Q4 2025 Zoom Communications Inc Earnings Call

Eric Yuan

Thank you, Charles. Thank you, everyone, for joining us today. FY25 was an incredible year, marked by a major advancement in the evolution of Zoom into an AI-first work platform, spanning phone, Teams Chat, Events, Docs and more, and a strong momentum in Contact Center and Workvivo. A key highlight has been the rapid adoption of our AI capabilities, growth in monthly active users of Zoom AI Companion accelerated to 68% quarter over quarter, demonstrating the real value AI is providing customers.
Zoom AI Companion has emerged as a driving force behind our transformation into an AI-first company, enabling our customers to discover enhanced productivity opportunities. We are always looking ahead, moving forward, and reimagining what’s possible be frictionless work. And now we look forward to helping our customers fully realize the benefits of agentic AI and discover what’s possible with AI agents.
As part of AI Companion 2.0, we added advanced agentic capabilities, including memory, reasoning, orchestration and seamless integration with Microsoft and Google services. In April, we’re launching the custom AI Companion add-on to automate workplace houses through custom agents. This will personalize AI to feed the customer needs connected with our existing data and work seamlessly with their third-party tools.
We are also enhancing Zoom Workplace for clinicians with an upgrade AI Companion that will enable clinical note-taking abilities and specialized medical features for healthcare providers starting in March. Additionally, we are upgrading our business services by introducing more agentic capabilities. Zoom Virtual Agent will soon expand reasoning abilities to handle complex tasks while maintaining conversation or context for more natural and helpful outcomes.
We are uniquely positioned to succeed in agentic AI for several reasons. Zoom is a system of engagement for our users with the recent information in ongoing conversations. This exceptional context along with user engagement allows us to drive greater value for customers.
Our federated AI approach lets us combine the best models for each task. We can use specialized small language models where appropriate while leveraging large models for more complex reasoning, driving both quality and cost efficiency.
Zoom is known for making complex technologies simple for users. We manage the complexity of AI models while keeping the experience intuitive, powerful, and connected with popular third-party apps. We believe our strategic approach positions us favorably to help bring value to the customer. We are focused on delivering critical value while building towards an ambitious vision of AI that truly amplifies human potential for the customer.
Our AI-first work platform continues to gain momentum, driven by our core strengths in meetings and expanding portfolio of integrated solutions such as Phone, Team Chat, Events, and Zoom Docs, Whiteboard and Zoom Rooms. We see this in the results. Zoom Workplace had a big win with Amazon in Q4.
With this Zoom Workplace, Zoom Phone continues to see traction with both new customers and expansions. We built upon our strength in retail, healthcare, and education which delivered 7 of our top 10 Zoom Phone deals this quarter.
The recent Mitel partnership opens up access to Mitel’s 70 million global end-users and demonstrates how our open ecosystem approach is resonating with customers seeking flexible deployment models and a choice. Zoom Team Chat continues to serve as a collaboration hub across our platform. The recent redesign of the side bar has enhanced navigation and productivity, while our new workflow automation capabilities are driving deeper platform engagement.
Beyond Zoom Team Chat, we are seeing encouraging adoption across our broader portfolio. Zoom Docs usage more than doubled quarter over quarter together with Whiteboard, which was a Customer’s Choice recipient in the 2024 Gartner Peer Insights Voice of the Customer report for visual collaboration applications. Zoom Team Chat and Zoom Docs are critical components of our AI-first platform vision that expands our system of engagement and allow customers to do more with AI.
Both Contact Center and Workvivo delivered exceptional results this quarter. In Contact Center, we achieved our largest ARR deal in history with a Fortune 100 US tech company for over 15,000 agents, demonstrating our ability to win and deliver for the most demanding enterprise customers. The number of Contact Center customers with over $100,000 in ARR grew over 100% year over year, with wins both displacing on-prem and leading CCAR vendors.
Our AI-first approach is resonating strongly. The majority of our deals are now in the higher-tier elite or premium packages, validating the power and customer appeal of our comprehensive AI and workforce engagement capabilities.
Workvivo also had a record quarter driven by strength across all regions. The total number of Workvivo customers grew 89% year over year, accelerating from 79% in Q3. We signed three deals over $1 million in ARR, each with major global brands. Our strategic partnership as a preferred migration partner for Workplace has been a strong contributed to this momentum.
These solutions are critical components of our AI-first work platform vision. Contact Center extends our platform from employee engagement or customer engagement while Workvivo broadens our employee collaboration to internal engagement and culture. Together, they exemplify our strategy of thoughtful expansion into high-growth areas, where we can deliver the reseated value through our platform approach, AI leadership, and a rapid innovation for the customer.
As we look ahead to FY26, we are focused on our key strategic priorities: expanding our AI capabilities to drive customer value; rapidly innovating within Zoom Workplace; and building upon momentum in new products such as Contact Center and Workvivo. Despite ongoing macro challenges and uncertainties, we are encouraged that our value position and the total cost of ownership are gaining traction in the market. Our innovation engine is fired on all cylinders, our platform strategy is working, and we have significant opportunities and growth vectors to execute upon.
Now on top of the record-setting Contact Center win I just highlighted, let me share some more amazing wins in Q4. We are excited to offer Zoom to Amazon employees and further strengthen our long-standing relationship with AWS as our preferred cloud provider. This builds on the success we’ve achieved helping customers easily procure and deploy Zoom through AWS marketplace.
Let me also thank Delta Air Lines, who this year is the first US airline to celebrate its Centennial for choosing Workvivo as their employee communications and engagement platform. Upon the sunsetting of Meta Workplace, Delta strategically chose to migrate to Workvivo. As part of a multi-year deal, Workvivo will serve Delta’s entire global workforce reinforcing their strong company culture with omnichannel reach and key features live streaming, employee recognition and a comprehensive engagement analytics.
Let me also thank Cloud Software Group, a global mission-critical enterprise software leader as one of our newest CX clients to the Zoom family. Recognizing the simplicity and ease-of-use of our unified platform, they opted for the Zoom Contact Center and Zoom Virtual Agent to modernize the way they communicate and collaborate with their customers.
These incredible wins across workplace and business services validate our strategy of delivering a full platform of modern, integrated, AI-powered solutions to drive meaningful business value and outcomes for customers.
Now let me hand over to Michelle, who will take us through the financial results. Thank you.

Michelle Chang

Thank you, Eric, and hello, everyone. I’m excited to be with you again and share that we beat our top-line and profitability guidance.
In Q4, total revenue grew approximately 3% year over year to $1.184 billion, $4 million above the high end of our guidance. Total revenue adjusted for constant currency, grew approximately 4% to $1.188 billion, $9 million above the high end of our constant currency guidance range. Our enterprise revenue grew approximately 6% year over year and now makes up 60% of our total revenue, up 2 points year over year. We are continuing to see signs of stability in our online business. In Q4, average monthly churn was 2.8%, a 20-basis-point improvement year over year and our lowest ever churn rate in the fourth quarter.
In our enterprise business, we saw a 7% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers now make up 31% of our total revenue, up 1 point year over year.
Our trailing 12-month net dollar expansion rate for enterprise customers in Q4 remained flat year over year at 98%. The total number of enterprise customers at the end of Q4 was approximately 192,600. As we said previously, enterprise customer account is more reflective of our go-to-market motion rather than a direct measure of our enterprise business performance.
We will continue to do migrations between our two go-to-market motions in order to best serve our customers as we did last year. And as such, going forward into the next fiscal year, we will no longer include this metric in our prepared remarks or SEC filings. To provide ongoing transparency, we will include it in the earnings deck appendix throughout FY26. We still believe that enterprise revenue growth and KPIs such as net dollar expansion are better reflections of the future business and expect future migrations to have minimal impact on these metrics.
Now back to the financial results. Pivoting to our growth internationally, our Americas revenue grew 4% year over year; EMEA grew 2%; and APAC grew 3%. On a constant currency basis, EMEA grew 2%; and APAC grew 5% year over year.
Moving to our non-GAAP results, which, as a reminder, excludes stock-based compensation and associated payroll taxes, acquisition-related expenses, net gains on strategic investments and all associated tax effects. Non-GAAP gross margin in Q4 was 78.8%, slightly lower than Q4 of last year, primarily due to strategic investments in AI, partially offset by efficiency gains. The results in Q4 were in line with our prior commentary, and we continue to reiterate our goal of reaching 80% gross margin over the long term.
Non-GAAP income from operations grew 5% year over year to $468 million, exceeding the high end of our guidance by $20 million. Non-GAAP operating margin for Q4 improved to 39.5%, up 81 basis points from Q4 of last year, even amongst continued investment in AI, our platform, and our emerging growth businesses.
Non-GAAP diluted net income per share in Q4 was $1.41 on approximately 317 million non-GAAP diluted weighted average shares outstanding. This result was $0.11 above the high end of our guidance and $0.01 lower than Q4 of last year, primarily due to higher income tax and unrealized foreign exchange losses.
Turning to the balance sheet. Deferred revenue at the end of the period grew 7% year over year to $1.35 billion, outperforming the 5% to 6% we estimated last quarter. The growth was driven by continued refinement of discounting practices as well as ongoing business growth. For Q1, we expect deferred revenue to be up 4% to 5% year over year.
Looking at both our billed and unbilled contracts, our RPO increased 6% year over year to approximately $3.8 billion. We expect to recognize 59% of total RPO as revenue over the next 12 months. That is up from 58% in Q4 of last year.
Operating cash flow in the quarter increased 21% year over year to $425 million. Free cash flow grew 25% year over year to $416 million. Operating cash flow and free cash flow margins in the quarter expanded to 35.9% and 35.2%, respectively. We ended the quarter with approximately $7.8 billion in cash, cash equivalents, and marketable securities, excluding restricted cash.
Under our $2.7 billion share buyback authorization, in Q4, we purchased 4.3 million shares for $355 million, increasing our repurchases quarter over quarter by $53 million and contributing to the reduction of common share outstanding in Q4.
Pivoting from Q4, I wanted to share a few of our full-year FY25 highlights. Total revenue grew 3%, and total enterprise revenue grew 5% year over year, both of which accelerated in the second half. Our free cash flow grew 23% year over year to $1.8 billion. We also achieved a non-GAAP operating margin of 39.4%, a 20-basis improvement from FY24.
And finally, significant progress on stock-based compensation, down to 20% of revenue, representing a 3-point reduction year over year and slightly ahead of the pace of reduction that we discussed at Zoomtopia. And we repurchased 15.9 million shares for $1.1 billion, contributing to the reduction of common stock outstanding in FY25.
Now turning to guidance. In Q1, we expect revenue to be in the range of $1.162 billion to $1.167 billion. This represents approximately 2% year-over-year growth at the midpoint or 2.6% year-over-year growth on a constant currency basis.
As a reminder, Q1 of FY26 has one fewer day than the prior year. We expect non-GAAP operating income to be in the range of $440 million to $445 million, representing an operating margin of 38% at the midpoint. Our outlook for non-GAAP earnings per share is $1.29 to $1.31 based on approximately 316 million shares outstanding. And as a reminder, future share repurchases are not reflected in the share count and EPS guidance.
For the full year of FY26, we expect revenue to be in the range of $4.785 billion to $4.795 billion, which represents approximately 2.7% year-over-year growth at the midpoint or 3.1% year-over-year growth on a constant currency basis. We expect our non-GAAP operating income to be in the range of $1.85 billion to $1.86 billion, representing an operating margin of approximately 39% at the midpoint.
Our outlook for non-GAAP earnings per share for FY26 is $5.34 to $5.37, based on approximately 318 million shares outstanding. For FY26, we expect free cash flow to be in the range of $1.68 billion to $1.72 billion.
We’re proud of our progress in FY25, and we’re excited about the differentiated, agentic AI vision and the value that it provides to our customers. We’re going to continue to invest thoughtfully in our priorities that we’ve outlined while maintaining our focus on profitability and cash flow generation. We’re excited and incredibly grateful for the trust of the entire Zoom team, our customers, and our investors.
Kelsey, please queue the first question.

Operator

Thank you so much, Michelle. (Operator Instructions)
Kash Rangan, Goldman Sachs.

Kash Rangan

Thank you so much. Congrats on finishing up the fiscal year. Eric, a question for you. You’ve certainly made a lot of pivotal advances positioning the company to be very AI-first. It shows up in the quarter-to-quarter usage of Zoom Companion, the Amazon deal that you won — congratulations.
As you look ahead, do you think the AI capabilities could — where do you think the AI capabilities could become a tailwind for your business in that it starts to drive, accelerate maybe the underlying platform and the AI features are additive to the revenue growth rate? We’re still stable, but could this set the stage up for better than stable growth? Thank you so much.

Eric Yuan

Kash, that’s a great question. That’s to double down on AI investment. It’s always our priority for a while, right? I think it’s happening already, meaning if you look at our low-end SMB customer online buyers, AI Companion is part of that at no additional cost, made our service very sticky. And also the customers — to give a very basic example, like meeting summary, right, as it works so well, more and more customers find the value. Actually, for sure, they are going to enjoy using our service more, right? That’s for low end.
For high end, for sure — and we understand that today’s AI Companion additional cost, we cannot monetize. However, in April, we are going to announce the customized AI Companion for interested customers. We can monetize.
But the most important thing is for business services. Take a Contact Center, for example, why we are winning? Because a lot of AI features like AI Expert Assist, AI — a lot of features built into our quality management and so on and so forth. But all those business services, that’s another great way for us to monetize AI. For workplace and for enterprise customer AI Companion low end and also really make our service sticky and improve the value. It is actually customer realize, we add more and more services, more and more value, guess what, they are going to stay with Zoom plus usage also will be higher. That’s our strategy to leverage AI.

Operator

Samad Samana, Jefferies.

Samad Samana

Hi, good evening. And I’ll echo Kash’s kind words as well. It’s good to see all the progress that Zoom is making. I guess on the AI side, I want to follow up on that.
Eric, when you think about — there’s new AI-based products, but how is AI impacting the decision by larger customers, in particular, to adopt maybe the existing components of the platform and thinking about expanding, leveraging Zoom in advance of the AI features that are being released?
And maybe just a dovetail into — I’ll cheat and ask two in one. Michelle, what are you assuming around AI investments? And are those fully embedded into guidance for the year? So those are my two questions.

Eric Yuan

Yeah. So I can address the first part of your AI question. So you look at it from a customer or partner perspective, right? So almost every vendor, they try to pitch their AI story. Our customer is smart. Our customers want to understand what’s the value that AI added to their business, right?
So they would like to take — to test the area services and especially look at the value and at the cost, right? And look at our AI Companion — all those AI Companion core features today and a new additional cost, right? And customer really like it because of the quality getting better and better every quarter and very useful. Not like some other competitors, right?
You talk about their AI strategy, and the customers realize that, wow, it’s very expensive. And the total cost of ownership is not getting better because cost of the value is not great, but also it’s not free, and you always try to increase price.
That’s the reason why for us to leverage our AI technology to build the trusted relationship with the customer. And I think that we are going to win in the long run, because you don’t want to tell a customer, hey, this feature now, you need to pay more, right? You need to do this, do that. That’s not right.
That’s the reason why we shared our strategy, road map, features, pricing, everything with our customers transparently, reflected by the AI Companion usage. We are winning more and more customer trust. Zoom has a very good AI functionalities and also they trust Zoom. We are not going to charge the customer a crazy price, right? I think that’s the way for us to be the long-term — the winning.

Michelle Chang

And then maybe just to add on with how to think about AI and what’s in our guide, I would say from a top-line perspective, the trends that we’re seeing in stemming churn as well as the Contact Center elite revenue that Eric talks about out, those are in our plans, we certainly have revenue in our plans for the more H2 focused SKUs like custom AI Companion. But those will still obviously be ramping and not a dominant thing. And then in terms of the investment, we said last time that this would be one of our three investments, and it’s baked into the guide.

Operator

Ryan MacWilliams, Barclays.

Ryan MacWilliams

Hey, guys. Good to see you. Greetings from Switzerland. This is a new one for me out of here asking the question on earnings call. Michelle, two for you. Lots of growth opportunities for Zoom. How would you rank the top three drivers for Zoom’s net new revenue in fiscal 2026 between like Contact Center, AIs, and Phone, et cetera. And then as you built up to the full-year guide, how should we think about what it implies from contributions from the enterprise customer segment and the online gross rate?

Michelle Chang

So let me maybe answer the first one, and then I’ll round back to the other one, Ryan, and I hope you’re well in Switzerland. But I would say when you look at the full-year guide that we gave of 2.7% when you factor sort of FX and leap year, it gets much more in 3.3% range. So just as context. Within that, I would say that we have assumed that online to slightly down and that enterprise will really be the dominant growth driver.
So in terms of how to think about the top three, I think I would answer it like this. Look, certainly, Ryan, where like our core business and when I talk about core, it will sort of be inclusive of Phone, we are pleased with what we’re seeing in terms of record churn. And also, I would say we’re seeing the same in our enterprise business.
So we’re down — sales had sort of peaked in the start of ’25. We’re now seeing sequential improvement every single quarter, which is great. And so we certainly have an expectation and those are big dollars.
Then I would go to sort of our adjacent fast-flowing TAM, like Contact Center and Workvivo, and both are certainly important to us, where we’ll be working to continue to grow customer and the successes that we’ve seen both upmarket and extend those down through channel. And in particular, you sort of asked an AI questions, so let me leave that one in, which is just a connection again that our Contact Center revenue is really being driven by that elite SKU, which is out top 140 SKU, which includes not only inbound and outbound but AI as well.

Operator

Meta Marshall, Morgan Stanley.

Meta Marshall

Great. Thank you. Maybe just a quick question on just what kind of go-to-market investments you guys are making as you broaden the portfolio and as you kind of see what has more traction with customers, particularly when it comes to Contact Center. And maybe just asking on the big deal that was one, just what was the go to market motion with winning kind of that large customer. Thanks.

Michelle Chang

Do you want me to?

Eric Yuan

Yeah. Go ahead.

Michelle Chang

I was going to answer broad things and maybe you can layer in from a deal perspective. Does that sound good?
All right. So nice to see you again as well. What I would say in terms of our priorities for our go-to-market, maybe the first one that I would call out is just to continue to move upmarket that we’ve been seeing. We have releasing progress in Contact Center and Workvivo in that space, but also in Phone and other. So first priority, go-to-market wise, would certainly be to move our enterprise — continue to move our enterprise business upmarket.
Second thing, really important to us — we’ve talked about it before, it’s integral to Phone and Contact Center, but also moving further down in our customer breadth, which is really accelerating the channel. And then I would say probably third to that is returning our online business to growth. While I’ve sort of said the guide as fought down, the ambition, of course, is to return it to growth. So that’s how I think about our top three priorities.
Eric, do you want to comment on the (multiple speakers) ?

Eric Yuan

Yeah. So maybe I’ll add on what Michelle said in terms of doubling down our channel, the business, and look at our Contact Center in top 10 deals. And the Contact Center, 6 out of those 10 deals are driven by the channel partners. And we are going to — investing more, right, to make sure that the channel partner can contribute more to our Contact Center growth.

Operator

Alex Zukin, Wolfe Research.

Alex Zukin

Guys, congrats on a great quarter. Maybe just two-parter, right? So first, to the extent, Eric, that you can talk about the demand environment post-election, the difference between the two segments in online and enterprise, and maybe talk about what you’re seeing in SMB, what you’re seeing — I’ve gotten questions about federal exposure and all of the DOGE headlines. So just talk about — you mentioned in the script that it’s still choppy; it’s still uncertain. So maybe put a finer point on that.
And then what kind of got you over the line with Amazon in terms of winning that deal? And you’re now at a point where kind of 2 of the Mag 7 are deeply partnered and entrenched with Zoom, where, to some extent, they were effectively competing with one or two of your products beforehand. So what is kind of happening? And how do you see the opportunity to turn those into almost also distribution channels? You mentioned the Delta example with Workvivo. Amazon, I imagine, has a number of giant customers that now maybe are opportunities.

Eric Yuan

So Michelle, how about I address the second one; you address in the first one?

Michelle Chang

Okay. Look, I would say — I would characterize what we’re seeing in the macroenvironment as mixed but stable. To the positive, on the enterprise side, we’re seeing a lot of upmarket momentum, and you can see it in our results. I mentioned earlier, so I won’t repeat it again, but a sequential improvement in the downsells on the enterprise side.
Also on the online, we’re seeing record low churn rates in both Q3 and Q4. So those you can look at and say positive. But certainly, you open the headlines and you see elements of lay-offs, ambitious — or sort of volatile times, if you will, in the news. I would say that’s sort of behind our sentiment that things are still mixed.

Eric Yuan

Yeah. So regarding the Amazon deal, as you all know, right, Amazon was using the Chime, which was acquisition done many years ago, right? And you look at the video conferencing, and it’s becoming more and more important. Again, Zoom not only just video conferencing and the full Workplace platform, a lot of other services, even in a conference room system, right?
So Amazon, they are evaluating all those services. They want to find out the best — the product to serve their employee needs. So called Amazon’s greater company does care about the employee experience by looking, into all the services, right? So for sure, the Zoom is the best choice. So they would like to deploy the Zoom to improve their communication, collaboration, the needs. I just kind of — for all those companies, really care about employee experience, I think they all will select Zoom as a vendor.
So speaking of distribution, we already started working together with Amazon. I think it’s a huge opportunity ahead of us, how to leverage those Amazon marketplace to drive our top-line growth. We’re already seeing some early signs of success, working together with the Amazon team more and more to drive — again, that’s a — this is part of a channel partnership, right? This Amazon Workplace is doing very well for a lot of other companies, right? So we also want to be part of that as well. So that’s a win-win, I think, yeah.

Operator

Peter Levine, Evercore.

Peter Levine

Great. Thank you for taking my questions here. So in April, when the AI customization and the AI Companion becomes available, I think it’s $11 or $12 a seat, can you maybe help us understand how you’re thinking about like what’s the real use case? And then in terms of adoption, what are you envisioning in terms of how many employees within an organization would actually need this type of application?
And then second for you, Eric, if you see the headlines around even in our world in banking where a lot of people are forced to back five days week, maybe just help us understand how are you thinking about that? Does that, at all, prohibit your customers may be thinking about expanding? But just would love to know your thoughts on if this back to office five days a week becomes more of a reality.

Eric Yuan

Yeah. I think five days in the working week is for financial institutions, I think, I fully understand, right, because it’s very important — in-person meetings for sure, is a lot of benefit. I fully understand. But also at the same time, for every large financial institutions, you always have employees across the country and also a lot of international branch offices as well, and you talk to the customers, partner, you Zoom, right?
I think internal usage might be kind of up and down. But overall, and then the tools like Zoom is still very important is collaboration tools, right? I do not have any concern. I truly respect every company decision is fully remote or five days in office or hybrid, the thing for each company, right? So we just want to help our customers to enable no matter which way they go and make sure they have the best collaboration and communication tools to help them improve their productivity.
Michelle, you want to address the first one?

Michelle Chang

Yeah, maybe, Eric, I’ll let you talk about the use cases. But Peter, in regards to your question about what are sort of the assumptions or what’s the targeting in our head with the $12 custom AI Companion SKU, I would say, starting with enterprise customers, obviously, the easiest place to sort of hunt on that is our own customer base and talk about that, but certainly not just limited to that.
But we’ll be probably giving a lot more, I would say, at Enterprise Connect, which you can see on the thing there. But I would say, we’ve assumed some degree of monetization in FY26; I think you’ll see more of it in ’27. And we think that the $12 price point is going to be a really compelling TCO story for our customers differentiated from what others in the market are pricing.

Eric Yuan

Yeah. So regarding the customer AI Companion use cases, high levels, we give a customer flexibility to customize their needs. I’ll give a few examples. One feature like we have a Zoom Service Call video clip — we are going to support the standard template, right? How to support every customer? They have a customized template for each of the users, and this is a part of AI Companion Studio, right?
And also, all kinds of third-party integration, right? And they prefer some of those third-party application integration with their data, with the knowledge, with their dictionary, a lot of things. Each company is different. They would want to customize, so we can leverage our Companion Studio to work together with the customer, to support their needs and also at same time, comment about this.

Operator

Mark Murphy, JP Morgan.

Mark Murphy

Thank you. I will echo Kash’s congrats on finishing the fiscal year. Eric, I wanted to try to get your thoughts, your perspective on DeepSeek and any potential you see for lower inferencing costs in AI models if DeepSeek is something that you’re testing out.
And Michelle, looking at how strong the cash flow production is, can you speak to the cost or margin profile for the AI products? And what type of gross margin profile you see — you maybe are thinking would be coming in for the AI Companion as well?

Eric Yuan

Yeah. So Mark, yeah, I can address your first question regarding DeepSeek. And I think a few, I did publish a LinkedIn post about my thought about the DeepSeek. After the earnings call, I will forward LinkedIn post. But high level, I think given this is open source — we like it because the open source, right — you look at it from vendors like us, can we build application layer and the AI technology? We also do our own large language model, a lot of the techniques, right, a lot of optimization and so on and so forth we all can learn from, right?
This is good for the application and the vendors like us. And look at large language models, also like the Llama for example and also look at DeepSeek and also, by the way, look at it even for hardware vendors like NVIDIA, Broadcom, also good for them as well.
The reason why — there’s a lot of demand for GPUs, right? And normally, they know they serve those very large cloud vendors first. Again for Zoom, probably we are not on the top priority, maybe the second priority, and a lot of other companies behind us.
With large cloud vendors, they may not buy — win more. However, the huge demand — we want to buy more. And after that, a lot of other companies also want to buy more. Overall, I think it’s good for everyone.
And also, the cost for like from a hardware side, a large language model, the cash and reference everything, as you look at that, we will drive the cost down. Now that’s why overall, that’s good for industry, because it open source, right? And that’s my take on that.

Michelle Chang

Mark, maybe your question about kind of how to think about the margins, we’re not going to obviously give any guidance or probably going forward any AI-specific margin. But I would say that we look at those very closely and our margins for every active are coming down in line with what our expectations would be, if not more.
What I would say maybe more broadly to maybe address where I think you may be going with the question is that we’re very pleased with our margin finish in FY25. And while we don’t guide to the margin in ’26, I would say we feel good that our increased usage in AI and our spend there is going to be offset by efficiencies such that we should be able to see in FY26, some acceleration of margin in line with sort of — not up to the 80%, but holding very true, I guess, Mark, to the principles that we set in our long-term margins.

Mark Murphy

And Michelle, thank you for that. But just to clarify. I think you said margin for active users are coming down. Did you mean the cost profile is coming (multiple speakers) ?

Michelle Chang

Yeah, costs.

Operator

Michael Turrin, Wells Fargo.

Michael Turrin

Hey. Thanks very much. Nice to see everyone. I was intending to continue on the margin question. So there’s a little bit of a follow-on here. But Michelle, first one for your guide, can you just speak to the delta between implied operating and free cash flow margin, what’s driving that for the upcoming year?
And maybe just going back to margin trajectory, Zoom has had higher targets that suggest margins may come down as investments go up. You’re guiding for just slight compression on the operating margin side. So maybe just how you’re thinking about the trade-offs if that still holds? Or what could shift that at all, if you don’t mind? Thanks very much.

Michelle Chang

Perfect. So let me maybe start with what I think is a more tactical but, Michael, by all means, correct me if I’m misunderstanding your question. On the free cash flow, for ’25, we’re certainly seeing quite a strong growth. There’s obviously the timing elements of that — of some pull forward relative to ’26.
Our expectation on is that you’d still continue to see that OI growth, that you’re impacted by timing differences as well as different interest conditions and tax conditions. So that’s kind of how I would have investors think about free cash flows.
In terms of your operating income and how we think about it long term, I actually think you teed it up that beautifully, which is, look, we are going to be first and foremost about revenue growth, but we are also going to balance that with profitability. And our long-term guide, we gave sort of what I would call as a wide margin of possibility of things that we would do. And really, what Eric and I have been centered on is giving clear and clean prioritized business priorities to investors, so you know where we’re investing in.
And then really, look, we are going to invest when we see growth. But we’re also going to be just pushing an ongoing frame of efficiency. And I think you really see that in our ’26 guide, and I think you should expect to see similar.

Operator

Arjun Bhatia, William Blair.

Arjun Bhatia

Perfect. Eric, I have one for you and, Michelle, one for you. Eric, you mentioned agentic AI. As you’re moving more towards agentic and you’re adding agents to your platform, how do you think about just evolving your pricing model? Does that fall under the broader AI Companion, or do you anticipate having a different pricing approach for agentic capabilities?
And then Michelle, it seems like you’re just having a lot of traction with enterprise. It seems like that part of the business is going well. When do you think we should see NRR start to inflect? And maybe what are the puts and takes there going into FY26? Thank you.

Eric Yuan

Yeah. So regarding the agentic capabilities, today, look at Zoom AI Companion, it’s already agentic, right? So you essentially look at for 1.0 or 2.0, we already embrace agentic framework. We have Workplace agent and also have many other services agent. Part of the Contact Center also can support third-party agent as well. And meaning — this is more like a technology, natural evolution from GenAI to agentic framework, every company.
We are doing that as well, because this is very important and the new technology, new framework and a lot of agents were built by us and the Zoom AI Companion Studio, customers also can build agent as well. I do not think we need to have a special SKU, right? Because this is part of our Zoom AI Companion Studio and to offer customers agentic capabilities.

Michelle Chang

And then maybe on your comments on the guide, I just continue to reiterate that that full-year guide has some headwinds of foreign exchange and leap year sort of without 2.7% when you factor them in 3.3%. I’ll reiterate my comments on online — the expectation is that it’s flat to a slight decline. And that really enterprise is what will — what we expect to carry the growth.
And in terms of the elements of what we expect to carry the growth and they would be an acceleration, but it’s the same things we’ve been talking about and frankly, seen throughout FY25, pushing up market, gaining channel traction, and seen churn and downsells moderate. And then certainly growing into our land and expand motions even further with Workvivo and Contact Center.

Operator

James Fish, Piper Sandler.

James Fish

Hey, guys. Thanks for the question here. Building off of a bunch of the prior ones, but as we think about a shift more towards AI contribution, aren’t we shifting more towards a consumption model rather than a seat model over time? Why wouldn’t we see margin compression longer term, or how are you guys kind of thinking about balancing seat-based pricing and consumption-based pricing?
And also working off of Turrin’s prior question, you are guiding for a free cash flow conversion rate that is beneath what you guys just did and you mentioned Michelle, some pull forward. So how should we think about what sort of got pulled forward in the cash flow that wouldn’t be repeating or why we wouldn’t be closer to a sort of 100% free cash flow conversion at time?

Michelle Chang

Yeah. I can start with that. Let’s see. Your first question was sort of around how to think about margins and business models and why we don’t see compression. And what I would say is that what we expect to see is similar to what you saw in FY25, which is we’re seeing obvious increase in cost from AI and that we have an ongoing methodical kind of efficiency list to offset, and we certainly expect that broadly to continue into FY26. So I think we feel good about our ability to kind of moderate that.
Maybe other things I would talk about, Eric mentioned in his prepared remarks, but we really think the federated approach that we have to AI is an important element to being able to both give better quality of results, but also improved cost, meaning being able to match the right model at the right cost to the right action that needs to be done for customer value.
So that’s really how we’re thinking about managing things broadly. There’s other things we do more holistically, where we can offset stuff that’s maybe not in AI in our margins, things like colos, et cetera, that we’ve talked about previously.
And then your question around free cash flow, I understood of why don’t we see more of an increase similar in line with what we saw in ’25. So let me answer that. First of all, in FY25, we had interest rates that we’re growing off of a large base as well as we saw billings and positive operating income. As we go into ’26, we’re going to see different interest rate conditions, different tax conditions, as I mentioned, but still that’s from operating income. So really, it’s sort of a timing thing.
The other thing that I might mention that we’ve not talked as explicitly about is our broad guide, be it in revenue, our operating income continues to use a consistent methodology to what Zoom’s before — kind of that prudent consistent where we see to beat.

Operator

Tom Blakey, Cantor Fitzgerald.

Thomas Blakey

Great. Thank you for taking my questions. Maybe just seems like everybody else is doing, too. I’ll try to sneak two in, Eric and Michelle.
On the CCaaS, great successes here. I was wondering if you could talk a little bit more about that longer plan to get CCaaS up to 10% of revenue in line with the Zoom Phone timeline. Maybe that’s being pulled in a little bit here with the successes in the higher tiers, Eric.
And then maybe on Workvivo, again, just solid numbers, great traction last year. Wondering with the Meta workplace migration opportunity, if you wanted to just maybe double-click on that. Maybe this is for Michelle, if you’re maybe seeing there’s still enough runway there that continue — that type of a growth accelerant can continue in fiscal ’26 and not become more of a headwind, that would be helpful. Thank you so much.

Eric Yuan

Yeah. So Tom, regarding the Contact Center contribution to our top-line growth, for sure, that’s always our aspiration, right, to continue to leverage the Contact Center to contribute more.
I think the timing wise, it’s perfect. There’s a lot of invest customers still deploy on-prem solution, right? You take this largest ARR win, right? So that Fortune 100 US tech company, they were using on-prem solutions, right? And when they decided to migrate to cloud distribution, for sure, they wanted to look at all the cloud vendors.
They want to make sure the native to build the cloud — the solution with also all the innovations, the AI is part of that That’s the reason why we’re much better positioned, right?
And also, in the product Phone, we have high confidence. On the go-to-market side, we also needed to double down on the channel. A lot of the things, I think, are doing very well, also reflected by more than 50% top 10 deals in Q4, also driven by the channel partners.
As long as we focus on the innovation with AI and all the features drive the velocity and at the same time — and listen to customers and double down go-to-market side, I think we are going to be much better positioned, and this is growing and the AI-driven and the Contact Center market.

Michelle Chang

Yeah, and thanks, Maybe I’ll hit your Workvivo and then some broad comments about the two products together. From a Workvivo, like you said, we feel great. Record bookings — excuse me — 89% growth in customers, so all very durable things.
Certainly, Meta — and we called that out in our prepared remarks — is driving a lot of that. But I’ll remind you that we had non-Meta growth before. And so we feel good about our ability to drive both, frankly.
And then we’re not going to give guidance. You have our overall revenue guidance. You have the color and context on enterprise versus online split. But I would say that the elements, the underlying durable elements of what drove ’25, we expect to be present in ’26.

Operator

Michael Funk, Bank of America.

Michael Funk

Great. Thank you. Thank you, Eric. Thank you, Michelle. You ought to be proud of what you’ve achieved in the last two years. I wanted to level-set discussion around revenue growth though, because the previous narrative was a march towards mid-single-digit revenue growth. You’re still guiding below that for fiscal ’26.
So wanted a better — state of the strategy maybe shifted to customer stickiness, meaning bundling and discounting or other factors are at play here, maybe online churns remain a little bit higher, maybe macro has been more difficult, maybe you’re waiting to have more monetizable AI solutions. But I want to better understand how level-set that revenue growth forecast for longer term because previously, it was discussed as a mid-single-digit target.

Michelle Chang

I’ll maybe take that one, Eric. And then feel free to jump in. But I would say I don’t think there’s been a change relative to that, meaning if you go to the core of our business like our guide — and our performance reflect the same thing, which is we have seen sequential improvements in downsell in enterprise. We’re seeing record level churn — low churn in online.
And then the elements that will drive ’26 are the same: move-up market, broadened channel from a go-to-market perspective, from a product perspective, growth in Phone, growth Workvivo, growth in Contact Center. So I really don’t see it as a shift in approach. And from a macro perspective, we’ve also assumed macro conditions.

Michael Funk

Okay. Maybe a quick math question, Michelle, maybe it’s a revenue new thing. But if I look at the revenue from over 100,000 customers year over year, simply taking a percentage of revenue and number of customers, it looks to be declining slightly. Is there a change or a shift in those 100,000 customers? Is it a different product set that you’re selling into them? Or is my basic math incorrect?

Michelle Chang

Our over 100,00 trailing 12-month customers grew 7%. Am I misunderstanding your question?

Michael Funk

Yeah, but if I simply take the percentage of revenue from those customers and then divide it by the number of customers, I get to a lower amount of revenue per customer than a year ago. Maybe we can take it offline if that’s a better idea.

Michelle Chang

Happy to take it in the next call if you’re there. But big picture, so people have the sentiment. We feel good about our traction in that market.

Operator

Rishi Jaluria, RBC Capital Markets.

Rishi Jaluria

Wonderful. Thanks so much for taking my question. I’ll keep it to one just given timing. Eric, I appreciate that you’re talking about Zoom Chat and highlighting that in your prepared remarks. Can you talk a little bit about where you’re getting some of the traction? And what’s the impact that you’re seeing in your customer base, whether it’s better churn, whether it’s better expansion rates, adoption of other adjacent products? Any color there would be helpful? Thank you.

Eric Yuan

Thank you, Rishi. You talked about our Zoom Team Chat, right? So if you look at — maybe use one of the deals I want to share with you like in Q4, we won a big deal in the manufacturing market — like 30,000 Zoom Workplaces and also the 12,000 Zoom Team Chat users, right? Because the reason why customers — when we talk to the customers the entire Zoom Workplace suite and realized Zoom Team Chat is part of that. At a new additional cost and look at the functionality and a lot of features and innovations, well, why not? This one is standardized Zoom. Essentially, when customers realize the power of Zoom Team Chat, they are all very interested, right?
That’s the reason why you look at some start-up companies, right? They also look at — given that they do not have a lot of the capital, after they deploy Zoom, they also found our Zoom Team Chat. So again, from a product perspective, it’s a pretty cool product service, because we already have that for a long time. Just from a marketing perspective, a lot of the customers did not know that, right? So that’s the reason why we need to figure out a way to fix that problem.
Again, this is the power of the entire Zoom Workplace suite. Team Chat is part of that. Meta customers deployed the meetings in the phone. They do not realize that Team Chat is already part of that; why not use that, right? We needed to fix that marketing option problem or adoption problem? Again, this is on our radar screen to address that.

Michelle Chang

Maybe I’d also highlight, Rishi, just a current example that stuck with me, which is — we saw a recent customer in a Compute versus Microsoft to 12,000 users. And they commented that the chat and the inclusive value was integral to their decision. So we are — while it’s still early days, and we’re working on it, we’re excited about what we see.

Rishi Jaluria

Very helpful. Thanks, Eric. Thanks, Michelle.

Eric Yuan

Thank you. By the way, Rishi, you also can use Zoom Team Chat as well. We can connect to over Zoom Team Chat.

Operator

Siti Panigrahi, Mizuho.

Siti Panigrahi

Thanks for squeezing me in. I’ll go back to the Contact Center. Eric, if you wear your General Manager hat for Contact Center, if you look at Phone after two, three years, you saw the inflection point. Now Contact Center has been now almost like two, three years since we launched. Is this a year for Contact Center, or do you think there’s some kind of — it’s a demand side customers trying to pause and looking at the AI strategy, there’s some kind of delay there?
And also, we see like Avaya now it’s not going to support the AXP customer, less than 200 customers. So how do you see Contact Center opportunity in terms of inflection? When do you think it will be like Phone?

Eric Yuan

Yeah. First of all, we do see the momentum, right? And in Q3, in terms of number of seats, the largest deal, Q4 in terms of ARR — so large deal, more and more customer realized, wow, Zoom Contact Center, that works so well and look at all the innovation and scalability and integration with other core services, I think, are also parts of AI.
I think we just need to focus on execution, market opportunities there. We look at our top 10 deals, right? I think if I recall correctly, six or seven to replace the existing in-cloud vendors, right? And the key is really — because given — the two years ago, we announced that, right? So given the shorter period of timing, customer, they do not realize we have that.
Again, this is a marketing problem. We’ve got to fix that, but we have high confidence on the product side, and I think we do see the momentum now. Hopefully, this year, we’re going to make even more progress compared to Zoom Phone growth trajectory. We want to build that, right? So that’s always our aspiration.

Michelle Chang

And, Siti, for your notes. It was 7 of 10: 7 coming from cloud, 3 coming from on-prem. And the 6 of 10 is the momentum in our channel.

Operator

And again, everyone, that does conclude our Q&A session for today. Eric, Michelle, any concluding closing remarks?

Eric Yuan

Yeah. Thank you, all, for your time. We really appreciate it.

Michelle Chang

Thank you.

Operator

You bet. Thanks, everyone. And again, this does conclude today’s earnings webinar. As always, we thank you all for joining us, and we look forward to seeing you next quarter. Take care.