Zoom Communications, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• Eric Yuan highlighted FY25 as an incredible year with major AI advancements, Zoom evolving into an AI-first work platform, and strong momentum in Contact Center and Workvivo. Key wins included Amazon, Delta Air Lines, and Cloud Software Group. Focused on agentic AI capabilities, product upgrades, and leveraging AI to drive value for customers.
• Michelle Chang discussed financial results: Q4 total revenue grew ~3% YoY to $1.184B, Enterprise revenue 60% of total, up 2 points YoY. Non-GAAP gross margin 78.8%, non-GAAP operating margin 39.5%. Deferred revenue grew 7% YoY to $1.35B. Guidance provided for Q1 2026 and FY2026, with revenue, operating income, and EPS outlooks.

Segment Performance:

• Zoom Workplace: Including Phone, Team Chat, Events, and Docs saw growth. Zoom Phone had strong traction with new customers and expansions, especially in retail, healthcare, and education. Zoom Team Chat had a redesigned sidebar and workflow automation. Zoom Docs usage more than doubled quarter-over-quarter. The Zoom Workplace won a big deal with Amazon in Q4.
• Contact Center: Achieved the largest ARR deal in history with a Fortune 100 US tech company for over 15,000 agents. The number of Contact Center customers with over $100,000 in ARR grew over 100% year-over-year, with wins displacing on-prem and leading CCaaS vendors.
• Workvivo: Had a record quarter with an 89% year-over-year growth in customers, accelerating from 79% in Q3. Signed three deals over $1 million in ARR with major global brands, benefiting from the partnership as the preferred migration partner for Meta Workplace.
• AI: Zoom AI Companion monthly active users grew 68% quarter-over-quarter, demonstrating the value of AI. The company is focused on agentic AI capabilities, with launches like Custom AI Companion add-on in April and upgrades to Zoom Workplace for Clinicians and Business Services.

Guidance:

• Q1 2026: Expect revenue in the range of $1.162B to $1.167B (~2% YoY growth at midpoint, ~2.6% constant currency growth). Non-GAAP operating income $440M to $445M, EPS $1.29 to $1.31.
• FY2026: Expect revenue in the range of $4.785B to $4.795B (~2.7% YoY growth at midpoint, ~3.1% constant currency growth). Non-GAAP operating income $1.85B to $1.86B, EPS $5.34 to $5.37, free cash flow $1.68B to $1.72B.

Risks:

• Ongoing macro challenges and uncertainties that could affect performance and financial results.
• Forward-looking statements subject to risks and factors that could materially differ from actual results, as discussed in SEC filings.

Q: Kash Rangan asked Eric about how AI capabilities could be a tailwind for the business.

A: Eric Yuan responded that AI investment is a top priority, with AI Companion being sticky for low-end SMB customers and monetizable for high-end and business services through customized solutions.

Q: Samad Samana asked about AI impact on larger customers' adoption and Michelle about AI investments in guidance.

A: Eric Yuan discussed customer trust in AI due to value and cost transparency, while Michelle Chang noted AI investments are baked into guidance with ramping monetization of custom AI.

Q: Samad Samana followed up on top drivers for net new revenue and enterprise customer segment contribution.

A: Michelle Chang stated enterprise is the dominant growth driver, with online flat to slightly down, and contact center and Workvivo important adjacent growth areas.

Q: Meta Marshall asked about go-to-market investments for contact center.

A: Michelle Chang and Eric Yuan discussed moving upmarket, accelerating channel, and returning online to growth, with contact center growth driven by elite SKUs and channel partnerships.

Q: Alex Zukin asked about demand environment and Amazon deal.

A: Michelle Chang noted mixed but stable macro, with enterprise showing upmarket momentum and online record low churn. Eric Yuan discussed Amazon deal as a win due to Zoom's full workplace platform and opportunity with Amazon marketplace.

Q: Peter Levine asked about AI customization use cases and back-to-office impact.

A: Eric Yuan and Michelle Chang discussed AI customization use cases like custom templates and third-party integrations, with no concern about back-to-office affecting Zoom's importance for collaboration.

Q: Mark Murphy asked about DeepSeek and AI product margins.

A: Eric Yuan discussed open source and industry benefits, while Michelle Chang noted margins for AI products are closely monitored with efficiencies offsetting costs.

Q: Michael Turrin asked about free cash flow margin delta and margin trajectory.

A: Michelle Chang explained free cash flow timing differences and ongoing focus on revenue growth balanced with profitability, expecting margin efficiency to continue.

Q: Arjun Bhatia asked about agentic AI pricing and NRR inflection.

A: Eric Yuan discussed agentic AI as part of Zoom AI Companion, with pricing integrated, and Michelle Chang noted enterprise traction with focus on moving upmarket and channel for NRR growth.

Q: James Fish asked about consumption vs seat pricing and cash flow conversion.

A: Michelle Chang discussed federated AI approach balancing costs and efficiencies, with cash flow conversion affected by timing and consistent guidance methodology.

Q: Tom Blakey asked about CCaaS revenue target and Workvivo growth.

A: Eric Yuan and Michelle Chang discussed CCaaS growth potential with channel momentum and Workvivo's continued growth from Meta Workplace migration and other customers.

Q: Michael Funk asked about revenue growth guidance and 100,000+ ARR customers.

A: Michelle Chang noted sequential improvements in enterprise and online churn, with 100,000+ ARR customers growing 7% YoY, and focus on ongoing growth drivers.

Q: Rishi Jaluria asked about Zoom Chat traction.

A: Eric Yuan discussed Zoom Team Chat's inclusion in the workplace suite, driving adoption through no additional cost and features, with marketing focus to increase awareness.

Q: Siti Panigrahi asked about Contact Center inflection and momentum.

A: Eric Yuan and Michelle Chang discussed Contact Center momentum with 7 of 10 top deals from cloud vendors, channel growth, and aspiration to beat Zoom Phone's growth trajectory.