Zoom Communications, Inc. (ZM) September 9, 2026 Conference Transcript

All right, I think we're good to get started whenever. Delighted to have Michelle from Zoom, Zoom CFO, here with us today. Thank you so much for coming.

My pleasure.

We'll get right into it. As Zoom combines its conversational context with data from customers' other applications, how does the platform evolve into a more strategic orchestration layer?

Yeah, this is an important shift for Zoom. Look, I think everyone's kind of reinventing themselves in an AI era, and it's certainly true for Zoom. Not only in terms of just how we even reinvent our core in our meetings business, but we've broadened so much out of our meetings business, which I know we'll talk about today, and it's about reinventing that. So what Zoom talks about is there's going to be systems of engagement and systems of record. We're obviously coming at it from an engagement perspective, but really what matters to the customer is getting them to action because when we know there's action, then there's business value. And the good news is when we can deliver business value to our customers, it drives revenue. So what we're really focused on within that is we sit at the context of so many conversations. The differential for Zoom in terms of an AI era and why we win is the shift to platform that you were mentioning is because there's so much that happens in human-to-human conversation that just gets lost. It never sits in a system of record. It never sits, you know, even today it is sort of just dispersed pre-AI world in a system of engagement. So we're really excited about this and think there's a real differentiator for Zoom, both in the context that we have in the AI, obviously our quality and all of that, but also in the context that we can see not only inside the company but outside the company. So I know we'll get to unpacking that more as we go.

Yeah, and on that point, I guess, the strategic case for Zoom increasingly rests on the idea that conversational context is a differentiated asset. So what does Zoom know because it sits inside live conversations that another enterprise software company can't easily recreate?

Yeah, it is that context, right? And I'll give you sort of an example because that context is so hard to capture anywhere, and yet it's really a lot of where the value for a lot of companies sits is in that human-to-human connection. So Eric talks about this, our CEO talks about this as human-to-human connections will always persist. The ingenuity, the creativity of humans, that's where that will reside. and humans to systems and systems to systems, those are going to change as we get into an AI world. But really, there's a deep belief at Zoom that that human connection prevails. And so let me give a couple of examples of that, of what we talk about when we talk about system of action and why we think Zoom has a unique differential. Let's say I'm an engineer. I sit through a Monday morning meeting to review specs and whatever. We're sitting there talking. The conversation goes all over. I have now a database of all the conversations, but I take that conversation intelligence and I update it into a JIRA without even leaving the Zoom platform. That's what we're talking about when we talk about system of action. Let's say I'm selling you something, right? Conversation goes all over the place. We make decisions, you know, but it's that taking that conversation, updating automatically without a seller having to spend more cycles into Salesforce and be able to take action off of it that really creates a system of action. And Zoom's excited about this because when we can do that, there's such value for the customer. When there's value for the customer, there's revenue for it.

Yeah, and you've framed Zoom's growth inflection around product diversification, AI monetization, focusing up market, channel expansion, and then also lowering churn, Which of these has kind of progressed the furthest, I'd say, over the last kind of 6 to 12 months? And where do you feel like you have the largest execution gaps to come?

So, look, our growth story, I guess, first, before I kind of get to parsing it out, is one of an enterprise. Our online business, we've been working to stabilize. That represents about 38% of our business. Our growth, our growth inflection, which is all what Zoom is about these days, is all on the enterprise side. And I would say it's a bit interrelated, some of the dynamics that you said. So we've been moving from just being a meetings company to much more diversified product set. A lot of that diversified product set sits in an AI world, and a lot of it is underscored with channel and moving up markets. So the things kind of all begin to intertwine, but those are really the dynamics that are driving that inflection and growth. And, you know, look, in terms of execution and all of that, look, I think we've seen tremendous pace of innovation from our engineering. It's really just the sharpening of our portfolio, and I think you're going to see that. You've seen it come in. Faster innovation, sharpening portfolio. And on the sales side, it's a lot of just ongoing operational excellence.

We often get the questions from investors whenever we see kind of a period where fundamentals improve, is this structural or cyclical? And so on the enterprise business specifically, what gives you kind of confidence that this represents a structural improvement in the growth rate of that business rather than just a period of one-off or something? Yeah.

So let me maybe then unpack our enterprise growth story with, I thought it was very important when I came on as CFO to really hone for investors, what are the things that will drive durable growth? I would get the question all the time, how can you get to double digit growth? And look, it's not just important to talk about investors, but I got to turn around and talk to all of Zoom about it. And so we landed on our three priorities that now we use every time we talk to investors. It frames our earning script every time. But it also frames where we make our investments internally and where we think the growth comes from. First and most matured, we've got to infuse AI into our core. In our meetings business, in our phone business, which we call Workplace, we've got to continually reinvent those because they represent great launching pads. And the thing that gives me confidence that this isn't just a one-off, if you will, is we're seeing churn go down year-over-year, multi-quarter year trend, bone, strong grower for us, clearly taking share, growth in the teens. Okay, then go to the next one, which is we know we have strengths in customer experience. We know there's a convergence and a nice synergy in particular for Zoom with UCAS and CCAS. And so we've got to figure out the scale there, and you're seeing proof of durability in quarter in and quarter out. It's driven by AI. It's high double-digit, meaning just south of 100% growth, like quarter in and quarter out. And we're just getting started in terms of our product portfolio, and we can come back to that. And then you go to that innovation of AI and then the other pieces we can monetize in ZoomMate that I'm sure we'll talk about and in things like our Common Room and DRA products with sales AI. And I'm like, you know, think about where we are in those stages, and that gives me a ton of confidence for durability.

Yeah, so starting a little bit higher level on the AI strategy, and then we'll go into the specific products. Zoom-federated AI architecture lets you kind of route workloads across different models and your own smaller models. How do you think about the benefits of that approach for both product quality and unit economics?

Look, I think that Zoom was an early adopter of the federated, you know, in a time when a lot of people were going all in with one model. I think Zoom took a very differentiated process. Now it's become more norm, but it's essential for quality and cost, so to your question. And what it means for Zoom is, hey, we're going to have an SLM that's going to be where we take all of our high-volume stuff and we grind costs out and we get super good at quality in a way that others just can't match, and you're seeing that. Then we're going to have LLM where there's sort of the cutting edge and we want to use those and test and we'll use them opportunistically and we won't just be linked to one provider. And then look, it's going to also be an open source play for XAM as well. And look, those combination of things as well as flexibility and how customers deploy on-prem, how they want to, we see it as winning in large deals. There are deals that we mentioned, a multimillion-dollar ARR. In the last quarter alone, Zoom's approach to AI was a key differential in the deal, not only churn, but upselling as well.

Yeah, and when you're putting new products out into markets that have that kind of AI functionality built in, And how do you think about whether to just add those to your core offerings and not necessarily directly monetize versus when you directly monetize?

This is another one. I'll give Zim credit. When I came in, they had put AI value in their meetings, paid SKUs at no additional cost. And I have to say, at first I was like, wow. But it made sense the more you began to think about, customers will expect a certain amount of AI value just as part of it. Similar analogy, like cars just have seatbelts, right? And so what we tend to think about is really focusing maniacally on customer value. And that's where we believe we'll monetize. And look, as part of it, there'll be some like meeting summaries or capturing notes, but people will just expect that as part of the meetings experience. But look, we're also going to hold ourselves to ROI there. We ought to expect reduction in churn. We ought to expect bringing in new customers, maybe some additive wins. But then we'll reserve sort of to the side of the paywall things where we feel like we have unique value and things like Zoom made and our sales AI and obviously customer experience where the customer then can very clearly see the ROI of their AI deployment.

And then on customer experience specifically it's currently Zoom, I'd say like cleanest source of direct AI monetization. So as virtual agents automate more interactions, how does that expand Zoom's revenue opportunity rather than just creating pressure I'd say on existing teams?

This is such a good one and I love the question because I think it's some people that are maybe more looking at this as traditional players in contact center maybe don't understand the chapter that Zoom entered So Zoom entered is sort of an AI first customer experience with a differentiated approach that I'm going to talk about. But before I go to it, why it's important is we kind of came in with a modern, fresh approach. We don't have the tech debt and business model transition that a lot of the more traditional players that started and caught customer experience are grappling with. But look, it's not enough just to be that. We really embrace the AI first, and I think Zoom is really unique on two particular fronts. We've approached our customer experience as sort of a holistic approach. We're gonna be there in traditional contact center, we're gonna be there when agents need to be assisted with AI, and we're gonna be there in virtual agents, which is also opening up new markets. But Zoom differentiates by stitching that together with intelligence and being able to hand off seamlessly to that within ComTech Center and then across to UCAS as well. And so I think that's a lot of what is driving. If you look at the underlying signals in our customer experience business, that's what's driving the formula of success.

Yeah, and then Zoom may kind of expand the monetization, I'd say, opportunity outside of customer experience. But it's kind of much earlier in that adoption curve. So what have you learned from initial customers about their willingness to pay for something that's more of the horizontal AI? Yeah.

So first, for those that may be less familiar with ZoomMate, think of this as that behind the paywall AI value for meetings business primarily. And so look, there's three value props, and then I'll talk about maybe what we're seeing in enterprise customers versus more small customers. The value prop is the ability, once you have that virality of AI usage in the meetings base, in the phone base, to be able to search, even if it's not a Zoom meeting, even if it's not Zoom email, so Microsoft Teams, Google Mail, Slack chat, the ability to search across all of a customer's assets as well as their enterprise systems, those integrations. So that's value prop number one from Zoom Mate. Second one is the ability then to take that intelligence and move it into agentic orchestration, simple tasks and actions. And the third one is the ability to turn it into creation at the end. Simple example I say, just in case that sounds like a bunch of tech words, let's say we're in a sales meeting. I can take all of those sales calls, no matter where they happen, have a base of knowledge, marry that with Salesforce data and emails with the customer. I can query on it and learn. I have a base that just keeps getting smarter with me. Turn it into simple actions of updating Salesforce and then turn it into a custom RFP at the end. So look, an enterprise customer is a very different conversation. It starts with governance, trust, integration, search. With S&B, it's far more, I want the out-of-the-box, simple to deploy, help me with this problem that I have. And so, you know, look, a lot of our big wins that we shared with investors have been on the enterprise side. We've put some big names that have done wall-to-wall deployment, like MongoDB, Oracle Salesforce, and we're proud of those. And it's also about bringing that value to our S&B and online audiences as well. Yeah.

As you see customers shift out of this seat-based pricing model and kind of go more towards a hybrid consumption outcome-based pricing model, how are you seeing them adapt in those sales processes and how has that kind of evolved over the past year or two?

Yeah. So first, I think it's worth noting kind of where Zoom is in that journey. Look, we have hybrid and Zoom mates. We have full consumptive and things like ZVA. Still is the percentage for Zoom is small. But look, this is a lot of where the market is going. And together with our customers, we are working through it. A lot of it is visibility, understanding, walking customers through it. They may have been burned before in terms of large surprises, not by us, but it's a lot of helping them understand, getting comfort, and then making sure that our sellers, We tend to not pivot our sellers by consecutive or per user, but we pivot them on adding value to the customer and think that's the right answer for our sales side.

Yeah, and as you're seeing AI become larger from a usage perspective within your customer base, how are you kind of thinking about the different margin levers that you can look at in order to maintain consistent gross margins over the next couple of quarters, acknowledging that I think usage is the most important thing for a lot of companies right now?

Yeah. Look, I'd say it starts with the top line. When you focus on business value, that brings the top line in. I think where people get sideways is where they forget that you owe the customer business value at the end of the day. So I think it starts there. Look, Zoom has, you know, best in class margins. And, you know, our AI usage has gone up somewhere in the 100 to 200% growth year over year for quite some time, and we've been able to do that and still with an expanding portfolio hold to gross margins. Well, the formula for that, I would say, is the federated stuff that we talked about before, as well as it is just efficiencies in our core. And then look, staying true to that monetization piece. And then, you know, look, we have to work that SLM to LLM and now open source gives us a great new leverage to go after.

Yeah, and you guys are kind of operating at that high-end watermark that we see companies from an operating margin perspective, so 40% non-GAAP margin.

Yeah.

How do you think about that going forward? Like as you start to invest in more growth initiatives, how do you think about the ROI of that? And then does that kind of indicate there's more operating leverage still to come for the company or any like First, let me start with gross margin.

We're still holding to a long-term 80%, which is phenomenal, even despite all of this. So starting there, what I've said to investors is you should think about our FY27 operating margin guidance, which is 40.7 in our latest guide, as reflective of where we'll be. Only when we see a more notable inflection in revenue growth will we change short of our operating margin, and that's because, like I've said very consistently, my focus will be on growth, first and foremost, getting that growth to inflect, and we're proud of the progress. But at the same time, when we're at 5% growth, we have to be also maintaining our margins. And so, look, we'll be very thoughtful about how we navigate that, but that's the guidance that we've given to investors.

Yeah, I'm pivoting a little bit to more of the specific product question. WorkVivo has now surpassed $100 million in ARR and is expanding from kind of an employee communications tool into kind of a broader AI-native digital headquarters, I think you guys have said. How does WorkVivo's role within the broader Zoom platform change as more employees and knowledge and work move into that platform?

I love, first let me say Work Vivo is sort of started as our employee experience product, and I love what they're doing this year. One, it's fun to see them pass the 100 million milestone because it's a great example of an acquired product set for Zoom. But even more, you know, I talked about the federated model, and we talked about the advantages that that gives to Zoom. There's also a secret ingredient in Zoom where we build sort of once with our core AI technology and then leverage that in different ways. If we think about this system of action of taking conversation to completion, there's a lot of reusable parts in that, and that's going to also be a key ingredient, and WorkVilo is a great example of that. So they announced SEER, which is using kind of AI to get insights about your employee base, and they put AI and sort of an AI-first digital employee experience infused in there. Well, they did it with the backbone of what Zoom had produced. And so I love that. And now it opens new revenue streams to continue to inflect the growth rate for work people.

And then Zoom Revenue Accelerator and then Common Room as well have kind of continued to extend Zoom outside of that just sales conversation and into getting more buyer signals, prospecting, and a lot of things that can happen before that conversation even begins. So how kind of broad is your ambition within the revenue technology stack, and, like, how do you kind of view the bounds of where you'll go and where you won't go?

Yeah. Look, I think you'll see a common room, which is sort of that insight piece that you talked about, together with ZRA, which was an existing product that sort of took that conversational intelligence when we're in a sales call and having that into completion. it's a great marrying of two product sets to deliver something that others in the industry can't do. Look, we'll keep investors updated about where the product portfolio goes, but the thing I want to make sure I get out to investors is this is an area where Zoom has a right to win because a lot of our meeting space occurs and of sellers' calls happen on Zoom phone and happen on Zoom meetings, and if they don't, we have the open ecosystem approach, So it's an area where I think taking that conversational intelligence to completion is a really great opportunity. And we hear from CROs all the time of just wanting less complexity in their tech stack and wanting something that fuses it together, and so really excited about what Zoom is doing in the combination of the tail. And I think that you're going to see that rise in our priorities as we move forward.

And then on the phone piece, that continues to grow at a double-digit rate. It's kind of also scaled very nicely as well. So it's not growing double digits in a small base. It's growing double digits in a big base. It's continued to be kind of more dependent on replacing on-premise systems and kind of going after that, like, old core phone system, I would say. So do you see that as kind of, like, the primary driver from here, or do you think you kind of can use other levers, I guess?

What's driving our phone base is a couple of things. Yes, it's on-prem because a lot of people on on-prem are rethinking in the AI world, but it's almost equally. Last quarter, we had a lot of on-prem that can tend to be lumpy, but we drive both off of the cloud and on-prem, so Zoom has a healthy flow from both. And what I love about it is, you know, it's giving some real nice adjacencies to Zoom. Think about contact center. Frequently, we see contact center and Zoom deals go hand-in-hand, customers wanting that simplicity of one stack. But we also see Zoom phone opening up new AI doors in things like we have a product AI receptionist. We'll think about what a natural adjacency that is to a phone sale and what value that can provide to customers that need sort of an all-with-on simple help and resolution for their customers and what a cost savings that can be. So I get excited both about the durability of the team's growth of feeding both off of cloud and on-prem, as well as the adjacencies that it gives us to land and expand in our base from there.

Yeah, and this applies a little bit to Zoom Phone, but also probably to the broader suite. How much are you seeing AI start to become a part of decisions that customers are making when they're thinking about future-proofing their tech stack? Or does that still feel kind of like a newer opportunity?

AI is in any conversation. And that's why if I go back to our priorities, every single one talks about AI. We've got to reinvent the meetings for AI. We've got to fuse AI and phone. We're clearly winning in contact center because of the AI disruption and because we have a tremendous product to meet that moment. And then we've got to add new, you know, vertical scenarios in Common Room and ZRA and horizontal scenarios in Zoom And so AI is the red thread to all of those, where it's no longer just some, you know, AI for AI's sake. But I would say the era that we're moving into is prove the real value. And that's why I love our approach is like customer first, how do you show value to them? And when we can do that with incremental sales or productivity or higher CSAT and cost reductions and resolution times, that's when Zoom is going to win.

I think there's been a perception, at least, that Zoom has kind of historically won through this best-of-breed approach. But increasingly, you're depending on a broader platform adoption in order to grow. So how do you kind of preserve that product differentiation and that best-of-breed quality while also going after a broader platform opportunity?

Yeah. Look, I give our CEO a lot of credit for that. Look, it's how he thinks. If I think about the ethos of Zoom, if you will, it's simplicity, reliability, openness. Look, those are critical and value for the customer. Those are as critical in yesterday of building the meetings core as they are in an AI world. And I think that's why you're seeing us focus on customer value, focus on, you know, simple and reliable scenarios to deliver that value. And then certainly in an AI world, an open ecosystem, it's not going to just be everyone does all their AI with one person. That's not going to be the AI world we live in. Yeah.

And then anything on like AI budgets and how you're seeing at least enterprise customers start to make room in their organization for AI, I'm understanding a lot of it can be value-based pricing, but any kind of help that you can give us getting in the minds of your customers as I'm making this decision?

Look, I'll also give you the CFO perspective, which is, you know, I think a lot of it's clearly driving value from an R&D perspective and pace of innovation. You can see that so much of what I even talked about in that third priority came in the last six months for ZAM. customer experience I think that that's one of the first leading indicators of AI just from the standpoint that like customers can see how it can solve the chronic issues of resolution time having to repeat yourself which leads to poor CSAT and so in terms of unlocking budgets I think it starts with a customer value and it's a lot of it's going to come from other areas that aren't necessarily tech spend. So it's going to come from, if you will, in the old cloud days, the analog to digital transformation of budgets that ultimately drives that. And look, I think maybe to throw in one because I probably forgot to mention it earlier, I think there's a lot of companies that put out AI stats, you know, of money, and to me the only stat that matters is is AI inflecting your revenue growth in total. And so for Zoom, it's a bit complicated because it comes in indirect monetization and direct monetization, but the thing I care most about is are we adding value for our customers, and when we do, does it inflict our revenue growth?

I think some of the products that we've talked about here, some of them are organic, some of them are inorganic. I think we've definitely seen software companies in general become more acquisitive in this AI era and kind of go into the private markets more often. Curious what your philosophy has been and if there's been kind of any change to that philosophy just as a result of the amount of innovation we're seeing in the private market.

Look, I would say there's clearly been a change. ZAM has acquired two companies in its 15-year history and three in the last year. And I think it's because there is a lot of value out there, but you also have to be very careful. And so what I have tried to do with investors is really sharpen our talk track of how to think about when we will acquire. So what we've said is we'll acquire as part of one of those three priorities. We will acquire, and it won't slow down, the progress that we're making. We'll acquire with strong financials, meaning a clear thesis of payoff and return and getting things to durable margins, et cetera, and inflecting revenue growth with synergy. And look, as a result, for Zoom, that means largely small to medium-sized acquisitions, which is what you saw us do with bonsai, bright hair, and common room.

And as customer expectations have continued to evolve for Zoom, kind of reflective of how you're selling more of a platform today, any kind of direction that customers are pulling you into next? Like, how do you think about kind of what that next leg is going forward?

Look, I think the conversations with customers are about AI trust and governance. I think the conversations have gone beyond AI for AI's sake and are very much like prove the value. And that's great because I think that's where Zoom has really focused too. So there's a great meeting of those two. And look, there's probably a bit ahead of us, if I give one that's sort of on the future, is this consumptive. and what does that look like, and how do I think about budgeting that differently, you know, as part of that.

Any kind of early look or tidbits you're willing to give us ahead of the Zoomtopia conference in October?

Ah, let's see. I think with Zoomtopia, I think you're going to continue to see AI innovation. Sorry, I got something in my eye. I think you're going to see us continue to sharpen those three priorities, of the growth represent what gets us back to double-digit, more durable revenue growth. And I think you're going to see us sharpen them even more for investors, just a turning in the crank as we go further on in our journey. And, look, I think you're going to continue to see Zoom be Zoom, simple, innovative, fast-paced, you know, while sticking to customer at our core.

Yeah.

Yeah, and we're excited to have an investor day, too, so we'll, I think from an investor day, you can expect us to translate what we see at Zoomtopia to investors and how you think about that relative to our growth, and we'll have some longer-term guidance in there and some fun stats to share as well.

Well, I appreciate it so much. Please join me in thanking Michelle.

Thank you.