Zoom Communications, Inc. Q4 FY2026 Earnings Call

Hello everyone and welcome to Zoom's Q4 FY2026 Earnings Release Webinar. I will now hand things over to Charles Evislage, Head of Investor Relations. Charles, over to you.

Thank you Catherine. Hello everyone and welcome to Zoom's Earnings Video Webinar for the fourth quarter in full fiscal year 2026. I'm joined today by Zoom's Founder and CEO Eric Yuan and Zoom 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 gap during this call we will make forward-looking statements including statements regarding our financial outlook for the first quarter in full fiscal year 2027 2027 our expectations regarding financial and business trends impacts from the macroeconomic environment, our market position, stock for purchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations, and product initiatives, including future product and future 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 10k and quarterly reports on form 10q 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's giving his prepared remarks via Zoom custom avatar. Thank you, Charles.

FY26 was a pivotal year for Zoom and for our industry. We grew Q4 revenue 5.3% and full-year FY26 revenue 4.4%, an acceleration of 130 basis points over FY25. These results reflect the increasing value of our platform with innovations like AI Companion 3.0 as our platform expands and evolves into an AI-powered system of action for modern work. The inflection and growth reflects a structural shift in the market. Organizations are moving beyond systems of record and engagement toward AI-driven systems of action that help customers and employees get real work done. Zoom is uniquely positioned to lead this transition we bridge work both inside and outside the organization across collaboration customer experience and employee experience using ai to take conversations all the way to completion and this directly connects to the three priorities we outlined last quarter to bring this system of action to life first elevate the workplace with ai second drive growth of new ai products And third, scale AI-first customer experience. Let me start by speaking about scaling AI-first customer experience. Zoom's advantage in customer experience comes from embedding it within our broader system of action, not treating it as a standalone solution, as many competitors do. Our CX platform is differentiated because it is built on the same platform that powers collaboration inside the organization and extends seamlessly to customer engagement and other external workflows. By unifying internal and external workflows, we eliminate traditional silos and enable customer journeys to move continuously from conversation to completion. Within customer experience itself, Zoom delivers a cohesive set of intelligent capabilities that empower both human and virtual agents and turn live interactions into coordinated action across teams and systems to drive outcomes. our ai innovation across ai assisted human agents and virtual agents is translating into improved service outcomes and cost savings for our customers and incremental revenue for zoom you see this in zcx arr continuing to grow in high double digits and in fact accelerating in q4 driven by ai monetization more concretely you see it in the story our deal composition tells about why customers choose us. Every one of our top 10 deals this quarter included paid AI and seven represented competitive displacements of leading CCAS vendors. Let me bring this to life with some Q4 customer wins. We welcomed Aeroflow Health, a medical device company who chose Zoom Contact Center in a major Q4 deal spanning ZCC Elite and ZVA Voice Plus Chat to replace a leading CCAS vendor due to our bold AI vision for CX and ability to execute. we also saw many expansions. MLB and OpenLane both began as Zoom contact center customers and in Q4 bought a combination of ZCC Elite and ZVA Voice to deliver reimagined AI first human plus virtual agent customer service. In other cases, customers are adopting the full Zoom CX suite alongside Zoom Phone and Workplace to transform service operations end-to-end. For example, in Q4, a major insurance provider decided to replace an expensive contact center stitched to an ai point solution with our unified zoom phone contact center and zva voice to automate call triage reduce agent workload and increase overall efficiency we also partnered with surrey and sussex healthcare nhs trust who administers regional nhs services to modernize their manual fragmented inbound call operations through a single secure digital platform powered by zoom phone zoom contact center and zva voice plus chat to enable ai powered self-service improve wait times reduce missed appointments and enhance overall patient outcomes and call operations efficiency these wins also demonstrate the momentum behind zoom virtual agent and the customer response to our voice ai within the cx suite Only a few quarters in market, ZVA Voice has already been included in four of our top 10 CX deals. We are also starting to see ZVA Voice bring in new customers and act as a beachhead for potential expansion into large organizations. In Q4, we signed a nearly seven-figure ARR deal with a leading U.S. retailer leveraging ZVA to handle inbound calls across more than 1,100 locations. ZVA 3.0 announced yesterday builds upon this growing momentum. It operates across voice and chat, taking action across systems, executing complex multi-step workflows, learning continuously from how human agents resolve issues and seamlessly bringing people into the conversation with full context when needed. That's how we are helping enterprises close the loop on customer issues at scale. and it's a powerful example of how our CX platform can drive measurable efficiency, better experiences, and real business value for our customers. Our second priority is to grow AI revenue streams beyond customer experience and to extend the system of action to new AI products across vertical and horizontal workflows. Zoom Revenue Accelerator, our revenue orchestration platform that uses the power of Zoom AI to drive prospecting, coaching, CRM automation, and more, is a great example of this vertical value. ZRA had a strong quarter. The number of customers purchasing it grew 50% year over year, and its largest Q4 transaction spanned HR services, real estate, technology, and automotive sectors. Another great example of vertical workflows is BrightHire, which we were very excited to close in Q4 and bring similar conversational AI value to recruiting and hiring bright hire is early in its growth path together we have a tremendous opportunity to combine bright hires domain specific ai capabilities with zoom's product breadth and distribution advantages to transform how organizations recruit hire and retain talent we are also making progress with custom ai companion which brings horizontal value to workflows across zoom workplace and beyond we're proud to welcome the following new customers showing the breadth of what this product can unlock harmonic a leader in virtualized broadband and video streaming solutions added custom AI companion wall-to-wall to their workplace deployment to integrate across multiple third-party tools and support knowledge retention sales enablement and employee onboarding custom AI companion also made headway in sectors like education where AI literacy is of paramount importance for both students and administrators. In Q4, Grand Valley State University adopted it wall-to-wall alongside Zoom Workplace for Education, supporting their efforts to streamline Help Desk and other student-facing processes by connecting administrators and community members more seamlessly with internal knowledge bases and workflows. At the same time, they added ZVA to their existing zoom contact center to provide students with more responsive omni-channel support last the foundation of our system of action sits within zoom workplace spanning the full meetings and work life cycle where context is created and work moves forward by evolving collaboration into an engine of action while preserving the flexibility of an open ecosystem Zoom workplace remains simple, reliable, and deeply preferred by solopreneurs and Fortune 10 companies alike. Q4 marked a big step forward with the launch of AI Companion 3.0, advancing our system of action by turning meetings from one-off events into engines of ongoing work. As innovation accelerates, adoption continues to grow and broaden. In Q4, AI companion monthly active users more than tripled year-over-year, MAUs engaging AI through the side panel more than doubled quarter-over-quarter, and within Zoom Phone, MAUs using AI features increased 35% sequentially. This momentum reflects not only scale, but expanding depth of engagement across workflows. We also revitalized our core Zoom workplace client, simplifying the user experience with refreshed interfaces and streamlined navigation to make action even more intuitive. Our product mastery continues to translate into competitive wins and meaningful displacements across meetings, phone, chat, and beyond. Zoom Phone had some great competitive wins, and Phone ARR continues to grow in the mid-teens. Let me highlight some customer wins to bring this to life. In Q4, we landed a Fortune 10 customer on Zoom Phone in a large and competitive deal for 140,000 seats, replacing Cisco Calling. We also secured two major U.S. financial institutions on Zoom, Workplace and Phone, displacing Teams and Cisco Calling. Additionally, we significantly expanded our footprint with a leading global bank, adding nearly 50,000 Zoom Phone seats in Q4 and bringing their total deployment to an incredible 150,000 seats. These financial sector wins highlight our ability to meet the complex, highly regulated needs of the industry. Our customer-centric approach to innovation, particularly around AI and security, enables institutions to ensure compliance, mitigate regulatory risk, and modernize operations. The momentum is similar in healthcare, where we witnessed a growing number of workplace and phone wins that also added customer experience. They are choosing Zoom not only for sector-specific capabilities, but for the differentiation offered by our cohesive AI-first system of action, spanning patient engagement, care coordination, and back-office collaboration. In the age of AI, Zoom becomes more essential. We are building the system of action that turns conversations into coordinated execution across work inside the organization and with the world outside, including customer engagement, sales, recruiting, and more. By connecting collaboration to action, Zoom drives measurable outcomes, and we're still early in what this system can unlock.

Now, let me turn it over to Michelle to take us through the financials. michelle thank you eric and hello everyone i'm excited to be with you today to share zoom's q4 and full fy26 financial performance in q4 total revenue grew 5.3 percent year over year to 1.25 billion dollars or 4.8 percent in constant currency this result was 12 million dollars above the high end of our guidance our enterprise business continues to be strong with revenue growing 7.1 percent year-over-year representing 61 percent of our total revenue up one point year-over-year and our online business continues to show signs of stabilizing in q4 average monthly term was 2.9 percent as compared to 2.8 percent in q4 of FY25 in our enterprise business we saw nine percent year-over-year growth in the number of customers contributing more than a hundred thousand dollars in trailing 12-month revenue these customers now make up 33 percent of our total revenue up two points here every year our trailing 12-month net dollar expansion rate for enterprise customers in q4 continues to hold steady at 98 percent pivoting to our growth internationally our america's revenue grew six percent year-over-year EMEA grew five percent and APAC grew three percent moving to our non-GAAP results which as a reminder exclude stock-based compensation expense and associated payroll taxes net litigation settlements acquisition related expenses impairments of assets charitable donations of common stock tax benefits from discrete activities net gains on strategic investments and all associated tax effects. Non-GAAP gross margin in Q4 was 79.8 percent, up one point from Q4 of last year, primarily due to continued cost optimization efforts while we remain focused on investing in the app. Non-GAAP income from operations grew 4.6 percent year-over-year to $490 million, exceeding the high end of our guidance by $8 million. Non-GAAP operating margin for q4 was 39.3 percent as compared to 39.5 percent in the prior year period the slight margin decline was due to changes in our bonus structure and investments in ai non-gap diluted net income per share in q4 increased by three cents year over year to 1.44 on approximately 303 million non-gap diluted weighted average shares outstanding this result included a headwind of approximately 11 cents from higher than expected taxes due in part to tax trips discrete to the quarter turning to the balance sheet deferred revenue at the end of q4 group 5 percent year over year to 1.42 billion dollars above the high end of our previously provided range For Q1, we expect deferred revenue to be up 1% to 2% year-over-year, which takes into account the recent trend of larger and longer duration competitive takeouts in phone and contact center that often include credits to defray transition costs. Looking at both our billed and unbilled contracts, our RPO increased over 10% year-over-year to approximately $4.2 billion. dollars we expect to recognize 57 of the total rpo as revenue over the next 12 months down two points year over year in q4 we had operating cash flow of 355 million dollars as compared to 425 million dollars in the prior year period free cash flow was 338 million dollars as compared to 416 million dollars in the prior year period our q4 operating cash flow and free cash flow margins were 28.4 percent and 27.1 percent respectively we ended the quarter with 7.8 billion dollars in cash cash equivalents and marketable securities excluding restricted cash under the current 3.7 billion dollar share buyback plan in q4 we repurchase 3.8 million shares for approximately 324 million dollars that brought our total repurchased under the plan to 36.3 million shares for 2.7 billion dollars at the end of q4 looking into FY27 and beyond we intend to leverage buybacks to at a minimum offset dilution on a yearly basis reflecting management's confidence and long-term commitment to shareholder value creation pivoting from q4 i'd like to highlight some of the major financial milestones for the full fy26 total revenue for fy26 grew 4.4 percent and our enterprise revenue grew 6.5 percent both accelerating 130 basis points year over year along with the top line progress we also improved margins we reached a non-gap gross margin of 79.7 percent up 84 basis points from the prior year and a non-gap operating margin of 40.4 percent up 100 basis points from the prior year free cash flow through 6.4 percent to 1.9 billion dollars and finally we continue to be strong stewards of shareholder capital we reduce stock-based compensation expense by 18 percent in FY26 that combined with the continued execution of our buyback allowed us to reduce our diluted weighted average shares outstanding by 2.5 percent turning to guidance in q1 we expect revenue to be in the range of 1.22 to 1.225 billion dollars this represents 4.1 percent year over year growth at the midpoint we expect non-GAAP operating income to be in the range of 487 to 492 million dollars representing an operating margin of 40 percent at the midpoint Our outlook for non-GAAP earnings per share is $1.40 to $1.42, based on approximately 304 million shares outstanding. For FY27, we expect revenue to cross the $5 billion milestone and land in the range of $5.065 to $5.075 billion, which at the midpoint represents 4.1% year-over-year growth. we expect our non-GAAP operating incomes to be in the range of 2.05 to 2.06 billion dollars representing an operating margin of 40.5 percent at the midpoint this margin guidance includes a temporal tailwind of 180 basis points related to an accounting amortization change offset by 70 basis points of pressure from the second era of our shift from SBC to cash bonus compensation in addition our outlook for non-GAAP earnings per share in FY27 is $5.77 to $5.81 based on approximately 308 million shares outstanding included in this guidance is an interest income headwind of approximately $50 million in FY27 due to lower yields in a declining rate environment. As a reminder, future share repurchases are not reflected in the share count and our EPS guidance. For FY27, we expect free cash flow to be in the range of $1.7 to $1.74 billion, dollars which includes approximately 75 million dollars of incremental capex related to the post-pandemic refreshment cycle of assets across our u.s data centers as well as similar interest income headwinds previously mentioned as we end fy26 and we move into fy27 we're thrilled with our progress and we're excited about our differentiated vision as an ai first system of action the success gives us confidence in our ability to grow durably beyond five billion dollars in revenue across progress in meetings continued growth in phone scaling our ai first customer experience and in introducing new ai revenue streams we're excited to do all of this and still maintain our focus on profitability cash flow generation and shareholder returns thank you to our customers investors and of course the entire zoom team for your trust and your support with that catherine please cue up the first question thank you michelle we'll now begin the q a portion of the call when i read your name please turn on your video and

unmute as a reminder in an effort to hear from everyone please limit yourself to one question Our first question will come from Arjun Bhatia with William Blair.

Perfect. Thank you so much. Eric, maybe one for you. We'll start. I'm just curious how you think about AI monetization progress in fiscal 2027. You called out a couple examples of, you know, customers adopting custom AI companion and going ball to ball. How do you think that and your broader portfolio of sort of, you know, AI products evolves in terms of adoption and contribution to revenue next year?

Yes, great question. So, well, you know, very optimistic about our AI technology monetization in AI-527. Dreamed by, first of all, and customized AI company. You know, more and more in the customers, they see the value and they would like it, you know, because AI company will be built in for free. But customer-like company is different. We can monetize. That's the one aspect, right, to drive the AI, you know, monetization. At the same time, we have very solid company, 3.0 Foundation, and the team working so hard to innovate. We levered that technology to empower other use cases like ZVA, you know, Zoom Economic Center, Zoom Phone, and ZRA. almost every, you know, those, the product lines, right, for customer experience or for sales experience, even for webinar, right, we can leverage AI, you know, to empower, you know, those, the vertical use cases, also, we can, you know, monetize, again, you know, take the ZCX, for example, right, look at top 10 ZCX deals we close in Q4, four of them already attached with Zoom voice aging, right, Zoom voice aging is built upon our AI technology, we see more and more opportunities like that. I'm, I cannot be more excited, you know, than before, right, because of AI and because our monetization strategy for AI. Thank you.

Our next question comes from Alan Farkovsky from VTIG.

Hey guys, can you hear me? Yep. Awesome. Congrats on the strong quarter here. Great to see the acceleration and Zoom customer experience. Michelle, I wanted to ask you, and I'll stick to question here but on the q1 deferred revenue growth guidance of one and a half percent the midpoint can you just quantify the impact from the larger competitive takeouts and for the fiscal 27 revenue guidance can you just give some color like what you're assuming for enterprise and online revenue growth let me touch on the deferred revenue one so I think this is one that's really important for investors to understand and maybe not read into it as you traditionally might um first first of all it's important to note this is a billing dynamic and not sort of a rev wreck thing what we saw was a recent trend that's actually great for zoom's

business of you know wins in large and longer competitive platforms where we're um providing a grace period to our customers to help them with that transition this is good for zoom this is intentional. And I think maybe just one other piece for investors, you can see that the fruits of that so much in Eric's script, and you can see it in the long-term RPO that's up 15% relative to 3% in Q3. So a couple thoughts on deferred revenue. In terms of the guide, at 4.1%, One other thing that I want to make sure we call out to investors is included in that guide is a 40-basis headwind of pressure from a single large competitor white labeling that churned at the end of FY26. Setting that aside to your broader question, we expect online to have slight growth sort of in the range of what they had this year. And really, it's going to be enterprise that's the headline for the growth. And it's going to be the sorts of things that we talked about on this earnings and that, frankly, we've been talking about with investors, which is progress in AI monetization, progress in product diversification, and building out new routes to market, upmarket, and with our channel.

Awesome. Congrats on the strong quarter, guys. Thank you.

Our next question will come from Peter Levine from Evercore.

Great. Thank you for taking my question. Eric, one for you. I think in a world where, you know, AI models or provider, the AI model providers are, you know, essentially they're controlling the intelligence layer and theoretically could build, you know, AI native collaboration suites on top of their capabilities. So I guess the question is, like, what's, like, in terms of technology or what structural barriers, I think, prevent them from disintermediating Zoom?

Like, what's the moat that you feel, like, will defend your markets, data, the infrastructure, it's the enterprise relationships brand equity but like or is it something deeper i guess it's like how do you think about that risk and then how would you debunk the concerns that like ai could ultimately replace you guys yeah wonderful question i think i that if you think about the the the mission critical you know a communication like a zoom reliability is extremely important right it got to work every time you cannot say today's meeting will not work tomorrow might work no one is going to use that, right? And security is also extremely important, right? You need all kinds of security features, all you need to build in, plus ease of use. That's the reason why the customer, they choose to use Zoom. You know, back to the AI, I think, yeah, I'm an engineer, right? I also now started writing code as well with AI coding tools. I think it's extremely hard to replicate what we built over the past many years. Because first of all, a lot of code is still C++ code. You know, to open up the video, audio, a lot of things. But today, look at AI coding tools. This is so hard, you know, to build a very scalable and, you know, the leveraged native OS build all kinds of code. It's not as straightforward. You can do it very easy, system you know high-end tools but it's more like a toy since nobody can use that because this collaboration is not of a system record or or database or i mean store uh uh information you know even you i don't know work you know how to use that right it's fine but when it comes mission critical with a cloud and tools like zoom is really hard to leverage ai coding tools to replicate whatever chip i have very high confidence and by the way no matter what we do we're still you know tools like zoom right human to human connection interaction is still very important so uh michelle follow up on net retention 98 you know community just help us first again you know

all the new products that you're having you're seeing upsell contact center voice you know when does that reflection uh when can we see that in the model thank you yeah so uh great question on nda look we've said that it will rebound uh in the long term we've not put guidance and and when it rebounds, it's going to be off of so many of the drivers that we're talking about here. Progress and churn, phone and mid-teens, contact center and high double digits, and obviously the onset of AI monetization. Look, we're going to run the business sort of to revenue growth, and you have our 27 guidance there. But a couple of notes, maybe for investors about headwinds relative to NDE. First of all, I just want to go back to that white label churn that we talked about, a competitive white-label churn that will obviously put some pressure. And then the other thing that I call out for investors is actually good pressure, which is with WorkVivo and Contact Center, we're seeing them bring in new customers to Zoom. And look, in the fullness of time, that will replicate through our net dollar expansion. But obviously, it'll take a little bit more time. So just two more mechanical things to take into consideration.

Thank you. Thank you, Erin.

Thank you, Michelle. our next question comes from city pinagrahi from mizzou hey guys thank you for taking the question chat on here for city um you know i think the america's revenue growth trend has been pretty clear and quite strong throughout this this fiscal year i was wondering if you could dive a little bit into the trends you're seeing internationally and sort of any key initiatives there for for the upcoming the current year to to re-accelerate uh growth there eric do you want take on or do you want me to yeah go ahead please yeah i mean look i i would point to you know we're pleased um i think we gave the constant currency uh growth rates but they're up and growing uh

across our international business um maybe the you know thing that i would call out is i think as we move into areas like contact center and you know phone as well as work vivo that's giving us together with investments in channel an opportunity really to break into international markets so you know it is something that we're investing in we've also done maybe more local investments like UK data center but it's something that we're focused on and with our broader product expansion AI monetization as well as channel investments is something we think will grow in the future next up we have a question from Alex Zucan with Wolf Research

Yeah. Hey, guys. Thanks for taking my question. I'll maybe make mine pretty quick. There's been a lot of questions around, I think, just your ownership structure of some of the larger foundation model companies. I know we haven't talked about it or asked about it, but given it's such a wide-ranging topic, maybe I'll let you address it to the extent that you want to, specifically maybe on the anthropic stake. And then, Michelle, for you, just any comments about how clearly the growth on phone contact center was really, really strong this year? As you look at the guide implicit, I know you don't give product-level guidance, but as we think about the sustainability of mid-teens growth in phone, the sustainability of whatever the very high rates of growth are in Zoom contact center, How should we think about those, particularly since you don't want us to pull any kind of forward-looking dimension from the deferreds?

Perfect. So let me hit Anthropic first, and then we'll round Alex with the product question. Look, in our results, you will see a total strategic investment. Zoom has a Zoom Ventures fund that we use to strategically invest in tech that we feel like is important to Zoom, and you'll see the total balance of that at 1.6 billion and in q4 you'll see a gain of 532 million dollars pre-tax this is due mainly of course to the change in the valuation of anthropic after their last round um look we have a minority stake but anthropic is a critical partner zoom has long-standing talks about our federated approach um to ai and anthropic is, you know, key to our roadmap and a great partner in our federated approach. On the, you know, sort of durability, if I get your question right, Alex, on phone, you know, I really look at just, you know, we've seen continual. I'm going to hit phone, and then I'll wrap with contact center. We've been seeing, you know, very durable mid-teens growth. Look, we haven't updated our penetration stats in Zoom, But in Zoomtopia, I think in 24, we said it was 19% of our meetings base. I think that just both speaks to progress and opportunity going forward. And then look, you know, on the phone side, I just look at all the examples that Eric talked about. Leading insurance, you know, Cisco win, an F10, a Cisco win, major fast food chain, RingCentral win, and really feel like a major U.S. bank, a Microsoft, Cisco win. And so we feel great about the share gains on phone. On contact center, you know, what I would point to there is just multiple quarters, now four quarters at high double digit and actually Q4 accelerating off that. But really, and I think, Alex, you've been a great noter of this, you know, is to look at the makeup of contact center as reflective of where we will go. For many quarters, we've been talking about the majority of the top 10 deals being large displacements. We've been talking for quarters about the value really coming in AI, now 10 of 10. And to Eric's point, 4 of 10 in voice, which has been, you know, a new entrant for Zoom in the summer. We did a 2.0 refresh, and even yesterday we announced a 3.0. And really, maybe if I could wrap with one stat, which is how oftentimes these things come together. And I think it's a great example of what Eric introduced in this system of action of both inside the organization and outside, just what a powerful element that is. And six of our ten largest contact center deals, as an example, pulled through a phone as well.

So just quickly, Alex, this is such a great question to add on to what we share aside. we talk about the the top 10 you know zoom phone deals zoom content center deals doing very well this is more like a lot of enterprise i think this year you look at smb also a huge opportunity the reason why because ai you know our air is very affordable federal approach right look at the last december i look at a human you know hre test you know zoom rank number one for a while right so you know because those investment you know because of the price and also the latency the technology, I think we have a huge opportunity for all of those SMB customers as well because of AI.

And especially true, you know, just to mark Eric's comment because it's such a good one, that is especially true in ZBA. So great to see the new product value, which will really open up new opportunities down Thank you very much.

Thank you, Alex.

Up next, we have a question from Josh Baer with Morgan Stanley. thank you very much for the question um and congrats on a strong quarter do you obviously have the horizontal tools that every single knowledge worker in the world can use but you're also building this portfolio of very departmental solutions marketing sales hr contact center so a strategy question for you eric how do you balance addressing additional departments and roles with new products versus going deep into these areas uh rolling out more solutions in these departments that you're already in and balancing all of that with uh the horizontal on play thanks yeah just

wonderful questions you know speaking of vertical solution you know allow my ai avatar right i use that for three quarters already as you can see the quality is getting better and better right it's kind of one of the vertical use case you know for marketing team having started that i think given the the ai evolution you know ai coding tools you know i think we have you know foundational technology now we can do both on horizontal front right we we keep innovating you know and more features and services right and deliver happiness of customers you see the air companies you got a little announced you know last uh december and also in terms of innovation a lot of things about going to announce new innovations announced at enterprise connect that's on the horizontal front look at each vertical use case is a departmental use case or vertical market use cases I think you know because of the AI I think we can monetize that's why we also want to double down on those use case you know customer support there's one example ZRA webinar you know bright high in almost the area in the vertical use case I think we can leverage AI to quickly penetrate into those market we never thought about before that's why you know well, we're excited, you know, because of AI.

Thank you.

Thank you.

We have a question from Tyler Radke with Citi.

Hi, thank you. I wanted to ask you about the custom AI companion. You noted some good wins, I think, in higher education and some other verticals in the quarter, but how are you thinking about that in terms of a driver for FY27? And is this something where you're seeing list price sort of be realized in the field or is there still sort of heavy discounting? Just give us an understanding of sort of how that rolls out from a go-to-market perspective.

So you get a customer air company. Again, air company is part of an offering. It's for free. It's become more and more powerful. But, you know, the way for us to monetize AI company is to go through the customer AI company, in particular for medium and large enterprise customers, because with the third-party applications, you know, connectors, and also we build in a workflow and no-code workflow to build an agent. And that's kind of our vision, right, from a composition to completion. If you do not have very flexible workflow builder to have you build an agent, how can you, you know, complete a task, right? So, you know, because, you know, it used to be all Zoom, just in order to collaborate, now with the Zoom customer company, with workflow, connecting with all the third-party applications, more skills, more agent, and then we can achieve from a competition to a completion. And, you know, also not only workflow, but also customer company also can give you, you know, the enterprise knowledge, you know, retrieval, you know, functionality, right? You can connect so many third-party applications, right? I do not need to log into a different system. I was in the Zoom AirCompany interface, I can search for any information and help you write it, you know, and document, you know, to achieve the task. Essentially, AirCompany, a custom AirCompany, is a customized, you know, workflow builder and also the information search capabilities to connect with all kinds of third-party enterprise applications is extremely powerful, and we can monetize for those, to target the enterprise customers.

Up next.

Yeah, Tanya, go ahead. I think Tanya maybe has...

Oh, can you hear me? Yeah, yeah. Oh, sorry. Just any way to... Is that going to be a contributor to FY27, or is it still kind of early days in terms of that monetization of the premium AI custom companion?

It already contributed, right, to our growth. So I want to close the, you know, the big customer A combine deals, you know, in the quarter in Q3 and Q4. With more innovations, for sure, it's going to help us more in FI27. Great. Thank you. Thank you.

Up next, we have a question from Seth Gilbert with UBS.

Hey, thanks for the question. Maybe just one, if I hold the online growth, online year-over-year growth at about, you know, 1.2% for fiscal 27, That would imply that the enterprise decelerates by about one point from the 4Q exit rate of 7%. So maybe a question for you, Michelle. Can you talk about some of the puts and takes here that could cause enterprise to outperform? Thank you.

Is there a question on Q4 or is it more on guiding going forward?

Oh, it's more on guiding going forward. So, yeah, sorry.

Let me talk about online, and then I'll finish with enterprise. I think, you know, online, so pleased to see a return to growth. It was the first time we've had growth since fiscal 22. And look, that growth comes off of adding value in our portfolio of workplace, you know, workplace portfolio as well as AI. And that's why we're able to realize a price increase as well as, you know, keep record low churn. Our guide assumes an additional price increase on the annual SKU. So in line with monthly, it's really just intended to do the same thing as the prior, but bring them into value. But look, so to your more meta question, enterprise is going to be the durable driver for growth going forward. And I'll just continue to hit home the components. It's making progress and meeting churn. It's keeping phone in that sort of mid-teens growth range. is continuing with that better-together story to pull along contact center and realize the AI value, that is by far where we are seeing the most immediate pulls of the incremental AI monetization in both agent-assisted AI as well as the ZBA that Eric and I talked about. And then, look, there's so much coming on from an AI monetization perspective, both in-product, WorkVivo phone, but additionally beyond that in new SKUs, we've now opened up a note-taker SKU to our free base, as well as, you know, making continually products like ZRA even better.

So we look out to the forward, and we're excited about the progress that we made this year, 130 bps kind of up year over year, and we're equally excited, if not more, on the 27 go forward. got it thank you up next we have a question from tom blakey with cancer fitzgerald hey guys uh thanks for taking my question um eric or michelle i'd like to hear about maybe some you know quantifying of these these credits that you called out that was interesting you know and even if it's you can't call it out numerically just how they're trending i i think the numerical help would kind of understand help us as a group understand what

of headwinds we're talking about that you know as you know i know eric you're managing this business for a multi-year basis here um as they come you know you guys are innovating and taking share um when they come off like what that would look like and i have a follow-up if you may yeah i can take that um so look it's it's in line with what i said earlier which is um again i just want to continue to emphasize investors don't read into this as normal these are great competitive wins, we're providing a grace period so that I, you know, in exchange for a larger and longer term competitive platform win. Think of this as helpful in sizing, Tom, as really the primary driver between the D-cell and Q4 relative to the guide in Q1.

And if helpful on the other side, maybe what I'd point to is connecting you to that uptick in long-term RPO as helpful for sizing. yeah that would that would be helpful and then um eric you know just combining you and michelle's comments here um michelle's guiding us to grow online kind of relatively flat but you seem awfully excited about the smb's opportunity to maybe equally do as well uh i know it's early days in terms of maybe uh tackling the web the successes that you've had on the enterprise side with cx and phone, but is it safe to assume that that's, you know, maybe not implied or imputed in that one, you know, kind of 1% guide for Fiscal 27 online?

Yeah, so when I mentioned SMB customers, more like a high-end, you know, for higher-end, yes, for the not-online buyers, you know, like SMB customers, right? Used to be, you know, they say to look at multiple solutions now because of the power for AI, and also, you know, I think we have a huge opportunity to serve those SMB customers because we have a very rich product portfolio that was great AI capabilities yeah it's not all about individual online buyers and yeah Michelle could you comment on BrightHire anything on the top or bottom line impact in fiscal 27 and that's it for me thank you yeah so it closed mid Q4 so I think that the impact to Q4 is sort of de minimis the guide and the reflects, obviously, BrightHire, and I would just say that it's a perfect example, I think, of what Eric laid out in the earlier question with regards to, you know, vertical and horizontal

value. So this is a business where we share common customers, so there's sort of mutual benefits, and this is a product where we have, you know, similarities with really taking AI value to rethink the hiring kind of approach more insights efficiencies as well as then you have work vivo on the other side and sort of thinking about the life cycle of kind of human talent so it's something that they use zoom and all of their interviews and and so we look at it and there's natural synergies and they're um relatively small this is a small acquisition you can see the size of it um sub 100 um so it's helpful excellent very helpful thank you guys thank you our next

question comes from samad samana with jeffries hi good evening thanks jay my question uh so i wanted to ask about pricing you guys have continued to create a lot of value you've obviously part of it is to drive better retention which we've seen over the years some of it is to be expressed in kind of monetary terms, how are you thinking about that balance for fiscal 27, Michelle? And what are you assuming in the guidance, if anything, from a price increase perspective? And to the extent, I'm sorry for the 11-part question, I'm learning from some of my peers. But if you have, can you give us a sense of timing around that assumption as well? Thank you so much.

Let me hit explicitly the online and then I'll move and talk about our enterprise because I think the dynamics look a little bit different. So our online guide includes a price increase of 6% to go ineffective mid-March to our annual skew. So think of this as this is really the flip side of what we did last year. And I really encourage investors not to think about it as a price increase. Price increase is just one mechanism for realizing incremental value to customer. So price increase ongoing, if you will, is not something that Zoom is going to use. it's going to come with incremental value in this case it came with much more value across chat calendar meetings whiteboard etc etc in our workplace as well as AI value so that's really what's behind that so that's sort of how to think about the online side and on the enterprise side as well and you know one important to note that those prices then impact the enterprise but look there we're going to focus much more on you know total contract value things like discounting and contact contract sorry duration and and those would be baked into our guide given great thank you so

much appreciate it thank you our next question comes from ryan nick williams with wells fargo hey guys this is chris on for ryan uh thanks for taking our question eric you've mentioned in the past doubling down on the product side and so we were curious if in the last few months you've seen any product velocity improvements from magenta coding tools like you're mentioning and if you're thinking about product investments any different this year compared to last year yeah so a while back advice so we all adopt you know AI you know coding tools is getting more and more powerful and especially for the new product that development I or new

service, right, certainly consolidated our piece of innovation, but at the same time we also have, you know, a lot of the, you know, existing services, right, and a lot of, you know, coding written by other engineers, right. I do not think that AI coding tools is powerful enough, right, to maintain all those things, you know, meanings of the lens of coding yet, right. So, having started that, you look at it not only for engineers, but also the UI designers, product managers, almost everywhere we can have the AI coding tools to improve our productivity. Essentially, we drive the innovation, you know, the speed. And you get the product area we invest, you know, like ZVA for sure is a great example. And, you know, we kind of built in a lot of, you know, new features, you know, and it's probably in terms of speed and better than any time in our company history, right? You know, that's the reason why over the past few months, in the customer field, but wow, you know, you had this feature, the other feature, you know, much better position. This is a great example because AI coding tools and also because of the way we embrace AI. So, again, not only for engineers, but entire, you know, the product development, you know, the life cycle. Awesome. Thank you, guys. Thank you.

Our next question comes from Jackson Ader with KeyBank.

Great. Good evening, guys. Thanks for taking our questions. The question I have is around the channel, and I think you guys have made a bunch of improvements and enhancements to the channel partner program the last few quarters and last year. And so really, I'm curious, number one, any kind of continued enhancements that you definitely know are going to be implemented here that should help for growth in 2027? And then also, it seems like, you know, I understand there are some kind of headwinds, tailwinds to the margin for fiscal 27. And I'm just curious, is that due to the mix of the type of investments you're making, meaning channel versus direct, or is it just the overall amount of investments that you're making?

Yeah, let me go ahead and take that, and then Eric, you can pepper in as he said. Look, channel, if you think about sort of those durable elements of revenue growth, is going to be essential to things like a phone business and a contact center. It's just how, you know, customers procure in that space. And also it just speaks to, you know, beyond just the software, the consulting, the deployment, just how customers, you know, interact with partners. And, look, we're very – this is something we've been very intentional about, and I think you can see it in our revenue growth inflection. Look, in terms of a quick couple of stats and things of why we feel great about our investments, you can see it in our large contact center wins, 9 of 10 in channel. Our channel base continues to grow, and, frankly, the proportion of new customers coming from channel, to me, is especially exciting. The kinds of things that we're investing in, to your question, look, it's around incentives. We made, starting last year, a lot of system capabilities and portals so that we really help enable, especially to all of the product value that Eric mentioned and things like ZVA coming out at incrementally fast levels. You know, we want to make sure that our ecosystem is ready there with us, and so we'll invest in that. And then maybe the last channel investment that I would mention is we're bridging that into things like systems providers, which we think is going to be really important going forward. On the operating margin guide, let me make some comments because I want to make sure that people really understand the bigger picture here. So we guided to 40 and a half at the midpoint. WANA, obviously, beyond the mechanics of, you know, reminding that we've used a consistent forecast methodology, we really want to make sure that investors understand the two dynamics which are not channel, We're up 180 basis points due to the amortization change that we referenced in scripts. And then that's offset in part by the comp changes. We're in our second year of shifting from stock-based compensation to cash. So those are really the headlines to think about in terms of the off margin versus anything channel.

Got it. Thank you very much, guys. Thank you.

Our next question comes from William Power with Baird.

Okay, great. Thanks for taking the question. You know, Eric, really encouraging to see, you know, continued progress on Zoom phone, obviously the broader, you know, ARR, you know, growth trends. But I'm particularly interested in the, you know, the Cisco displacements. You know, I think historically there's just been a lot of inertia with some of these legacy phone systems, especially that large enterprises have. So I'm just kind of curious, you know, is this just a function of working through the sales cycle? Or is it a function of enterprises just becoming that much more comfortable with Zoom phone quality? What's kind of putting you over top here and maybe just to help us kind of understand the sustainability of some of these large opportunities?

Yes, that's a wonderful question. Believe it or not, actually, look at the total phone deployment. You know, a lot of, I think probably still more than 50%, I did not get the new number, still on-prem deployment. I mean, for a lot of you as a customer, right? And they deployed the on-prem phone system for a long time, and said, yeah, it's okay, it's not great, and why do they want to, you know, hurry to migrate to the cloud, right? This kind of sort of mentality before. Now, with AI, there's a strong reason for those of the very large internet customers, you know, they cannot leverage AI for the on-prem, right? So that's why I would say that we will be an acceleration for those large-interview customers migrate away from on-prem to cloud. Zoom is a much better position. You know, we've been in quite a few very large, very complicated phone deployment for on-prem, you know, to the cloud. Again, AI is a driver, you know, and for those customers to migrate, you know, AI first, you know, cloud, you know, phone system. And that's a, yeah, that's a driver.

And maybe just add the numbers to what Eric said, it's about 130 plus million seeds in the cloud and about 150-ish on-prem. So Eric's spot on on the ROD 5050.

So what's the opportunity? Yeah, huge. Because if not, it's hard to do communism. It's okay. I used it for 20 years. It's okay.

But now, you know, it's a great opportunity ahead of us. maybe the last thing that i mentioned is just increasingly how the deals reflect it's not just phone alone as a workload it's that sort of wanting that whole system of action i think that's why you see so many contacts on our phone and deals coming together and so and you know as we think about large competitive displacements i think the inability to kind of have that full portfolio is is one other reason thank you thank you our last question for today comes from katherine trepnick with rosenblatt securities okay uh thanks for seeking me in uh

quick question on the channel so i i get the fact that you go direct with the phone in the contact center and you did mention systems and you did talk this quarter that you had many more deals that were bundled so are you seeing a different buying pattern from the enterprise and the smbs that are forcing you or maybe being large or the system integrators are more attractive to you can you peel that back but for me thanks your question pattern is are we seeing i mean i would what are you seeing yeah it seems like you had more bundles this quarter than you have typically discussed. So how is that changing your go-to-market motion and your working with the different partners? Because most of the partners typically just sell the phone at the contact center. So it seems to me if it's a more complex deal that you're going to need either direct sales force or more of a system integrator.

Yeah, I mean, I would say what we saw in Q4 was just an intensification of the pattern that we've seen previously, which is, you know, just what a natural sale it is for a phone and contact center to come together. And then frequently that also comes with a meetings portfolio. And look, you know, in a lot of the deals, did they also include other great SIM products? Yes. I think it speaks to sort of where the market is going, that system of action that we talked about also stitching the ai value in um and then certainly catherine investments that you've noted uh and your your stuff about investments in the channel well and the other part is are you seeing the enterprise want to move more towards a platform like they are in security and that you're feeling you have enough product pieces now to be part of that platform play yeah i mean i'll i'll jump in and then eric you you should certainly jump in as well i do think I think, and you're seeing in a lot of those large deals, those platform things, I don't think it means all of them. I don't think like anything there's a binary answer, but maybe just as a quick data point, like if you look at our top 10 deals in contact center, six of 10 included phones. So I think it's just an indicator that there is both those that really want that platform, that whole system of action stitched together with AI, And then there's others that are just going to have, you know, their own technology and come at it in different ways. But, look, I think, you know, maybe just sort of the third revenue conversation, I see that as a great sign. It's these all in with Zoom, large, longer-term deals. So I think there's some really great things on the future for our context and our business.

Yeah, just quickly to add on to what Michelle said. So, the Zoom workplace is our UCAS, you know, the platform. You know, contact center is a C-CAS, especially for those large-interviewed customers, right? When they look at it from on-prem, you know, to cloud, or maybe from the pre-AI solutions to AI solutions, if it can combine those two, consolidate those two systems into one platform, one vendor, why not? You know, this is a great ROI. That's the reason why quite often you say, hey, both UCAS and C-CAS will be new together. so that's a that's a reason thank you thank you thank you this concludes the Q&A portion of today's call I'll now turn it back over to Eric for closing remarks thank you for zoom employees customers partners and our images investors for your greatest support and we should appreciate well very very optimistic about IFA 27 so see you next quarter thank you Take care.

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

Thank you all.