Zoom Communications, Inc. Q3 FY2025 earnings call

• Hosted Zoomtopia 2024, unveiling an AI-first work platform vision and launching AI Companion 2.0.
• Enterprise revenues grew 6% YOY, with enterprise now making up 59% of total revenue.
• Average monthly churn decreased to 2.7%, the lowest ever.
• Ended Q3 with just shy of 4,000 enterprise customers contributing over $100,000 in trailing twelve-month revenue, making up 31% of revenue.
• Announced new corporate name, Zoom Communications Inc.
• Secured largest-ever contact center customer with over 20,000 seats and saw strong traction with WorkVIVO, including landing three net new customers with over $1 million in ARR.

In Q3, total revenue grew approximately 4% year over year to $1.178 billion. Enterprise revenues grew approximately 6% year over year, making up 59% of total revenue, up one point year over year. Zoom AI Companion monthly active users grew 59% quarter over quarter. The number of WorkVIVO customers grew 72% year over year. The number of Zoom Contact Center customers surpassed 1,250, up more than 82% year over year. Average monthly churn decreased to 2.7%, the lowest ever reported churn.

• Q4 revenue expected to be in the range of $1.175 to $1.18 billion, midpoint ~2.7% YOY growth. Non-GAAP operating income expected $443 to $448 million, midpoint operating margin 37.8%.
• FY2025 revenue expected $4.656 to $4.661 billion, midpoint ~2.9% YOY growth. Non-GAAP operating income $1.813 to $1.818 billion, midpoint operating margin 39%. EPS $5.41 to $5.43.
• Free cash flow expected towards high end of previously provided range of $1.58 to $1.62 billion for FY2025.
• Board authorized incremental $1.2 billion share repurchase, bringing total buyback to ~$2 billion to be executed by end of fiscal 2026.

Forward-looking statements are subject to risks and other factors that could affect performance and financial results, as discussed in SEC filings. Zoom assumes no obligation to update forward-looking statements.

Q: Meta Marshall with Morgan Stanley asked about customer interest in AI at Zoomtopia.

A: Eric Yuan said customer feedback on AI Companion 2.0 was positive, with over four million accounts enabled, and customers appreciate quality and no additional cost, plus interest in customized AI solutions.

Q: Kash Rangan with Goldman Sachs asked about AI budgets and macro sentiment.

A: Eric Yuan said companies are allocating budgets differently for AI, with Zoom in a better position due to quality and total cost of ownership; on macro, too early to tell but companies optimistic about embracing AI.

Q: Arjun Bhatia with William Blair asked about Contact Center deal.

A: Eric Yuan said the Spanish Revenue Service deal was won due to existing trust, scalable architecture, and feature set.

Q: Patrick Walravens with JMP Securities asked about Michelle Chang's first earnings call and FY2026 guidance.

A: Michelle Chang said she was excited by Zoom's AI-first platform vision and focus on top-line growth, capital allocation; will guide for FY2026 in next period.

Q: James Fish with Piper Sandler asked about AI investments and RPO.

A: Eric Yuan said AI investments go into Workplace platform, customized AI Companion, and Contact Center; Michelle Chang said lengthening billing terms led to RPO current piece increase.

Q: Alex Zukin with Wolfe Research asked about AI monetization and online/enterprise growth.

A: Eric Yuan and Michelle Chang discussed AI monetization through various products and positive KPIs for enterprise and online but didn't guide to 2026 specifics.

Q: Siti Panigrahi with Mizuho asked about key products for growth.

A: Michelle Chang said focus on Zoom's foundation, Workplace platform growth, Contact Center and WorkVIVO momentum, and international/channel expansion.

Q: Alan Varkovsky with Scotiabank discussed deferred revenue and guidance.

A: Michelle Chang said deferred revenue growth due to tightening discounting and lengthening billing terms, guidance philosophy unchanged.

Q: Michael Funk with Bank of America asked about market attack and price.

A: Eric Yuan said Zoom's strategy is better product, price, and service, with customers valuing product experience, stable pricing, and platform approach.

Q: Samad Samana with Jefferies asked about WorkVIVO growth from Meta.

A: Eric Yuan said WorkVIVO growth includes Meta migration, strong pipeline, and focus on further innovation.

Q: Tyler Radke with Citi asked about margins and expense evaluation.

A: Michelle Chang and Eric Yuan discussed investing in AI, emerging businesses, and platform, with disciplined expense management and confidence in cost optimization.

Q: Mark Murphy with JPMorgan asked about AI Companion data integration monetization.

A: Eric Yuan said customized AI Companion addresses customer needs for integrating internal data sources, with positive feedback from Zoomtopia.