has grown significantly, showing how we can meet customers where they are and add value within their existing tech stack. We continue to drive encouraging results across our high growth products that are positioned to target lines of business.

Thank you, Eric, and hello, everyone. I’m excited to be here with you today, let's dive into the financial results. In Q1, total revenue grew approximately 3% year-over-year to $1.175 billion. This result was $8 million above the high end of our guidance. As a reminder, Q1 of FY ‘26 had one fewer day than Q1 of FY ‘25. Our Enterprise revenue grew approximately 6% year-over-year, now represents 60% of our total revenue, up 2 points year-over-year. We continue to see encouraging signs of stability in our Online business. In Q1, average monthly churn was 2.8%, a 40 basis point improvement year-over-year, and our lowest ever churn rate for a first quarter. In our Enterprise business, we saw 8% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers now make up 32% of our total revenue, up 2 points year-over-year. Our trailing twelve-month net dollar expansion rate for Enterprise customers in Q1 held steady quarter-over-quarter at 98%. Pivoting to our growth internationally; our Americas revenue grew 4% year-over-year, EMEA grew 1%, and APAC grew 2%. Moving to our non-GAAP results, which as a reminder exclude stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains or losses on strategic investments, and all associated tax effects. Non-GAAP gross margin in Q1 was 79.2%, slightly lower than Q1 of last year, as we continued to invest in AI. We remain focused on driving efficiencies and delivering AI capabilities in a scalable, cost-effective way and continue to reiterate our goal of reaching an 80% non-GAAP gross margin over the long term. Non-GAAP income from operations grew 2% year-over-year to $467 million, exceeding the high end of our guidance by $22 million. Non-GAAP operating margin for Q1 was 39.8%, down 23 basis points from Q1 of last year. The margin decline was in line with expectations and due to changes in our bonus structure and investments in AI.

Thank you, Michelle. We will now start the Q&A segment of the call. When I call your name, please activate your video and unmute. Our first question will come from Siti Panigrahi with Mizuho.

Great. Thank you so much. And Eric, it's great to see your Avatar there. So, I want to ask about the Zoom AI Companion. It's good to see that, that's growing 40%, MAU growing 40% Q-over-Q. So now that you embed base level AI as part of your paid subscription. So, what kind of adoption are you seeing in terms of SMB segment even seeing free to paid migration? Are you seeing anything like that? And as you're launching also your paid AI company in SKU, how should we think about the adoption and revenue contribution there?

Yes. So Siti, thank you. First of all, I truly love my AI-generated Avatar. I think, we are going to continue using that. I can tell you, I like that experience a lot. So back to your question about AI Companion. First of all, if you look at the number of active users, look at the Q4 and Q1. And these are five times more, right? And meaning it's pretty healthy and more and more customers they enable AI Companion realizing the value, one example, like, Raymond James, right. So the leverage Zoom AI Companion features like making summary kind of improve their productivity. It's pretty accurate and with actionable insights as well. Overall, I think more and more customers that are going to enable AI Companion. So in terms of customized AI Companion and also the monetization, I think we already have a few customers, prospect testing that now and it's pretty powerful. And of course, we can integrate it with your companies, your data index and data as well and also like a dictionary and also supported the customized meeting summary template and our customized AI avatar as well. I think with more and more customers, they play around realize the value. I’m pretty sure the customer AI Companion can help us and monetize more.

Okay. Great. Thank you.

Our next question will come from Meta Marshall with Morgan Stanley.

Great. Thank you, and congrats on the quarter. I appreciate the statistics about kind of the increased traction with kind of the higher priced SKUs on the AI portion of Contact Center. But just any statistics you can give on just kind of either how customers are starting with Contact Center with the higher price SKUs with the kind of virtual agents or just anything to add there? And then second, on your kind of more cautious outlook on Enterprise, is that just based on elongating deal cycles or is that based on just kind of more cautious outlook on seats? Thanks.

Yeah. Michelle, I would address the first one, and you address the second one. So, if you look at the Zoom Contact Center, which is our customer experience platform and Zoom Virtual Agent is a very important part of that. And if you look at Q1, Q1 is the largest quarter in terms of ARR contribution. And so, if you look at the number of the upsells of Zoom Virtual Agent, it is the largest quarter ever. So meaning, we do have a lot of upsell opportunity to sell Zoom Virtual Agent and to our existing installed base. And also take a Zoom Phone, for example, right? We also deploy our Contact Center for a long time. When our team enabled Zoom Virtual Agent, we do see the huge value because we use the two metrics merit, how successful that is, one is the CCaaS (ph), another one is a self-service rate. Operate (ph) deploy Zoom Virtual Agent, it does help us a lot because CCaaS number 70. And guess what, the self-service rate is 97%, meaning 97% of those tickets resolved very well without any human agent involved, right? So it's a huge value. So we do see more and more customers want to test Zoom Virtual Agent. At the same time, literally, by the end of this month, we are going to launch our new version of Zoom Virtual Agent with a lot of new features plus Virtual Agent will be part of that as well. I think there are more upsell opportunities and also more new opportunities as well to double down on Zoom Virtual Agent, which is based on our AI Companion technology.

Maybe from my side, two quick comments on Contact Center customer experience, and then I'll move over to the question on the guide. Two things that I think we're seeing increasingly in terms of our customer buying behavior and customer experience is customers going straight to the Elite just because of all the AI value that is in that. And then maybe the other pattern that I think is clear in our deals is that this concept of better together that frequently customers are wanting a communication and collaboration platform together with the customer experience platform and we see that as a real strong theme as to why Zoom's winning. So I wanted to add that in. On your question on the color on the enterprise, let me start by just saying that broadly, across online and enterprise, the majority of the business in Q1 saw no change in buying behavior, no change in demand, still strong demand. Our fundamentals, as you see in all of the stats that we produce be a record low churn and online to our customer deal size over 100,000 in enterprise strength of so many of the expansive TAM products that we have still so strong. What we saw in terms of my comments about primarily prudence going forward. But we saw in Q1, in a couple of customer scenarios in larger U.S. customers, where there was just more prudent sales elongation and more scrutiny on deal terms, no losses, but just, again, a bit of a sales elongation and more scrutiny. So look, we feel that going into Q2 and into the second half, we have a great TCO and business value story. And so that’s really where we’re pivoting to make sure that we’re really getting out and landing that message with our customers.

Great. Thanks.

Our next question comes from Arjun Bhatia with William Blair.

Thank you, and I want to congratulate everyone on a strong start to the year, particularly in the Contact Center area. Eric, I have a question on a different topic. You talked about the Team's integration with Zoom Phone. I'm interested in how the competition is shaping up for Zoom in the video meeting solutions space, particularly now that AI Companion has been in the market for a while. We are noticing an increase in adoption as they unbundle their AI features. Are you starting to see a shift in the competitive landscape, and how is this affecting new customer acquisitions on your core platform?

Yeah. It's a great question. So look at the value of Zoom offering and first of all, and employees really love the Zoom experience. And if you do any service, right, in any company, it's no matter which solutions they deploy. If you had an employee make a decision, we have high confidence they all will choose Zoom platform, right? The second thing is, to look at the total cost of ownership, in particular, look at AI, our AI Companion is part of our offering compared with the other vendors who would like to charge a customer a lot per user per month, right? So meaning for those customers truly care about the employee experience, truly deep dive to understand the total cost of ownership of those offerings, they are going to keep using Zoom or go back to the Zoom platform. In one example, like, one big fintech company in Q1, they dropped the Teams suite for the Zoom platform because they like the Zoom experience with a lot of innovations, much more reliable and a great user interface, they are familiar with, right? So I think as long as we keep improving the product experience and make sure Zoom is the employee choice, I think we will see more and more opportunities. Also, if you look at the entire workplace, we already beyond meetings, right? The value of the workplace can deliver more and more value to customers. And we do see some more opportunities ahead of us.

All right. Perfect. Good to hear. Thank you.

The one I might just quickly add in is, we're seeing increasingly with the Team's integration. Many more customers come to us that way. So to your question about are we seeing that change in deal. We saw a lot of wins that we're proud of in Q1, there were Team's integrations.

Perfect. Thank you so much.

Next up, we have Alex Zukin from Wolfe Research.

Thanks for taking my question. It's Evan here for Alex. Congrats on the solid quarter. I want to ask about the Zoom Contact Center, which I find very interesting, and it’s great to see the new disclosure indicating it's a triple-digit million ARR business growing in high double-digits, if I'm correct. Previously, you shared year-on-year growth in terms of the number of customers with more than $100,000 ARR. Can you provide more details about the deal sizes driving that growth? Also, what are you seeing in the competitive environment for CCaaS, how is Zoom positioned, and what win rates are you experiencing? Are you seeing more greenfield or replacement deals? Thank you.

Sure, I can start. Michelle, feel free to add in. Looking at the year-over-year growth in the total number of Contact Center customers, we see a growth of around 65%. When examining the top 10 deals, none of them involve replacing existing cloud-based vendors or solutions. Additionally, if I remember correctly, six or seven of these top deals were facilitated by our channels. Many of these channels assist us in replacing other cloud-based vendors. We not only offer numerous innovations and features but are also seamlessly integrated with our Phone platform, with Zoom Virtual Agent being part of that. This is why customers recognize the value of our Zoom Connect Center.

I mean the only other thing, I think those are the metrics that we give for disclosure. The other one might just be a thread back in the dialogue earlier on the Elite SKU. So we are seeing great traction. I think it's a 10% mix shift year-over-year towards and licenses to our Elite SKU. So we're really proud and see a lot of momentum towards our AI-first solution.

Also at the same time, I want to share with you if you look at a lot of indirect customers. Their Contact Center as well still on prem. So a lot of opportunities for Zoom for other cloud-based Contact Center winners well, and in particular, you look at the AI-based virtual agent and also can play a big role to drive the future growth.

Thank you, guys.

Thank you. Our next question is from Michael Funk with Bank of America.

Hey, Eric. Hey, Michelle. This is Matt Bullock on for Mike Funk, clearly. Thanks for taking the question. I'd love some additional color on the early reception from customers to the online monthly pro pricing increase seems pretty modest, but would be interested in color on pricing sensitivity, any variance in customer churn for that cohort. And then assuming this pricing increase goes well, could we start to see pricing be more of a lever in the online business segment, considering all the positive trends with churn?

So maybe I can take that one, Eric. One thing that I think is really important just to note, and you said it is, we feel like it's a modest increase, but one that reflects really incremental value delivered to the customer. And that's sort of the bar that we hold ourselves whether you think about that as sort of the entirety of the platform, the AI, but I also want to call out that with our price increase, in particular, we doubled the storage limit. So look, it's a very different online business, I would say, than one that we had maybe in the past. And the evidence points that I look at that under are, obviously, the record low churn that we continue to see quarter-after-quarter, the mix of our customers that have been with us over 16 months, the percentage that are buying with us annually. So we feel like we're just in a different place. We always take price increases very thoughtfully. And I would say this isn't the first one we’ve done, but no plans to do others at this stage.

Got it. Thank you.

Next up, we'll hear from William Power with Baird.

Okay. Great. Thanks for taking the question. I actually want to circle back on online and kind of the earlier macro discussion. And I guess just trying to understand that the levels of conservatism built into the online segment. You're trying to build a little more conservatism, it sounds like on the enterprise side, why wouldn't churn maybe start to increase a little bit on online relative to where you've been? And I guess maybe just probably what we are kind of the assumptions there? And then I have a second question.

Our outlook reflects a more turbulent environment compared to when we last spoke. To reiterate my previous comments, we experienced strong demand throughout our business. We have not seen any macroeconomic impact on our online segment, and this has not been factored into our outlook. However, in specific customer situations within the enterprise sector, we opted for a cautious approach in our outlook and guidance.

I would like to ask about Zoom Phone. You mentioned that it is growing in the mid-teens, which seems to be higher than the industry growth rates based on what we see from competitors. This suggests that you are continuing to gain market share. However, there is still a significant market potential when considering the number of business phones available. Can you share your observations regarding the competitive landscape and the growth outlook? Is the mid-teens growth rate sustainable from this point forward, or is there potential for acceleration? What opportunities do you see ahead?

So from a high level, in terms of opportunity, if you look at the total install of business phones, the number of on-premise is still higher on cloud businesses, right? And I think it's around $150 million still on-premise seats, right? It's still a lot of opportunities. Those customers in the next few years, they still need to migrate to the modern cloud business solution. We are in much better position with our entire workplace platform, integration, open system. And that's the reason why our growth rate of phone is higher than the other cloud-based phone service providers.

And maybe just to add on. There's opportunity for Zoom on both. We have a lot of strong partnerships like the Mitel partnership is a big one for us in the on-prem stuff. And then we certainly have go-to-market motions focused on competitive takeouts in the cloud, as well as I might just say, across both. We've been talking about for a couple of earnings cycles here, just an investment and a maturation in our channel motion, which also will be advantageous to our phone business. So we think about it as a big opportunity. And maybe the other one that I might call out is the new partnership with Bell Canada. And then increasingly, we are seeing AI drive deals and seen more new customers to Zoom come through phones. So things that we're encouraged by.

Okay. Thank you.

Our next question is from Samad Samana with Jefferies.

All right. Great. Thank you for taking my questions. It's good to see everybody. Maybe first just on Workvivo, the customer growth there is really strong. Eric, you called out an acceleration in your prepared remarks. How should we think about maybe Meta migrations or that piece of that mix? And can you just remind us at what point you lap the Meta benefits and maybe how durable the growth there is? And then I have one follow-up for Michelle afterwards.

Michelle, do you want to take that?

Yeah. So look, I would say that we grow from both the Meta partnership as well as before that was consistent before the partnership was in place. Certainly, we're focused heavily on capitalizing against that amount of migration. And I think we said before that it's towards the second half of the year that, that sort of opportunity will normalize. What was the next question?

Just to add on to what Michelle said. You look at the number of the Workvivo customer count year-over-year, it's more than 100% growth. Huge opportunities, not only driven by the Meta migrator customers, but also new opportunities as well.

Maybe just a punch to Eric's comments. 90% of our Workvivo customers again are new to Zoom. So it's a really great way for us to introduce the breadth of our platform as well to real strong customer and brand names upmarket.

Understood. Michelle, regarding the accelerated buyback, is that primarily a response to favorable market conditions in Q1, or should we interpret it as an indicator that the buyback will remain at these levels due to how you're planning to allocate cash in the short term? Please help us understand the significance of this, considering it was your largest buyback activity to date.

Yeah. So look, I would say, you saw in our two announcements, the one I doubled down on when I started that look, this is going to be something that's important to Zoom of that original 2.7 tranche the two together. We have about 1.2 remaining. The way that I would think about Q1 is really that it reflects the reinforcement of confidence across myself, Eric and the Board. And look, certainly, we intentionally kind of went after acceleration here, but we remain committed to what we said before, which is the intention and expectation that we will go through the remaining $1.2 billion in fiscal '26.

Great. Thank you, both for taking my questions. Appreciate it.

Thank you.

Our next question comes from Tyler Radke with Citi.

Hi. Good afternoon. Thanks for taking the questions. Wanted to go back on the billings outlook for the next quarter. And you talked about some of the dynamics on the enterprise side of the business. But I'm wondering if you could sort of help us understand when you started to see some of these macro impacts layer into the business, how performance has been throughout kind of the month of April as well as May. And then as you think about the online business, how are you thinking about the new customer addition motion? I know churn was ahead of expectations, which was good to see. But how sensitive is that new customer acquisition motion to the macro? And if you could comment on what you're seeing there.

Yeah. So first with the comment on when we saw the enterprise, I would say that we saw deals are pausing and elongation throughout the quarter, but certainly, the bulk of our volume in enterprise happens towards the tail end of the quarter and things more so than. To your online question of new customers, we had a strong quarter in terms of new customers as well as churn. And so that's why I start to say, no impact of macro or no signs of macro impacting.

All right. Next up, we'll hear from James Fish with Piper Sandler.

Hey, guys. Thanks for the question here. Just first, on the channel transformation, what were some of the changes put in place and what's been some of the early feedback with that?

Yeah. So I can answer that and then Eric, feel free to jump in. Look, I would say, first and foremost, it's about expanding our partner ecosystem. It's about changing some of the channel incentives and really doubling down on those. And then in particular, one of the things that we have been talking about with our partner ecosystem was just the need to help them get from quote to cash faster. And so you may have seen that there was an article in the channel press about some efforts that we've made to really take that time from hours to minutes. So I would say broadly, our investments in the channel fall across those three things. And then I'd just say, look, the channel investments are very closely targeted towards our phone and Contact Center business where naturally they have both the ability to supplement what customers need as well as the ability to influence sales. And we're pleased with what we see in terms of the number of deals, the percentage of deals in both Contact Center and Phone that are channel-led or heavily channel influenced.

Got it. And I could follow up actually on Samad’s prior question, it's nice to see the $100 million mark. It seems like most of the success you guys talked about, though, is coming from that Zoom ecosystem customer, meaning they already got workplace and phone together. So is there a way to understand what I'm guessing is still a very low percentage in terms of the penetration of Contact Center into that sort of combined base that uses Workplace and Phone together. Thanks.

I'd say we don't disclose that as a metric, James. But what I would say is, we see both bidirectional. My comments earlier are that we find that really to be a differentiator with customers where the integrations of being able to go out and talk to customers, come back in and resolve problems in-house, we find that to be a real big win for us customer-wise.

Thank you. Our next question comes from Allan Verkhovski with Scotiabank.

Hey, Thank you for taking the questions and congrats on all the product innovation. Michelle, I wanted to just double-click on the revised enterprise revenue outlook. You mentioned that there was some deal elongation that you saw in the quarter. Just to be clear, are you guiding for a wider range of outcomes such that if the macro trends were to remain consistent, then you could potentially see more upside through the rest of the year? And could you also just update us on your updated timeline for when we could see NRR potentially get back to 100%.

Yeah. So let me start with the first one. Our outlook implies a consistent kind of macro environment relative to what we saw in Q1. So that's the way to think about the guide. In terms of net dollar expansion, I would say, we're pleased with the stability that we saw. It's been something that we've seen come in over the last four quarters. It’s certainly a foundation for us in terms of expansion and our numbers have been in line with guidance.

Our next question comes from Catharine Trebinick with Rosenblatt Securities.

Thank you for answering my questions. Since Jim Fish addressed my channel inquiry, I'll focus on your international efforts. Could you provide an update on that, particularly since it was a significant area of emphasis? My team has mentioned that you have made considerable staffing investments in the U.K. Could you share some insight into the products or key business areas you are concentrating on internationally? Thank you.

Yeah, I can take that. Let me say that our strategy is a global one Catharine, I think, the way that we go-to-market, the products that we are working on even our push and channel, our go-to-market and our product strategy are consistent globally. So maybe let me just say a little bit more of what we see really resonating in our EMEA business is really that better together and full buying into the platform of both that communication and collaboration experience, together with the customer experience. Maybe the other one that I would throw in is, we're really seeing employee experience go quite well in EMEA. So we're encouraged about, again, the broad growth thesis resonating in Europe as well.

Next up, we'll hear from Peter Weed with Bernstein.

Peter, are you there?

We can move ahead. Peter needs a minute. All right. We're going to move ahead here. Next up, we'll hear from Tom Blakey with Cantor Fitzgerald.

Great. Thanks for taking my questions. Curious, just maybe in terms of the elongation, Michelle, you can talk about maybe any trends in down sells in enterprise if you've seen that. In 1Q, just kind of counterbalancing the reported results with some very strong CCaaS and Zoom Phone? And then just maybe an update, second question once here about just reaching that kind of 10%, it's not a line in the sand, but we talked maybe a year or so ago or longer ago that CCaaS would reach about 10% of revenue at the same kind of time horizon is phone just like to get an update on that where CCaaS sits. Thanks.

We continue to see year-over-year improvement in churn and enterprise, along with a consistently low churn rate in online. When looking at competitive dynamics, it seems to be expanding. There's a focus on holistic value and a vision of better collaboration and customer experience. We are observing customer retention and satisfaction as mentioned by Eric, alongside an emphasis on innovation and dedication to our customers. Additionally, we are finding ways to coexist and succeed differently, such as through the Teams integration. Overall, we feel positive about the current trends, including the developments in recent deals. Regarding your second question about CCaaS reaching around 10% of revenue, we've aimed to provide additional insights for investors, including customer counts and details on Elite SKU and triple-digit ARR. We'll keep it at that for now.

Thank you.

Our next question is from Patrick Walravens with Citizens.

Hi there. This is Austin Cole on for Pat Walravens. Eric, it's really cool to see the AI Avatar. Maybe one day soon, more of us will be on this call using AI avatars. And that's actually what I wanted to ask you about is, what kind of high-level trends maybe you see taking place through conversations with customers right now that give you kind of confidence in AI's role both in communication and how they're getting work done. So kind of a broad question there, but maybe even specifically, like what are the use cases for these avatars, and how are you using this stuff internally to shape the work?

Great question. For the first time, we allowed an AI-generated avatar to participate in the earnings call. I really enjoyed that experience, and we will continue to enhance our Clips product. Regarding AI and its adoption, we examine every service and demonstrate to customers how to use AI to improve their product. Core features such as meeting summaries and chat message composition have been available for a while. Customers are eager to implement what we can provide and integrate with their existing systems, as they are developing their agents alongside other vendors. We also create agents and strive to ensure our AI Companion framework is customized for integration with other agents. Recently, we announced integrations with ServiceNow and JIRA. Our goal is to transition from a collaboration and communication company to a system of actions. Following a meeting, we not only provide a summary but also generate task items, and our AI agent will automatically create a general ticket and follow up. This evolution creates a comprehensive business workflow, which would be challenging without the AI agent, requiring manual driving and integration of other systems. Customers are focused on automating everything with the agentic framework because these agents can communicate with each other using the A2A protocol and the MCP protocol. We are very excited about collaborating with other vendors as part of this business workflow.

Okay. Thank you.

Our next question is from Peter Levine with Evercore.

Thank you for fitting me in. Michelle, you have been discussing frontline workers more frequently. Can you clarify what that product is? Are you targeting something like Microsoft's F1 or F3 SKU? I would like to understand your intentions regarding frontline workers. Additionally, about AI Companion 2.0, there is a monetization aspect for those interested in customizing their own AI agents. Can you provide insights on whether you expect to generate revenue from this product this year? It seems it might be more relevant for the second half of the year, so any information you can share about your expectations would be appreciated. Thank you.

Sure. So let me start with frontline workers. The way to think about that is I mean let me start with the market opportunity broadly. 80% of the workers in the world are frontline workers and yet only 1% of the SaaS spend is on them. And so what that tells us, what our customers tell us is there's a lot of value that they need. And so this product was really born out of that. And so think about what the product does in sort of, I would call it, three buckets. It's on-ship communications. It's workforce management, and its AI assistant sort of the flow of frontline worker work. And so that's kind of how to think about it. It just came into market. We are pleased. We've already closed several deals post-Giga. We're excited with the interest that we see, in particular, in industries like healthcare, retail, and manufacturing, where Zoom is strong. To your second question on custom AI Companion, I would say we're equally excited, different use case there. That's the two I talked about earlier. I won't repeat. Seen also excitement in the way that you should think about our H2 outlook for all of these is that we've factored in sort of what we see in measured things, given the size and scale of our business, it won't be a movable number in FY '26, and we'll just continue to update investors as we go through these earnings calls.

Great. Thank you very much.

Our final question will come from Matthew Harrigan with Benchmark.

Hello. Thank you. Now that you have gained experience in creating SLMs, what are your observations? It seems that many people are increasingly purchasing from NVIDIA. As you enhance the algorithms and improve your calculations, how is this impacting your business in terms of costs and opportunities? Thanks.

Eric, do you want to take that?

Sure. So our AI approach is a federated AI approach, meaning we have our own large dynamic models. Some customers just want to standardize our own model. At the same time, we integrated seamlessly with several other platforms. This is a very standard practice, right, how to optimize our costs while offering value. The reason why we can offer the free Zoom AI Companion to our customers is because of the optimization that works so well in terms of value and cost. We can offer that. And the customized AI Companion is different. It's more like enterprise data integration and other components. If you look at just the pure AI front, we are very competitive because we always balance cost and value. We have a very large team working on optimization.

Thanks, Eric. Nice avatar.

Thank you. Appreciate it. Next earnings call we will be much better.

Thank you. This concludes the Q&A portion of today's call. I'll turn it back over to Eric for closing remarks.

Thank you all and really appreciate your time. Thank you for all those investors who trust us, and we are going to do all we can to truly deliver happiness to you all. Thank you. Appreciate it.

Thank you.

Thank you, Eric and Michelle. This concludes today's earnings call. Thank you all for attending, and have a great rest of your day.