Earnings Call Transcript - ZM Q2 2026

Operator, Operator

Hello, and welcome to Zoom's Q2 FY '26 Earnings Release Webinar. As a reminder, today's webinar is being recorded. I will now hand things over to Charles Eveslage, Head of Investor Relations. Charles, over to you.

Charles Eveslage, Head of Investor Relations

Thank you, Megan. Hello, everyone, and welcome to Zoom's earnings video webinar for the second 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 substitution 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 third quarter and full fiscal year 2026, our expectations regarding financial and business trends, impacts from a macroeconomic environment, our market position, stock repurchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations, and product initiatives, including future products 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 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, like last quarter, is giving his prepared remarks via Zoom Custom Avatar. Eric?

Eric S. Yuan, CEO

Thank you, Charles. We delivered strong results highlighted by revenue growing at its fastest rate in 11 quarters. We also achieved meaningful progress on our 3 key priorities: delivering world-class AI to enhance customer value, rapidly innovating Zoom Workplace, and scaling high-growth departmental solutions. Zoom is strengthening its position as a leader in AI-powered collaboration helping customers work smarter, operate more efficiently, and deliver greater value to their organizations. Reflecting this impact, AI Companion monthly active users have grown over 4x year-over-year, with millions using our AI to boost business value throughout the meeting lifecycle and beyond. AI adoption now extends well beyond meeting summaries, with strong momentum in meeting prep and post-meeting task management, call summaries for Zoom Phone, and AI-first meeting integration and content generation capabilities for Zoom Docs. This progress is just the beginning and we look forward to sharing more AI innovations at Zoomtopia next month. Our broadening AI adoption is also translating into greater customer investment as organizations increasingly see our AI as critical to driving business outcomes. In Q2, a Fortune 200 U.S. tech company deployed Zoom Custom AI Companion, our paid AI add-on for Zoom Workplace, for nearly 60,000 employees to tap into company knowledge during meetings, generate action-ready summaries that power agentic workflows, and integrate directly with their AI bot to streamline IT service operations. Customers are also benefiting from our AI supporting human agents in our Contact Center Elite offering, which is a critical component driving revenue growth in Zoom customer experience. One example is ATPI, a leading U.K.-based global travel and events management company known for its expertise in complex sectors, who in Q2 selected Zoom Contact Center Elite alongside Zoom Phone to transform their global customer engagement. ATPI chose Zoom over the competition for our better together voice and contact center offering and because of the measurable potential of our AI features across AI Expert Assist, quality management, and workforce management to significantly reduce hours spent by both agents and supervisors on repeatable tasks. Lastly, we are also excited about the Q2 launch of Virtual Agent 2.0, which advances from conversational to agentic AI designed to deliver measurable customer outcomes. In its first month, we saw deals including SecureOne, a private security company, who replaced an expensive manual after-hours answering service with ZVA for Voice. The solution integrated seamlessly with their existing Zoom Phone deployment, reduced costs by tens of thousands of dollars annually, and enhanced sales prospecting through intelligent automation. This is just one example of how Zoom’s agentic AI tools can help customers drive both meaningful cost savings and new revenue opportunities. Zoom continues to innovate with Zoom Workplace, delivering a seamless and integrated collaboration experience with Zoom Meetings, Phone, Team Chat, Events, Docs, Whiteboard, and Rooms. We have been honored with four UC Today Awards, recognizing our continued innovation and leadership including Most Innovative Product for AI Companion, Best UC Platform for Zoom Workplace, Best UCaaS Provider Americas, and Best Contact Center Solution. Furthermore, in recognition of our customer focus and innovation, we are proud to be named a UCaaS leader in the Forrester Wave. Our continued momentum reflects not only strong customer demand for our modern collaboration solutions but also the success of meeting buyers where they are— through preferred channels like AWS Marketplace. In Q2, for example, Hubspot expanded to Zoom Workplace, including Zoom Phone, Rooms, Sessions, Whiteboard, translated captions, and more. This will deliver the benefits of our modern, integrated, and cohesive collaboration suite to help them enable hybrid work across their global workforce, reduce costs and simplify billing on AWS Marketplace. Our focus on customer value led many companies to return to Zoom after trying other services. One such company is F5, a global technology leader in application delivery and security. F5 bounced back to Zoom with a 7-figure ARR deal due to the increased productivity and lower total cost of ownership of our modern, easy-to-use platform. And finally, Zoom Phone delivered another strong quarter, sustaining mid-teens ARR growth and gaining market share versus leading competitors, an impressive result given its already large scale as a UCaaS leader. Our better together vision unifying best-in-class voice collaboration and customer engagement solutions drove a major 5-year, 7-figure ARR Zoom Phone deal displacing Cisco, which also includes Workplace and Contact Center Elite. We also continue to drive amazing growth with our customer experience and employee experience solutions. As I mentioned earlier, AI adoption is increasing within our customer experience offering and transforming how brands engage their customers and build loyalty with our set of modern, differentiated, AI-first tools. You see this momentum in the number of Zoom Contact Center customers with over $100,000 ARR, which grew 94% year-over-year to 229, highlighting our ability to win with large accounts in high-stakes deployments and migrate them into the high-end AI products. Our top 10 contact center deals were all displacements of leading competitors, and all but one were cloud displacements. Inland Real Estate Group, whose member companies employ more than 1,200 people, faced challenges for years managing disparate systems. In Q2, they chose the full Zoom platform, including Workplace, Phone, and Contact Center, to unify their collaboration and customer experience and future-proof their business. We have also made progress in building additional routes to market. We are excited about our newly established collaboration with PwC, which expands our Zoom Contact Center and AI opportunity and ability to meet the needs of global enterprise customers. Together, we have already co-sold several large deals, including a Fortune 50 technology firm, for which PwC will provide advisory and implementation services. In Q2, our employee experience offering continued to shine, with Workvivo reaching 168 customers with over $100,000 ARR— up 142% year-over-year. One of these large deals was Marubeni Corporation, a large, diversified Japanese conglomerate that transitioned to Workvivo from Meta Workplace with more than 10,000 licenses to elevate how it informs, connects, and engages employees. Before I hand it to Michelle to take us through the financial results, let me close by saying that on September 17, we look forward to bringing you Zoomtopia 2025: “For the People,” our biggest event of the year. You'll learn about exciting product reveals, inspiring stories, and much more. See you there.

Michelle Chang, CFO

Thank you, Eric, and hello, everybody. I'm excited to share Zoom’s Q2 FY '26 financial performance today. In Q2, total revenue grew 4.7% year-over-year to $1.217 billion, or 4.4% in constant currency. The result was $17 million above the high end of our guidance. Our Enterprise business continues to be a key point of strength with revenue growing 7% year-over-year and representing 60% of our total revenue, up 1 point year-over-year. Our Online business continues to show signs of stabilizing. In Q2, average monthly churn was flat year-over-year at continued lows of 2.9%. In our Enterprise business, we saw approximately 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers make up 32% of our total revenue, up 1 point year-over-year. Our trailing 12-month net dollar expansion rate for Enterprise customers in Q2 held steady at 98%. Pivoting to our growth internationally; our Americas revenue grew 5% year-over-year, EMEA grew 6%, and APAC grew 4%. Moving to our non-GAAP results, which as a reminder excludes stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, net litigation settlements, and all associated payroll tax effects. Non-GAAP gross margin in Q2 was 79.8%, up 128 basis points from Q2 of last year primarily due to cost optimization efforts. We continue to reiterate our long-term goal of 80% non-GAAP gross margins and remain focused in the near term around balancing investments with AI with cost efficiencies. Non-GAAP income from operations grew 10.5% year-over-year to $503 million, exceeding the high end of our guidance by over $38 million. Non-GAAP operating margin for Q2 was 41.3%, up 216 basis points from Q2 of last year. The operating margin improvement was driven by ongoing cost management and timing of spend. Non-GAAP diluted net income per share in Q2 was $1.53 on approximately 308 million non-GAAP diluted weighted-average shares outstanding. This result was $0.16 above the high end of our guidance and $0.14 higher than Q2 of FY '25. The EPS growth reflects strong business performance, effective cost management, and less dilution, driven by our buyback program and disciplined stock compensation management. Turning to the balance sheet. Deferred revenue at the end of the period grew 5% year-over-year to $1.48 billion, slightly ahead of the high end of our previously provided range. In Q3, we expect deferred revenue to be up 4% to 5% year-over-year. Looking at both our billed and unbilled contracts, our RPO increased over 5% year-over-year to approximately $4 billion. We expect to recognize just under 61% of the total RPO as revenue over the next 12 months, slightly up from 60% in Q2 of FY '25. Operating cash flow in Q2 grew 15% year-over-year to $516 million, representing an operating cash flow margin of 42.4%. Free cash flow in the quarter grew 39% year-over-year to $508 million, representing a free cash flow margin of 41.7%, up 10 points year-over-year. The year-over-year increase in free cash flow margin was driven by the timing of tax payments and the lapping of significant PP&E investments. We ended the quarter with approximately $7.8 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. In Q2, we again accelerated execution of our existing $2.7 billion share buyback plan, purchasing 6 million shares for $463 million, an increase of approximately 389,000 shares quarter-over-quarter, underscoring our commitment to delivering value to our shareholders. Turning to guidance. In Q3, we expect revenue to be in the range of $1.21 billion to $1.215 billion. This represents approximately 3% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $465 million to $470 million, representing an operating margin of 38.6% at the midpoint. Our outlook for non-GAAP earnings per share is $1.42 to $1.44 based on approximately 307 million shares outstanding. As a reminder, future share repurchases are not reflected in the share count and EPS guidance. For the full year FY '26, we are excited to raise both our revenue and profitability guidance. We now expect revenue to be in the range of $4.825 billion to $4.835 billion, which at the midpoint represents approximately 3.5% year-over-year growth. We expect our non-GAAP operating income to be in the range of $1.905 billion to $1.915 billion, representing an operating margin of 39.5% at the midpoint. In addition, our outlook for non-GAAP earnings per share in FY '26 is increasing to $5.81 to $5.84, based on approximately 308 million shares outstanding. With the strength in free cash flow in the first half and increased outlook for operating income in FY '26, we now expect free cash flow to be in the range of $1.74 billion to $1.78 billion for the full year. In closing, we've made progress improving top-line growth, we've sustained best-in-class profitability, and reduced dilution. We're executing on our three priorities with discipline and momentum, and we remain committed to building on this success to deliver lasting value for our shareholders. Thank you to the entire Zoom team, our customers, and our investors for your trust and support. With that Megan, please queue the first question.

Operator, Operator

Our first question will come from Peter Levine with Evercore.

Peter Levine, Analyst

Congrats on a good quarter. Maybe one for Eric, you're seeing kind of your AI solution really take off. But maybe can you help us share with us like what's the ROI that your customers are seeing, right? In terms of the 2.0, you referenced the customer, a pretty large customer that adopted 2.0. So I would love to know like what's the use case that you're seeing in the ROI? And then second, just from a macro perspective, anything you can share with us in terms of what you're hearing or seeing from your customers in terms of their appetite, IT budgets for collaboration.

Eric S. Yuan, CEO

Yes, great question. I'm currently using my phone to participate in this earnings call. Regarding AI, you are correct. We have launched the Zoom AI Companion 2.0 and we plan to announce something exciting at Zoomtopia next month. Two years ago, everyone was discussing AI, and our first step was to use it to enhance our features, like meeting summaries and transcriptions, which has been very successful. We introduced Zoom 2.0 to utilize agentic capabilities. We not only support meeting summaries but also consider the entire meeting lifecycle, from scheduling through the pre-meeting and post-meeting experiences. We are also exploring how to use AI to enhance other product experiences, like our Phone services and Workplace products. The feedback has been positive, and if we look at usage, it has increased significantly, with four times more monthly active users this quarter compared to last year. Customers are eager to leverage AI to enhance productivity and effectiveness, and there are many opportunities ahead. Regarding IT budgets, nearly all customers are looking for ways to incorporate AI to improve their products and collaborate effectively with their vendors. This is why many customers have either enabled the AI Companion or are in the process of doing so, and our AI Companion is included in their offerings without extra charges, apart from customized versions.

Operator, Operator

Our next question comes from Meta Marshall with Morgan Stanley.

Meta A. Marshall, Analyst

You noted the AI Companion vertical-specific win with the Fortune 2000 tech company. And I guess just how are some of these wins that you're getting on these vertical-specific AI Companions informing just what customer needs are, what they can do with AI beyond what we traditionally think of as like summarization.

Eric S. Yuan, CEO

Yes, that's a great question. Since we launched AI Companion, we have seen some early adopters who have been using AI for a while now and are looking for more ways to leverage our AI capabilities beyond just AI Companion. This is why they have opted for Customized AI Companion, which allows us to integrate with their indexing, content, and tailored meeting templates for their summaries, among other features. We also know that some customers are still in the process of adopting AI Companion. As I mentioned before, AI Companion is part of a package, and we expect more customers to either adopt it or have already done so. Those who have already adopted AI Companion are also exploring new features, which is why we provide Customized AI Companion. Ultimately, we aim to innovate further. It's not just about having AI Companion 2.0 or Customized AI Companion; we are very excited about the upcoming AI Companion announcement at Zoomtopia next month.

Operator, Operator

Our next question comes from Tyler Radke with Citi. You might be having some technical difficulty. Tyler, are you there? All right. Our next question comes from William Power with Baird.

Ioannis Samoilis, Analyst

This is Yanni Samoilis on for Will Power. A couple on the online segment. So I know you folks instituted a price increase for the monthly pro SKU earlier this summer, I think. So first of all, I think you mentioned last quarter that you were expecting that to add $10 million to $15 million of incremental revenue this year or at least as it compares to your initial forecast. And based on what you've seen so far, I'm wondering if any of your assumptions around that have changed or if your expectations there are still consistent. And then also just taking a step back, I was hoping you could comment on any feedback you've heard from customers so far, just in general. It looks like churn largely held stable. But I'd be curious if you have observed any other changes in customer behavior, maybe customers switching to annual plans to avoid that price increase or any other dynamics that you might have noticed.

Michelle Chang, CFO

Yes, I can address that. We're pleased with the 1.4% growth and the continued low churn. I want to reiterate our guidance remains between $10 million and $15 million, and I still expect a flat online number for the full year. We did notice some shift to long-term plans, but nothing significant. Regarding customer feedback, we did not experience much pushback, which indicates that the price increase is relatively small. This is likely tied to the value we've added to the Workplace SKU, including AI features and additional products, as well as the increase in storage limits. Overall, we feel the value proposition remains strong.

Operator, Operator

Our next question is from James Fish with Piper Sandler.

James Edward Fish, Analyst

Two-parter though, Eric, for you, Workvivo continues to have another strong quarter really, spike in usage from what we can tell. I guess what are you seeing with that asset as we head into the back half of the year, both from that partnership angle with Meta and the overall market? And then just Michelle, on the numbers here, you raised by 25% to the top line, beat by 20% on the quarter, have FX in your favor. Walk us through why we're not getting more of a roll forward of kind of the top line upside here? Is it just prudency or anything to think about for the back half of the year?

Eric S. Yuan, CEO

Michelle, you want me to address the first one?

Michelle Chang, CFO

Sure.

Eric S. Yuan, CEO

Yes. Regarding the growth of Workvivo, a significant partnership has certainly assisted us since last year. Our main priority now is to ensure that our customers transition smoothly to the Workvivo platform. We need to facilitate this transition effectively, making sure all features operate correctly and addressing any regressions. Simultaneously, many customers have recognized the necessity of an employee engagement platform, which has created numerous opportunities in our pipeline. Additionally, we plan to innovate further and introduce more enhancements to our Workvivo platform. AI also presents another avenue for us to innovate and enhance the platform experience. Previously, we primarily concentrated on large deals, but we believe that medium-sized customers will also gain advantages from deploying the Workvivo platform, marking a significant growth opportunity for us moving forward.

Michelle Chang, CFO

Yes. I have a few comments regarding the forecast. First, we are pleased with the consistent performance and the increase despite the U.S. constant currency. We are optimistic about the steady progress toward the growth rate, even with changing macro conditions, moving from 2.7% at the start of the year to 3.5% now. We are confident in our three strategic focus areas and the advancements we are seeing in those domains. Additionally, I want to highlight that our online guidance appears flat when comparing the first half to the second half, with revenue remaining fairly stable. The growth from Enterprise is what drives our outlook for the second half. We have applied a consistent forecasting method and have taken into account strong demand and durable drivers, while still recognizing the dynamic economic environment. I would also like to mention last quarter; I noted that we experienced some scrutiny with no losses, but additional examination in certain regions. I am happy to report that we noticed a slight reduction in that scrutiny in the second quarter, and we expect the second half outlook to align with what we observed in Q2.

Operator, Operator

Samad Samana from Jefferies will take the next question.

William Fitzsimmons, Analyst

This is Billy Fitzsimmons on for Samad. Eric, maybe for you. There have been a couple of questions on the AI Companion, but I want to dig deeper on the custom AI Companion add-on. It's still early. It's only been a few months now since launch. And I'm guessing we'll hear more at Zoomtopia. But can you share some anecdotes around what some of the initial customers who've purchased the add-on are saying about it, some prominent use cases day-to-day. I know you have third-party integrations with a bunch of different vendors. And then just how from a product or sales standpoint, you're getting customers to move from the included AI Companion to the paid add-on? And then if I could sneak in one more for Michelle. It just launched, it's still early. I imagine it will be more of a fiscal 2027 tailwind. But can you just level set for us if there will be any kind of benefit in the guide in the back half of this year?

Eric S. Yuan, CEO

Yes. I can address the AI Companion question. So first of all, please join at our user conference Zoomtopia next month. Again, a lot of exciting stuff around the Zoom AI Companion. For those customers who deploy AI Companion for a while, they love AI Companion. However, at the same time, they also asked about what they can do to leverage the company to help them more, right? Because some companies deploy AI Companion, they also have other applications like ServiceNow, Salesforce, Workday, and a lot of other applications, also Knowledge Base as well. How to connect with all those different data sources, right? Or some customers, they even use other data index like Amazon Q or Glean, you also need to connect with them as well. And we offer the basic meeting summary template. Customers, they want to have very flexible customized template and also connected with their dictionary and their knowledge base, a lot of the capabilities can be added into AI Companion to further improve the AI Companion for those customers. That's the reason why those customers talk with us, 'Hey, we want to enable Custom AI Companion.' And also share a lot of feedback with us. And this is the reason why we want to announce more and more innovations upon our AI Companion, the platform.

Michelle Chang, CFO

Yes. With respect to kind of how to think about AI products and what's in and out of our forecast, I kind of break it into 2 pieces. First, we're already seeing notable progress from AI in our Contact Center business. We talked about broadly the Contact Center business growing high double digits, and it continues to be. And certainly, our Elite SKU, which is where you get the AI value as well as ZVA, are part of that. So I would sort of say that's in the '26 numbers. In terms of the other products that just GA-ed in the April timeframe, this is sort of first quarter, and we're pleased with the customer examples that we shared and the pipeline building. But really, we just continue to emphasize what I've said previously, which is those won't really come in until '27, given law of large numbers, building product, et cetera.

Operator, Operator

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

Michael J. Funk, Analyst

Also on the AI products, can you provide any color on the size of the funnel and the growth in the funnel that you're seeing, very strong growth, obviously, in 2Q? And then any commentary on the uplift in customer ARR from adding AI solutions would be helpful.

Eric S. Yuan, CEO

Yes. Maybe I can address some of your questions. Michelle feel free to chime in. But given there's so many AI questions, I wish our AI Companion can answer those questions on behalf of me next time. So overall, I think if you look at AI Companion, not only to improve our meeting, our Workplace platform. Actually, AI Companion is a backend. It's our AI infrastructure platform and also our other product also benefit a lot from AI Companion. I'll give one example. Take Zoom Virtual Agent 2.0, for example. Literally, we just announced that recently, and we offer the voice and agent. And this is very important and very helpful to our Contact Center customers. But the backend architecture, a lot of innovations are coming from AI Companion as well. So AI Companion is a platform, right? It's a phone, Contact Center, almost every service will benefit from our AI Companion. Look at the core workplace meeting services, AI Companion is part of that. We only monetize for Custom AI Companion. But AI Companion is extremely important for us to empower our other services. That's a way for us to further monetize AI Companion.

Michelle Chang, CFO

Maybe I'll jump in as well. I took sort of the spirit of your question of how do we really think about and what we look at with respect to AI and measurement, certainly...

Michael J. Funk, Analyst

And also, Michelle, just also just in the context of revenue growth acceleration several years ago, management talked about accelerating revenue back to mid-single digits. You're well on your way there now, at 4.4% constant currency this quarter. So trying to think about contribution to future growth, talking about funnel size and uplift ARR, so we can contextualize the benefit.

Michelle Chang, CFO

In terms of how we approach AI and its impact on our health metrics, we initially focused on enabling capabilities, then shifted our attention to monthly active users. Eric mentioned in his write-up that our monthly active users have increased fourfold year-over-year, now reaching millions. We also pay close attention to the depth of usage, including aspects like deeper integration into productivity workflows and increased engagement in meetings, where customers are utilizing features like the side panel and task management more frequently. Additionally, AI integrations in products such as our phone services, along with agentic features that improve calendar management across our platform, are areas we closely monitor. Naturally, innovation, recognition, and the pace of these developments are priorities for Eric and me. Moreover, monetization remains a key focus. I want to emphasize the importance of our offerings like Contact Center Elite and ZVA, with Contact Center Elite being the most established. Incorporating AI value into all our paid products can significantly affect customer retention and attract new clients. These are our immediate priorities. Looking ahead, we see great potential with the Custom AI Companion, the launch of ZVA 2.0, and several of our specialized products.

Operator, Operator

Alex Zukin with Wolfe Research will ask the next question.

Aleksandr J. Zukin, Analyst

Maybe two quick ones. Eric, the first one for you and then Michelle, one for you as well. Eric, if I think about the way AI adoption is progressing inside of your customer base, both on the online portion as well as the Enterprise portion. How is that changing your opinion around the timeline, the timing of monetization to the extent they can start to bend the growth curve and the competitive framing environment, both against two hyperscalers with two very different opinions on pricing. One, incrementally higher and one, it's part of it for free. I love kind of your thought process on that going forward and then a quick follow-up.

Eric S. Yuan, CEO

Yes. Alex, great question. So as I mentioned earlier, Zoom AI Companion is a platform. AI Companion is empowering almost every product, we announced, right, or the customer that used. That's the reason why if you look at our Contact Center, for example, why we are doing so well? Because if you look at our top 10 deals, 9 out of 10 switched from other cloud vendors because when they look at our product, take Zoom Virtual Agent, for example, right? We build everything from the ground up. Why the innovation, the speed is very fast because we can leverage the capabilities from AI Companion, right? We announced Zoom Virtual Agent 2.0. Internally, we deploy that, our support team is very, very satisfied with the Zoom Virtual Agent powered by AI Companion. So when we look at AI Companion as a platform, how to leverage, empower all other point of services, either Phone, or Contact Center, Whiteboard, and a lot of other things, we are going to win. That can help us win more deals. At the same time, if you look at our core meeting product, right? It's a lot of features and it's a part of AI Companion, customers love that as well. And again, we are going to innovate faster. And that's the reason why I mentioned a few times, and please join our user conference next month. One of the key themes around Zoomtopia this year is really about AI and Zoom AI Companion.

Aleksandr J. Zukin, Analyst

Perfect. Michelle, maybe for you. Leading indicators are always important. It sounds like some of the deal cycle elongation that you saw resolved, I assume some of those deals that may be pushed also closed. Is there anything we're not seeing that is maybe creating a headwind in terms of the CRPO metrics in terms of billings that maybe is not painting the same picture around those KPIs as the largest beat that you've had in the years on a revenue basis, maybe is. So there seems to be a little bit of a divergence, anything that you can point us to, to help us kind of marry those two data points?

Michelle Chang, CFO

Yes. Let me start with some general comments on the macro environment before addressing RPO. From a macro perspective, we continue to see strong and broad demand, and we believe there are lasting drivers in this dynamic macro environment. This remains true. While it is a dynamic situation, we noted some scrutiny in certain geographic areas previously. I want to clarify that we have seen a partial easing of that, and demand from small and medium-sized businesses continues to be very strong. This is evident in our revenue results and is reflected in our low churn rates on the online side, as well as a consistent year-over-year decline in churn on the Enterprise side. So, while the environment remains dynamic, we feel confident about where we stand. Regarding your question about RPO, a 5% growth is strong. It is important to note that this is in comparison to a high baseline, and our RPO bookings are among the highest we have seen in years. The current RPO largely reflects this strong comparable. Another aspect we haven't discussed yet is the overall growth rate. In line with your question, we talked about the impact of foreign exchange and the easier comparable. We also have been moving past the trough we have mentioned for quite some time, along with some much less significant one-time recognition from professional services.

Operator, Operator

Our next question is from Arjun Bhatia with William Blair.

Arjun Rohit Bhatia, Analyst

Eric, I want to touch on a point that you actually brought up proactively on the last question about Contact Center. And I have a million questions on this, but I'll try to focus in on a couple of questions. The fact that you're winning contact center deals against other cloud providers is very surprising, not for anything other than the fact that there are so many on-prem to cloud migrations that are happening. And I'm curious what's driving the cloud displacements. Are those failed implementations? And what are customers seeing, I guess, in Zoom? Is it the AI capabilities? Is it a cleaner tech stack? Is it easier to implement? What are the kind of key drivers that are creating success for Zoom Contact Center, especially against the other cloud providers.

Eric S. Yuan, CEO

Yes, it's a great question. It's not surprising to us at all. We know we are going to win. There are several reasons why customers are dissatisfied with their current cloud contact center providers. If they were happy, they wouldn't want to switch, right? Their dissatisfaction often stems from issues like poor quality, outages, high costs, or ineffective innovation and architecture, including slow AI adoption. Each customer's reason may vary, but they are eager to explore modern contact center solutions. When they try Zoom, they often say, 'Wow, I can't believe it. You have almost every feature we need.' They also trust us and our core meeting platform, and they recognize that our company culture prioritizes customer happiness. We strive to delight our customers, and because of our capabilities, culture, and speed of innovation, they say, 'I trust Zoom.' For example, in the recent UC Awards, Zoom won four awards, including being recognized as the best contact center solution. Customers, partners, and analysts acknowledge our efforts, which is why we intend to strengthen our position. As we continue to innovate quickly and concentrate on product and customer experience, I believe we will achieve even more success. That's how I see our winning strategy.

Michelle Chang, CFO

Maybe let me just jump in and give a couple of stats that might give you a little dimension to some of our wins. We look at a lot of our top 10 wins. So 9 of 10 are replacing the leading contact center provider, 7 of 10 on AI. We're seeing triple-digit growth in our Elite, and 8 of 10 coming from channels. So just another evidence point of us really building out more of a channel and what's resonating with customers.

Eric S. Yuan, CEO

Yes. Another thing, if you look at the product experience, not like some other vendors. They needed to acquire this company, that company. You need to put everything together, the experience is not consistent. We have our own virtual agent. We have our own quality management, workforce management, and the core platform integration, which provides a very consistent experience. That's another reason why customers really want to select Zoom as their contact center solution provider.

Arjun Rohit Bhatia, Analyst

All right. Well, congrats on the success.

Operator, Operator

Our next question is from Rishi Jaluria with RBC Capital Markets.

Rishi Nitya Jaluria, Analyst

Eric and Michelle, really appreciate the time. Nice to see continued strength in the business in spite of everything going on there. Maybe two, AI-related questions I'd like to ask, one for Eric, one for Michelle. From a financial perspective, look, Eric, you've talked about your ambitions to become an AI-first company. And obviously, you're seeing this is great traction with your AI SKUs. As we think about the cost of inferencing and all these models, right, no matter how efficient you are, how do we square that away with the continued raise in cash flow guidance? And how should we be thinking about the long-term financial implications as the usage of AI among your customer base grows, as the use cases continue to expand, et cetera? And then maybe a little bit related to that, obviously, you've been doing great things with AI so far. How do we think about your plan to really leverage all the vast troves of unstructured data that's going through the Zoom platform and maybe build out even newer use cases on that in ways that are harder for customers to do themselves and relies on your domain expertise, your engineering talent, et cetera.

Eric S. Yuan, CEO

Yes, Rishi. That's a great question. You're right about leveraging data and products, especially AI, to create something new. For example, in my past experience, scheduling a meeting required me to navigate my calendar or rely on my assistant, which involved numerous clicks and steps. Now, I can simply use the Zoom AI Companion and chat with it, asking to schedule a meeting with Michelle next week for 30 minutes. It's a conversational interface, providing a smooth experience without needing to click a lot or learn any graphical user interface. This represents an AI-first experience. Regarding innovation, you’re correct that we have announced version 2.0, and next month we will unveil version 3.0. This version focuses on the agentic framework and automating your work while leveraging data. For instance, I can use Zoom AI Companion to write a Zoom Doc without the hassle of clicking through many options. Additionally, in my daily tasks, I often switch between different applications, making workflows increasingly important. Typically, I have to manually communicate my needs to the workflow system. However, with an AI-first approach, I can simply instruct Zoom AI Companion, which acts as a super agent to manage and automate tasks across various systems and applications. This is part of our vision, and I encourage you to join us at Zoomtopia next month to see the exciting new capabilities we will be introducing to enhance our AI Companion.

Michelle Chang, CFO

Yes, Rishi. I'll address the P&L question and come back if I didn't fully respond. We are proud that we are maintaining a gross margin of 79.8%, which is an increase of over 100 basis points year-over-year. This is achievable due to our efforts in offsetting investments and usage in AI with cost optimization. While there was a slight one-time benefit in the second quarter, we are actively working on sustainable measures regarding COGS, and I’ll briefly touch on OpEx. We continue to migrate cloud to colo, which remains a significant advantage for us in COGS. We've discussed our federated approach, ensuring we apply the right model to the right tasks to achieve the best quality and cost for our customers. We are also consistently monitoring AI costs. On the R&D side, we have made considerable investments in AI, and we will keep investing while seeking efficiencies in the business, including AI. We share the same challenges our customers face.

Operator, Operator

Tom Blakey with Cantor Fitzgerald will ask the next question.

Thomas Blakey, Analyst

Could you discuss CCaaS and the sequential momentum, particularly the notable 94% growth? I remember asking about monetization efforts in CCaaS a year or two ago, and you seemed quite enthusiastic about it. Additionally, could you share what guidance includes in terms of ongoing momentum in CCaaS? Insights on sequential growth would be beneficial. If possible, could you also elaborate on the dynamics of seats versus pricing? Furthermore, we've been observing the sustained momentum in Phone for years. With the recent acceleration in CCaaS and solid double-digit growth in Phone, could you merge these points and address what you anticipate as we head into the second half of the year and even into fiscal '27? I'm curious about any potential alleviations from recent downgrades or structural challenges in the core business that could lead to over 100% NRR in the future. The impressive figures in both CCaaS and Phone are truly remarkable.

Eric S. Yuan, CEO

Michelle, do you want to address that question?

Michelle Chang, CFO

I mean, look, we don't give kind of forward-looking product guidance for Contact Center and Zoom Phone. So I'd probably just comment on the nature of that and then broadly expectations for the future. So starting on Contact Center, another quarter of high double-digit growth, which we're very proud of. I think I covered earlier kind of the nature of the top deals, so I won't repeat it there. And then you mentioned the stat, of course, about us making progress upmarket, which is obviously a key consideration. That is all with a not ZVA 2.0 number. And so we look to the future and the reality that our customers are facing in growing labor costs and poor customer experience and see a durable driver in the contact center going forward. From a Zoom Phone perspective, continue to see mid-teens. We said that last time. We're saying it now. Maybe the things that haven't come out as much on this call that I'd mention for investors is really twofold. Just how much we're seeing Phone be a gateway in our deals to other products, right? Starting with meetings, you often go to phone, but now much more of a pathway to contact center, so sort of that better together story of being able to solve the customer problem, go back in the office and have that seamless experience that Eric talked about. And we see that being a durable thing. Also some new announcements that we're very excited about with the connection of ZVA and Zoom Phone as well as we're seeing connections of Zoom Phone to Zoom Revenue Accelerator. So a lot of real momentum. And then maybe the second thing that I would say on Zoom Phone that we would feel good about when we look to the future is just the AI progress within it. So sequentially, the MAU quarter-over-quarter has gone up over 30%. So we're proud to see that as well.

Operator, Operator

Our next question comes from Mark Murphy with JPMorgan.

Sonak Kolar, Analyst

This is Sonak Kolar standing in for Mark Murphy. Congratulations on the results. Eric, I wanted to discuss the recent launch of the AI-first Auto Dialer designed to enhance outbound sales. I’m curious about your long-term perspective on this opportunity and any feedback you’ve received since the launch. Specifically, how do you envision this increasing wallet share among your customers? Additionally, I have a quick follow-up for Michelle. Are there any notable trends in diverging demand patterns across different geographies or sectors? I noticed that international growth slightly exceeded that in the Americas. Is that difference primarily due to foreign exchange factors or other considerations?

Eric S. Yuan, CEO

Yes, those are great questions. Regarding the innovations in the Contact Center, we introduced several features in Q2. One notable feature is the agentless outbound dialers, which we refer to internally as the proactive AutoReach feature. This feature automatically places outbound calls with prerecorded messages, such as appointment reminders, without needing a live agent for manual tasks. Customers have expressed their appreciation for this innovation, and we've responded quickly to their feedback. This is just one example of how we continuously enhance the Contact Center. Our ability to respond to customer input contributes to their satisfaction with Zoom's Contact Center. Each quarter brings numerous innovations, and in Q2, we also launched additional feedback-driven features. Our Contact Center is utilized by customers in various divisions that may also employ internal support systems, which reinforces the need for us to support these different areas. Our ongoing introduction of new innovations every quarter includes the outbound dialer as just one of the improvements we offer.

Michelle Chang, CFO

Yes. Maybe I'd also just tag on to what Eric said and say that I am excited just as the CFO. A lot of the AI innovations now bring us much more into that value conversation of helping the customer create a better experience for their customers, drive revenue increasingly in many instances. So I think it's an exciting direction in terms of the value that we can provide customers. Real quick to your question. I wouldn't really call out any difference in broad demand. And then I'd say that FX was primarily an impact on the EMEA results.

Operator, Operator

Our final question comes from Siti Panigrahi with Mizuho.

Sameer Kalucha, Analyst

This is Sameer. I'm calling in for Siti. One thing I do want to check if you could double-click on the one-time margin benefit that you saw in the quarter. You mentioned it was because of professional services and some AI-related adjustments you are doing, if you could clarify that for me.

Michelle Chang, CFO

Yes, the situation is different. The mention of professional services refers to a minor, one-time impact on the revenue growth rate for Q2. Additionally, I noted that there were some one-time savings that positively affected the gross margin. However, on the revenue front, there are consistent factors contributing to growth, including product diversification and a move upmarket. Regarding gross margin, we are making additional investments in AI and incurring associated costs, but we are balancing these with improvements in efficiency.

Sameer Kalucha, Analyst

Great. And just another clarification is for the second half outlook, the main driver is the Enterprise side of things, and that's why the beat is not getting carried forward as much as it should be...

Michelle Chang, CFO

So what I did in the guide was reiterate what I'd said previously that we're going to capture the online price increase in the amount that we previously communicated. We're going to hold to online being flat, which is consistent with what I said last quarter and the raise is really on the Enterprise side, a combination of many broad things across Enterprise that we talked about today.

Operator, Operator

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

Michelle Chang, CFO

Yes. I just wanted to close to say that we look forward to hosting everyone for a virtual investor session, Q&A, and a little bit of a presentation after Zoomtopia on the 17th of September. We're going to have an exact panel with Eric and myself and other Zoom executives. We're going to do just a time to talk about insights onto our business strategy, key initiatives, and the innovations that we'll be debuting. So we look forward to hosting everyone.

Eric S. Yuan, CEO

Thank you. Thank you all.

Michelle Chang, CFO

Thank you.