Zoom - Q4 2026
February 25, 2026
Transcript
Operator (participant)
Hello, everyone, and welcome to Zoom's Q4 FY 2026 earnings release webinar. 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, Catherine. Hello, everyone, welcome to Zoom's earnings video webinar for the fourth quarter and full 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 substitute 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 first quarter and full fiscal year 2027, our expectations regarding financial and business trends, impacts from the macroeconomic environment, our market position, stock repurchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations, and product initiatives, including future product and feature 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.
With that, let me turn the discussion over to Eric, who's giving his prepared remarks via Zoom Custom Avatars.
Eric Yuan (Founder and CEO)
Thank you, Charles. FY 2026 was a pivotal year for Zoom and for our industry. We grew Q4 revenue 5.3% and full year FY 2026 revenue 4.4%, an acceleration of 130 basis points over FY 2025. These results reflect the increasing value of our platform with innovations like AI Companion 3.0, as our platform expands and evolves into an AI-powered system of action for modern work. The inflection in growth reflects a structural shift in the market. Organizations are moving beyond systems of record and engagement toward AI-driven systems of action that help customers and employees get real work done. Zoom is uniquely positioned to lead this transition. We bridge work both inside and outside the organization, across collaboration, customer experience, and employee experience, using AI to take conversations all the way to completion.
This directly connects to the three priorities we outlined last quarter to bring this system of action to life. First, elevate the Workplace with AI. Second, drive growth of new AI products. Third, scale AI-first customer experience. Let me start by speaking about scaling AI-first customer experience. Zoom's advantage in customer experience comes from embedding it within our broader system of action, not treating it as a standalone solution, as many competitors do. Our CX platform is differentiated because it is built on the same platform that powers collaboration inside the organization and extends seamlessly to customer engagement and other external workflows. By unifying internal and external workflows, we eliminate traditional silos and enable customer journeys to move continuously from conversation to completion.
Within customer experience itself, Zoom delivers a cohesive set of intelligent capabilities that empower both human and virtual agents and turn live interactions into coordinated action across teams and systems to drive outcomes. Our AI innovation across AI-assisted human agents and virtual agents is translating into improved service outcomes and cost savings for our customers and incremental revenue for Zoom. You see this in ZCX ARR continuing to grow in high double digits, and in fact, accelerating in Q4, driven by AI monetization. More concretely, you see it in the story our deal composition tells about why customers choose us. Every one of our top 10 deals this quarter included paid AI, and seven represented competitive displacements of leading CCaaS vendors. Let me bring this to life with some Q4 customer wins.
We welcomed Aeroflow Health, a medical device company, who chose Zoom Contact Center in a major Q4 deal spanning ZCC Elite and ZVA Voice plus chat to replace a leading CCaaS vendor due to our bold AI vision for CX and ability to execute. We also saw many expansions. MLB and OPENLANE both began as Zoom Contact Center customers, and in Q4, bought a combination of ZCC Elite and ZVA Voice to deliver reimagined AI-first human plus virtual agent customer service. In other cases, customers are adopting the full Zoom CX suite alongside Zoom Phone and Workplace to transform service operations end-to-end. For example, in Q4, a major insurance provider decided to replace an expensive contact center stitched to an AI point solution with our unified Zoom Phone, Contact Center, and ZVA Voice to automate call triage, reduce agent workload, and increase overall efficiency.
We also partnered with Surrey and Sussex Healthcare NHS Trust, who administers regional NHS services, to modernize their manual, fragmented inbound call operations through a single secure digital platform powered by Zoom Phone, Zoom Contact Center, and ZVA Voice plus chat to enable AI-powered self-service, improve wait times, reduce missed appointments, and enhance overall patient outcomes and call operations efficiency. These wins also demonstrate the momentum behind Zoom Virtual Agent and the customer response to our voice AI within the CX suite. Only a few quarters in market, ZVA Voice has already been included in four of our top 10 CX deals. We are also starting to see ZVA Voice bring in new customers and act as a beachhead for potential expansion into large organizations.
In Q4, we signed a nearly seven-figure ARR deal with a leading US retailer, leveraging ZVA to handle inbound calls across more than 1,100 locations. ZVA 3.0, announced yesterday, builds upon this growing momentum. It operates across voice and chat, taking action across systems, executing complex, multi-step workflows, learning continuously from how human agents resolve issues, and seamlessly bringing people into the conversation with full context when needed. That's how we are helping enterprises close the loop on customer issues at scale, and it's a powerful example of how our CX platform can drive measurable efficiency, better experiences, and real business value for our customers. Our second priority is to grow AI revenue streams beyond customer experience and to extend the system of action to new AI products across vertical and horizontal workflows.
Zoom Revenue Accelerator, our revenue orchestration platform that uses the power of Zoom AI to drive prospecting, coaching, CRM automation, and more, is a great example of this vertical value. ZRA had a strong quarter. The number of customers purchasing it grew 50% year-over-year, and its largest Q4 transactions spanned HR services, real estate, technology, and automotive sectors. Another great example of vertical workflows is BrightHire, which we were very excited to close in Q4 and bring similar conversational AI value to recruiting and hiring. BrightHire is early in its growth path. Together, we have a tremendous opportunity to combine BrightHire's domain-specific AI capabilities with Zoom's product breadth and distribution advantages to transform how organizations recruit, hire, and retain talent. We are also making progress with Custom AI Companion, which brings horizontal value to workflows across Zoom Workplace and beyond.
We're proud to welcome the following new customers, showing the breadth of what this product can unlock. Harmonic, a leader in virtualized broadband and video streaming solutions, added Custom AI Companion wall-to-wall to their Workplace deployment to integrate across multiple third-party tools and support knowledge retention, sales enablement, and employee onboarding. Custom AI Companion also made headway in sectors like education, where AI literacy is of paramount importance for both students and administrators. In Q4, Grand Valley State University adopted it wall-to-wall alongside Zoom Workplace for Education, supporting their efforts to streamline help desk and other student-facing processes by connecting administrators and community members more seamlessly with internal knowledge bases and workflows. At the same time, they added ZVA to their existing Zoom Contact Center to provide students with more responsive omni-channel support.
Last, the foundation of our system of action sits within Zoom Workplace, spanning the full meetings and work life cycle, where context is created and work moves forward. By evolving collaboration into an engine of action while preserving the flexibility of an open ecosystem, Zoom Workplace remains simple, reliable, and deeply preferred by solopreneurs and Fortune 10 companies alike. Q4 marked a big step forward with the launch of AI Companion 3.0, advancing our system of action by turning meetings from one-off events into engines of ongoing work. As innovation accelerates, adoption continues to grow and broaden. In Q4, AI Companion monthly active users more than tripled year-over-year. MAUs engaging AI through the side panel more than doubled quarter-over-quarter, and within Zoom Phone, MAUs using AI features increased 35% sequentially. This momentum reflects not only scale, but expanding depth of engagement across workflows.
We also revitalized our core Zoom Workplace client, simplifying the user experience with refreshed interfaces and streamlined navigation to make action even more intuitive. Our product mastery continues to translate into competitive wins and meaningful displacements across meetings, phone, chat, and beyond. Zoom Phone had some great competitive wins, and Phone ARR continues to grow in the mid-teens. Let me highlight some customer wins to bring this to life. In Q4, we landed a Fortune 10 customer on Zoom Phone in a large and competitive deal for 140,000 seats, replacing Cisco Calling. We also secured two major U.S. financial institutions on Zoom, Workplace, and Phone, displacing Teams and Cisco Calling. We significantly expanded our footprint with a leading global bank, adding nearly 50,000 Zoom Phone seats in Q4 and bringing their total deployment to an incredible 150,000 seats.
These financial sector wins highlight our ability to meet the complex, highly regulated needs of the industry. Our customer-centric approach to innovation, particularly around AI and security, enables institutions to ensure compliance, mitigate regulatory risk, and modernize operations. The momentum is similar in healthcare, where we witnessed a growing number of workplace and phone wins that also added customer experience. They are choosing Zoom not only for sector-specific capabilities, but for the differentiation offered by our cohesive AI-first system of action, spanning patient engagement, care coordination, and back-office collaboration. In the age of AI, Zoom becomes more essential. We are building the system of action that turns conversations into coordinated execution across work inside the organization and with the world outside, including customer engagement, sales, recruiting, and more. By connecting collaboration to action, Zoom drives measurable outcomes, and we're still early in what this system can unlock.
Let me turn it over to Michelle to take us through the financials. Michelle?
Michelle Chang (CFO)
Thank you, Eric. Hello, everyone. I'm excited to be with you today to share Zoom's Q4 and full FY 2026 financial performance. In Q4, total revenue grew 5.3% year-over-year to $1.25 billion, or 4.8% in constant currency. This result was $12 million above the high end of our guidance. Our enterprise business continues to be strong, with revenue growing 7.1% year-over-year, representing 61% of our total revenue, up 1 point year-over-year. Our online business continues to show signs of stabilizing. In Q4, average monthly churn was 2.9%, as compared to 2.8% in Q4 of FY 2025.
In our enterprise business, we saw 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers now make up 33% of our total revenue, up 2 points year-over-year. Our trailing 12-month net dollar expansion rate for enterprise customers in Q4 continues to hold steady at 98%. Pivoting to our growth internationally, our Americas revenue grew 6% year-over-year, EMEA grew 5%, and APAC grew 3%. Moving to our non-GAAP results, which, as a reminder, exclude stock-based compensation expense and associated payroll taxes, net litigation settlements, acquisition-related expenses, impairments of assets, charitable donations of common stock, tax benefits from discrete activities, net gains on strategic investments, and all associated tax effects.
Non-GAAP gross margin in Q4 was 79.8%, up 1 point from Q4 of last year, primarily due to continued cost optimization efforts while we remain focused on investing in AI. Non-GAAP income from operations grew 4.6% year-over-year to $490 million, exceeding the high end of our guidance by $8 million. Non-GAAP operating margin for Q4 was 39.3%, as compared to 39.5% in the prior year period. The slight margin decline was due to changes in our bonus structure and investments in AI. Non-GAAP diluted net income per share in Q4 increased by $0.03 year-over-year to $1.44 on approximately 303 million non-GAAP diluted weighted average shares outstanding.
This result included a headwind of approximately $0.11 from higher than expected taxes, due in part to tax true-ups discrete to the quarter. Turning to the balance sheet. Deferred revenue at the end of Q4 grew 5% year-over-year to $1.42 billion, above the high end of our previously provided range. For Q1, we expect deferred revenue to be up 1%-2% year-over-year, which takes into account the recent trend of larger and longer duration competitive takeouts in phone and contact center that often include credits to defray transition costs. Looking at both our billed and unbilled contracts, our RPO increased over 10% year-over-year to approximately $4.2 billion. We expect to recognize 57% of the total RPO as revenue over the next 12 months, down 2 points year-over-year.
In Q4, we had operating cash flow of $355 million, as compared to $425 million in the prior year period. Free cash flow was $338 million, as compared to $416 million in the prior year period. Our Q4 operating cash flow and free cash flow margins were 28.4% and 27.1%, respectively. We ended the quarter with $7.8 billion in cash equivalents, and marketable securities, excluding restricted cash. Under the current $3.7 billion share buyback plan, in Q4, we repurchased 3.8 million shares for approximately $324 million. That brought our total repurchased under the plan to 36.3 million shares for $2.7 billion at the end of Q4.
Looking into FY 2027 and beyond, we intend to leverage buybacks to, at a minimum, offset dilution on a yearly basis, reflecting management's confidence and long-term commitment to shareholder value creation. Pivoting from Q4, I'd like to highlight some of the major financial milestones for the full FY 2026. Total revenue for FY 2026 grew 4.4%. Our enterprise revenue grew 6.5%, both accelerating 130 basis points year-over-year. Along with the top line progress, we also improved margins. We reached a non-GAAP gross margin of 79.7%, up 80 basis points from the prior year. A non-GAAP operating margin of 40.4%, up 100 basis points from the prior year. Free cash flow grew 6.4% to $1.9 billion. Finally, we continue to be strong stewards of shareholder capital.
We reduced stock-based compensation expense by 18% in FY 2026. That, combined with the continued execution of our buyback, allowed us to reduce our diluted weighted average shares outstanding by 2.5%. Earning to guidance. In Q1, we expect revenue to be in the range of $1.22 billion-$1.225 billion. This represents 4.1% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $487 million-$492 million, representing an operating margin of 40% at the midpoint. Our outlook for non-GAAP earnings per share is $1.40-$1.42, based on approximately 304 million shares outstanding.
For FY 2027, we expect revenue to cross the $5 billion milestone and land in the range of $5.065 billion-$5.075 billion, which at the midpoint represents 4.1% year-over-year growth. We expect our non-GAAP operating income to be in the range of $2.05 billion-$2.06 billion, representing an operating margin of 40.5% at the midpoint. This margin guidance includes a temporal tailwind of 180 basis points related to an accounting amortization change, offset by 70 basis points of pressure from the second year of our shift from SBC to cash bonus compensation.
In addition, our outlook for non-GAAP earnings per share in FY 2027 is $5.77-$5.81, based on approximately 308 million shares outstanding. Included in this guidance is an interest income headwind of approximately $50 million in FY 2027 due to lower yields in a declining rate environment. As a reminder, future share repurchases are not reflected in the share count and our EPS guidance. For FY 2027, we expect free cash flow to be in the range of $1.7 billion-$1.74 billion, which includes approximately $75 million of incremental CapEx related to the post-pandemic refreshment cycle of assets across our U.S. data centers, as well as similar interest income headwinds previously mentioned.
As we end FY 2026 and we move into FY 2027, we're thrilled with our progress, and we're excited about our differentiated vision as an AI-first system of action. This success gives us confidence in our ability to grow durably beyond $5 billion in revenue across progress in meetings, continued growth in phone, scaling our AI-first customer experience, and in introducing new AI revenue streams. We're excited to do all of this and still maintain our focus on profitability, cash flow generation, and shareholder returns. Thank you to our customers, investors, and of course, the entire Zoom team, for your trust and your support. With that, Catherine, please queue up the first question.
Operator (participant)
Thank you, Michelle. We'll now begin the Q&A portion of the call. When I read your name, please turn on your video and unmute. As a reminder, in an effort to hear from everyone, please limit yourself to one question. Our first question will come from Arjun Bhatia with William Blair.
Arjun Bhatia (Partner, Co-Head Tech Equity Research, and Software Analyst)
Perfect. Thank you so much. Eric, maybe one for you, we'll start. I'm just curious, how you think about AI and monetization progress in fiscal 2027. You called out a couple of examples of, you know, customers adopting Custom AI Companion and going wall-to-wall. How do you think that and your broader portfolio of sort of, you know, AI products evolves in terms of adoption and contribution to revenue next year?
Eric Yuan (Founder and CEO)
Yes, great question. Well, you know, very optimistic about our AI technology monetization in FY 2027, driven by, first of all, and Custom AI Companion. You know, more and more in the customers, they see the value, and they would like it, you know, because AI Companion are built in for free, but Custom AI Companion is different. We can monetize. That's on one aspect, right, to drive the AI, you know, monetization. At the same time, we have very solid AI Companion foundation and a team working so hard to innovate. We leverage that technology to empower other use cases like ZVA, you know, Zoom Contact Center, Zoom Phone, and ZRA. Almost every, you know, those, the product lines, right, for customer experience or sales experience, even for webinar, right, we can leverage AI, you know, to empower, you know, those, the vertical use cases.
We can, you know, monetize. You know, take the ZCX, for example, right? Look at top 10 ZCX deals we closed in Q4, four of them already attached with Zoom Voice Agent, right? Zoom Voice Agent built upon our AI technology. We see more and more opportunity like that. I cannot be more excited, you know, than before, right? Because of AI and because of our monetization strategy for AI.
Arjun Bhatia (Partner, Co-Head Tech Equity Research, and Software Analyst)
Thank you.
Operator (participant)
Our next question comes from Allan Verkhovski from BTIG.
Allan Verkhovski (Director and Software Equity Research Analyst)
Hey, guys, can you hear me?
Eric Yuan (Founder and CEO)
Yep.
Allan Verkhovski (Director and Software Equity Research Analyst)
Awesome. Congrats on the strong quarter here. Great to see the acceleration and Zoom customer experience. Michelle, I wanted to ask you, and I'll stick to the question here, but on the Q1 deferred revenue growth guidance of 1.5% to midpoint, can you quantify the impact from the larger competitive takeouts? For the fiscal 2027 revenue guidance, can you just give some color, like, what you're assuming for enterprise and online revenue growth?
Michelle Chang (CFO)
Sure, no problem. Let me touch on the deferred revenue one, because I think this is one that's really important for investors to understand and maybe not read into it as you traditionally might. First of all, it's important to note this is a billing dynamic and not sort of a rev rec thing. What we saw was a recent trend that's actually great for Zoom's business of, you know, wins in large and longer competitive platforms, where we're providing a grace period to our customers to help them with that transition. This is good for Zoom. This is intentional. I think maybe just one other piece for investors, you can see that the fruits of that, so much in Eric's script, and you can see it in the long-term RPO that's up 15% relative to 3% in Q3.
A couple thoughts on deferred revenue. In terms of the guide, you know, at 4.1%, one other thing that I want to make sure we call out to investors is included in that guide is a 40 basis headwind of pressure from a single large competitor, white labeling, that churned at the end of FY 2026. Setting that aside, to your broader question, we expect online to have slight growth, sort of in the range of what they had this year. Really, it's going to be enterprise that's the headline for the growth. It's going to be the sorts of things that we talked about on this earnings, and that frankly, we've been talking about with investors, which is progress in AI monetization, progress in product diversification, and building out new routes to market, upmarket, and with our channel.
Allan Verkhovski (Director and Software Equity Research Analyst)
Awesome. Congrats on the strong quarter, guys. Thank you.
Operator (participant)
Our next question will come from Peter Levine from Evercore.
Peter Levine (Managing Director and Equity Analyst of Tech and Software)
Great. Thank you for taking my question. Eric, one for you. I think in a world where, you know, AI models or provider, the AI model providers are, you know, essentially, they're controlling the intelligence layer and theoretically could build, you know, AI-native collaboration suites on top of their capabilities. I guess the question is like, What, like, in terms of technology or what structural barriers, I think, prevent them from disintermediating Zoom? Like, what's the moat that you feel like will defend your markets? Data, the infrastructure, it's the enterprise relationships, brand equity, but like, or is it something deeper? I guess it's like, how do you think about that risk, and then how would you debunk the concerns that, like, AI could ultimately replace you guys?
Eric Yuan (Founder and CEO)
Wonderful question. If, if you think about the mission-critical, you know, communication like Zoom, reliability is extremely important, right? It got to work every time. You cannot say, "Today's meeting may not work, tomorrow might work," no one's going to use that, right? Security also extremely important, right? You need all kind of security features, also you need to build in, plus ease of use. The reason why the customer they choose to use Zoom. You know, back to the AI, I think, I'm an engineer, right? I also now starting writing code as well with IO, AI coding tools. I think it's extremely hard to replicate what we built over the past many years. First of all, a lot of our code is still C++ code.
You know, to optimize the video, audio, a lot of things, right? Today, look at the AI coding tools. It's so hard, you know, to build a very skippable and, you know, the leverage the native OS to build all kind of code. It's not as straightforward. You can build it very easy, just, you know, high-end tools, but it's more like a toys. It's nobody to use that because this is collaboration. It's not a system of record or database or store information. You know, even UI don't know work. You know how to use that, right? It's fine. When it comes to mission-critical video collaboration tools like Zoom, it's really hard to leverage the AI coding tools to replicate whatever achieve. I have very high confidence.
By the way, no matter what we do, we still need tools like Zoom, right? Human-to-human connection or interaction is still very important.
Peter Levine (Managing Director and Equity Analyst of Tech and Software)
Michelle, follow up on net retention, 98%. You know, can you maybe just help us bridge the gap? You know, all the new products that you're having, you're seeing upsell, contact center voice, you know, when does that inflection, when can we see that in the model? Thank you.
Michelle Chang (CFO)
Yeah. Great question on NBE. Look, we've said that it will rebound in the long term. We've not put guidance, and when it rebounds, it's going to be off of so many of the drivers that we're talking about here, progress in churn, phone in mid-teens, contact center in high double digits, and obviously the onset of AI monetization. Look, we're gonna run the business sort of to revenue growth, and you have our 2027 guidance there. A couple of notes maybe for investors about headwinds relative to NBE. First of all, I just wanted to go back to that, you know, white label churn that we talked about, of competitive white label churn. That will obviously put some pressure.
The other thing that I call out for investors is actually good pressure, which is with Workvivo and Contact Center, we're seeing them bring in new customers to Zoom. Look, in the fullness of time, that will replicate through our net dollar expansion, but obviously, it'll take a little bit more time. Just two more mechanical things to take into consideration.
Allan Verkhovski (Director and Software Equity Research Analyst)
Thank you. Thank you, Eric. Thank you, Michelle.
Eric Yuan (Founder and CEO)
Thank you.
Operator (participant)
Our next question comes from Siti Panigrahi from Mizuho.
Speaker 16
Hey, guys. Thank you for taking the question. Chad on here for Siti. You know, I think the America's revenue growth trend has been pretty clear and quite strong throughout this fiscal year. I was wondering if you could dive a little bit into the trends you're seeing internationally and sort of any key initiatives there for the current year to reaccelerate growth there.
Michelle Chang (CFO)
Eric, do you want to take that one, or do you want me to?
Eric Yuan (Founder and CEO)
Yeah, go ahead, please.
Michelle Chang (CFO)
Yeah, I mean, look, I would point to, you know, we're pleased. I think we give the constant currency growth rates, but they're up and growing across our international business. Maybe the, you know, thing that I would call out is I think as we move into areas like Contact Center and, you know, Phone, as well as Workvivo, that's giving us, together with investments in channel, an opportunity really to break into international markets. You know, it is something that we're investing in. We've also done maybe more local investments like U.K. Data Center, but it's something that we're focused on, and with our broader product expansion, AI monetization, as well as channel investments, is something we think will grow in the future.
Operator (participant)
Next up, we have a question from Alex Zukin with Wolfe Research.
Alex Zukin (Managing Director of Software Equity Research)
Yeah. Hey, guys, thanks for taking my question. I'll maybe make mine pretty quick. There's been a lot of questions around, I think, just your ownership structure of some of the larger foundation model companies. I know we haven't talked about it or asked about it, but given it's such a wide-ranging topic, maybe I'll let you address it to the extent that you want to, specifically maybe on the Anthropic stake. Michelle, for you, just any comments about how clearly the growth on phone, contact center was really strong this year.
As you look at the guide implicit, I know you don't give product level guidance, but as we think about the sustainability of mid-teens growth in phone, the sustainability of whatever very high rates of growth are in Zoom Contact Center, how should we think about those, particularly since you don't want us to pull any kind of forward-looking dimension from the deferred?
Michelle Chang (CFO)
Perfect. Let me hit Anthropic first, and then we'll round to Alex with the product question. Look, in our results, you will see a total strategic investment. Zoom has a Zoom Ventures fund that we use to strategically invest in tech that we feel like is important to Zoom, and you'll see the total balance of that at $1.6 billion. In Q4, you'll see a gain of $532 million pre-tax. This is due mainly, of course, to the change in the valuation of Anthropic after their last round. Look, we have a minority stake, but Anthropic is a critical partner.
Zoom has long-standing talks about our federated approach to AI, and Anthropic is, you know, key to our roadmap and a great partner in our federated approach. On the, you know, sort of durability, if I get your question right, Alex, on phone, you know, I really look at just, you know, we've seen continual. I'm gonna hit Phone, and then I'll wrap Contact Center. Phone, we've been seeing, you know, very durable mid-teens growth. Look, we haven't updated our penetration stats in Zoom. In Zoomtopia, I think in 2024, we said it was 19% of our meetings base. I think that just both speaks to progress and opportunity going forward.
Look, you know, on the phone side, I just look at all the examples that Eric talked about, leading insurance, you know, Cisco win, F10, a Cisco win, major fast food chain, RingCentral win. Really feel like a major U.S. bank, a Microsoft Cisco win. We feel great about the share gains on Phone. On Contact Center, you know, what I would point to there is just multiple quarters, now, four quarters at high double digit. Actually Q4 accelerating off that. Really, and I think, Alex, you've been a great noter of this, you know, is to look at the makeup of Contact Center as reflective of where we will go. For many quarters, we've been talking about the majority of the top 10 deals being large displacements.
We've been talking for quarters about the value really coming in AI, now 10 of 10. To Eric's point, four of 10 in voice, which has been a new entrant for Zoom. In the summer, we did a 2.0 refresh, even yesterday, we announced a 3.0. Really, maybe if I could wrap with one stat, which is how oftentimes these things come together. I think it's a great example of what Eric introduced in the system of action of both inside the organization and outside, just what a powerful element that is, six of our 10 largest Contact Center deals, as an example, pulled through Phone as well.
Eric Yuan (Founder and CEO)
Yeah. Just quickly, Alex, this is such a great question to add on to what Michelle Chang said. We talk about the top 10, you know, Zoom Phone deals, Zoom Contact Center deals are doing very well. This is more like for large enterprise. I think this year, if you look at SMB, also a huge opportunity. The reason why, because of AI. You know, our AI is very affordable, federally AI approved, right? Look at last December. I look at a human, you know, area test, you know, Zoom ranked number one for a while, right? You know, because those investment, you know, because of the price and also the latency of the technology, I think we have a huge opportunity for all of those SMB customers as well, because of AI, so.
Michelle Chang (CFO)
Especially true, you know, just to mark Eric's comment, 'cause it's such a good one, that is especially true in ZVA. Great to see the new product value, which will really open up new opportunities down the market.
Alex Zukin (Managing Director of Software Equity Research)
Thank you, both.
Michelle Chang (CFO)
Thanks.
Eric Yuan (Founder and CEO)
Thank you, Alex.
Operator (participant)
Up next, we have a question from Josh Baer with Morgan Stanley.
Josh Baer (Executive Director and Software Equity Research Analyst)
Great. Thank you very much for the question. Congrats on a strong quarter. You obviously have the horizontal tools that every single knowledge worker in the world can use, but you're also building this portfolio of very departmental solutions, marketing, sales, HR, contact center. A strategy question for you, Eric: How do you balance addressing additional departments and roles with new products versus going deep into these areas, rolling out more solutions in these departments that you're already in, and balancing all of that with the horizontal play? Thanks.
Eric Yuan (Founder and CEO)
Yeah, Josh, wonderful questions. You know, speaking of vertical solution, you know, allow my AI avatar, right? I use that for three quarters already. As you can see, the quality is getting better and better, right? This is kind of one of the vertical use case, you know, for marketing team. Having said that, I think given the AI evolution, you know, AI coding tools, you know, I think we have a, you know, foundational technology. Now, we can do both. On horizontal front, right, we keep innovating, you know, and more features and services, right? Deliver happiness to our customers. You see the AI Companions we got announced, you know, last December. Also in terms of innovation, a lot of things we are going to announce, new innovations announce at Enterprise Connect. That's on the horizontal front.
Look at each vertical use case, either departmental use case or vertical market use cases. I think, you know, because of AI, I think that we can monetize. That's why we also want to double down on those use cases. You know, customer support is one example, ZRA, you know, webinar, you know, BrightHire, you know, almost every, you know, vertical use case. I think we can leverage AI to quickly penetrate into those markets we never thought about it before. That's why, you know, we are very excited, you know, because of AI.
Josh Baer (Executive Director and Software Equity Research Analyst)
Thank you.
Eric Yuan (Founder and CEO)
Thank you.
Operator (participant)
We have a question from Tyler Radke with Citi.
Tyler Radke (Managing Director and Senior Equity Research Analyst of Software)
Hi, thank you. I wanted to ask you about the Custom AI Companion. You noted some good wins, I think, in higher education and some other verticals in the quarter, but how are you thinking about that in terms of a driver for FY 2027? Is this something where you're seeing list price sort of be realized in the field, or is there still sort of heavy discounting? Just give us an understanding of sort of how that rolls out from a go-to-market perspective. Thank you.
Eric Yuan (Founder and CEO)
Yeah. If you look at a Custom AI Companion, you know, again, AI Companion is part of offering, it's for free, it's become more and more powerful. You know, the way for us to monetize AI Companion is to go through the Custom AI Companion, in particular for medium and large enterprise customers, because with the third-party applications, you know, connectors, and also we build in a workflow and no-code workflow to build an agent. That's kind of our vision, right? From a composition to completion. If you do not have very flexible workflow builder to help you build an agent, how can you know, complete a task, right? You know, because, you know, used to be all Zoom, just, you know, the collaboration.
With the Zoom Custom AI Companion, with workflow, connecting with all the third-party applications, more skills, more agent, we can achieve from a combination to completion. You know, also not only workflow, but also Customer Companion also can give you the enterprise knowledge retrieval functionality, right? You can connect so many third-party applications, right? I do not need to log into different system. Within a Zoom AI Companion interface, I can search for any information and help you write it and a document to achieve the task. Essentially, AI Companion, Custom AI Companion, is a customized workflow builder and also the information search capabilities to connect with all kinds of third-party enterprise applications. It's extremely powerful, and we can monetize for those targeted enterprise customers.
Operator (participant)
Up next—
Eric Yuan (Founder and CEO)
Yeah, Tyler, go ahead. I think Tyler maybe—
Tyler Radke (Managing Director and Senior Equity Research Analyst of Software)
Oh, can you hear me?
Eric Yuan (Founder and CEO)
Yeah, yeah.
Tyler Radke (Managing Director and Senior Equity Research Analyst of Software)
Oh, sorry. I just, is that going to be a contributor to FY 2027, or is it still kind of early days in terms of that monetization of the premium AI Custom Companion?
Eric Yuan (Founder and CEO)
It already contributed, right, to our growth. I've already closed the, you know, the big customer AI Companion deals, you know, in the, you know, in the quarter, in Q3 and Q4. With more innovations, for sure, it's going to help us more in FY 2027.
Tyler Radke (Managing Director and Senior Equity Research Analyst of Software)
Thank you.
Eric Yuan (Founder and CEO)
Thank you.
Operator (participant)
Up next, we have a question from Seth Gilbert with UBS.
Seth Gilbert (Director of Software Equity Research)
Hey, thanks for the question. Maybe just one, if I hold the online growth, online year-over-year growth at about, you know, 1.2% for fiscal 2027, that would imply that the Enterprise decelerates by about 1 point from the 4Q exit rate of 7%. Maybe a question for you, Michelle, can you talk about some of the puts and takes here that could cause Enterprise to outperform? Thank you.
Michelle Chang (CFO)
Is your question on Q4 or it's more on guiding going forward?
Seth Gilbert (Director of Software Equity Research)
Oh, it's more on guiding going forward. Yeah, sorry.
Michelle Chang (CFO)
Yeah. Look, let me talk about online, then I'll finish with Enterprise. I think, you know, online, so pleased to see it return to growth. It was the first time we've had growth since fiscal 2022. Look, that growth comes off of adding value in our portfolio of Workplace, you know, Workplace portfolio, as well as AI. That's why we're able to realize on a price increase as well as, you know, keep record low churn. Our guide assumes an additional price increase on the annual SKU. In line with monthly, it's really just intended to do the same thing as the prior, but bring them into value. Look, so to your, to your more meta question, Enterprise is going to be the durable driver for growth going forward.
I'll just continue to hit home the components. It's making progress and meeting churn. It's keeping Phone in that sort of mid-teens growth range. It's continuing with that better together story to pull along Contact Center and realize the AI value. That is by far where we are seeing the most immediate pulls of that incremental AI monetization in both agent-assisted AI as well as the ZVA that Eric Yuan and I talked about. Look, there's so much coming on from an AI monetization perspective, both in products, Workvivo, Phone, but additionally beyond that, in new SKUs, we've now opened up a note taker SKU to our free base as well as, you know, making continually products like ZRA even better.
We look out to the forward, and we're excited about the progress that we made this year. 130 basis points, kind of up year-over-year, and we're equally excited, if not more, on the 2027 go forward.
Seth Gilbert (Director of Software Equity Research)
Got it. Thank you.
Operator (participant)
Up next, we have a question from Tom Blakey with Cantor Fitzgerald.
Tom Blakey (Managing Director)
Hey, guys. Thanks for taking my question. Eric, I, or Michelle, I'd like to hear about maybe some, you know, quantifying of these credits that you called out. That was interesting. You know, and even if it's you can't call it out numerically, just how they're trending. I think the numerical help would kind of understand, help us as a group, understand what kind of headwinds we're talking about that, you know, as you know, I know, Eric, you're managing this business for a multi-year basis here. As they come, you know, you guys are innovating and taking share, when they come off, like, what that would look like. I have a follow-up, if you may.
Michelle Chang (CFO)
Yeah, I can take that. look, it's in line with what I said earlier, which is, again, I just want to continue to emphasize with investors, don't read into this as normal. These are great competitive wins. We're providing a grace period so that you know, in exchange for a larger and longer term competitive platform win. Think of this, it's helpful in sizing, Tom, as really the primary driver between the detail in Q4 relative to the guide in Q1. it's helpful on the other side, maybe what I'd point to is connecting you to that uptick in long-term RPO as helpful sizing.
Tom Blakey (Managing Director)
Yeah, that would be helpful. Eric, you know, just combining you and Michelle's comments here, Michelle's guiding us to grow online, kind of relatively flat, but you seem awfully excited about the SMB's opportunity to maybe equally do as well. I know it's early days in terms of maybe tackling the world, the successes that you've had on the Enterprise side with CX and Phone, but, is it safe to assume that that's, maybe not implied or computed in that one, kind of 1% guide for fiscal 2027 online?
Eric Yuan (Founder and CEO)
Yeah. When I mention SMB customers, more like a high end, you know.
Tom Blakey (Managing Director)
Higher end.
Eric Yuan (Founder and CEO)
Yes. Well, the not online buyers is, you know, like SMB customers, right? Used to be, you know, they said, look at multiple solution now because of the power of AI. Also, you know, I think we have a huge opportunity to serve those SMB customers because we have a very rich product portfolio, we have great AI capabilities. Yeah, it's not about individual online buyers, and yeah.
Tom Blakey (Managing Director)
Michelle, could you comment on BrightHire? Anything on the top or bottom line impact into fiscal 2027? That's it for me. Thank you.
Michelle Chang (CFO)
It closed mid Q4, so I think that the impact to Q4 is sort of de minimis. The guide reflects obviously BrightHire, and I would just say that it's a perfect example, I think, of what Eric laid down in the earlier question with regards to, you know, vertical and horizontal value. This is a business where we share common customers, so there's sort of mutual benefit. And this is a product where we have, you know, similarities with really taking AI value to rethink the hiring kind of approach, more insights, efficiencies, as well as then you have Workvivo on the other side, and sort of thinking about the life cycle of kind of human talent.
It's something that they use Zoom in all of their interviews, and so we look at it and there's natural synergies, and they're, relatively small. This is a small acquisition. You can see the size of it, sub 100. That's helpful.
Tom Blakey (Managing Director)
Excellent. Very helpful. Thank you, guys.
Eric Yuan (Founder and CEO)
Thank you, Tom.
Operator (participant)
Our next question comes from Samad Samana with Jefferies.
Samad Samana (Managing Director)
Hi, good evening. Thanks for taking my question. I wanted to ask about pricing. You guys have continued to create a lot of value. You've obviously part of it is to drive better retention, which we've seen over the years. Some of it is to be expressed in kind of monetary terms. How are you thinking about that balance for fiscal 2027, Michelle? What are you assuming in the guidance, if anything, from a price increase perspective? To the extent, well, I'm sorry for the 11-part question. I'm learning from some of my peers. If you have, can you give us a sense of, like, timing around that assumption as well? Thank you so much.
Michelle Chang (CFO)
All right. Let me hit explicitly the online, and then I'll move and talk about our Enterprise, because I think the dynamics look a little bit different. Our online guide includes a price increase of 6% to go into effective mid-March to our annual SKU. Think of this as, this is really the flip side of what we did last year. I really encourage investors not to think about it as a price increase. Price increase is just one mechanism for realizing incremental value to customer. Price increase, ongoing, if you will, is not something that Zoom is going to use. It's going to come with incremental value. In this case, it came with much more value across chat, calendar, meetings, whiteboard, et cetera, et cetera, in our workplace, as well as AI value.
That's really what's behind that. That's sort of how to think about the online side. On the enterprise side as well, you know, one important to note that those prices then impact the enterprise. Look, there, we're going to focus much more on, you know, total contract value, things like discounting and contact, contract, sorry, duration. Those would be baked into our guide given.
Samad Samana (Managing Director)
Great. Thank you so much. Appreciate it.
Eric Yuan (Founder and CEO)
Thank you.
Operator (participant)
Our next question comes from Ryan MacWilliams with Wells Fargo.
Speaker 17
Hey, guys. This is Chris on for Ryan. Thanks for taking our question. Eric, you've mentioned in the past, doubling down on the product side. We were curious if in the last few months, you've seen any product velocity improvements from Magenta coding tools like you were mentioning, and if you're thinking about product investments any different this year compared to last year?
Eric Yuan (Founder and CEO)
A while back, right, so we all adopt, you know, AI, you know, coding tools. It's getting more and more powerful, and especially for the new product, the development, right, or new service, right? Certainly accelerated our piece of innovation. At the same time, we also have, you know, a lot of, the, you know, existing services, right? A lot of, you know, code written by our engineers, right? I do not think that the AI coding tools is powerful enough, right, to maintain all those, you know, millions of the lines of code yet, right? I'm excited that you look at it not only for engineers, but also the UI designers, product managers, almost everywhere, right, we can have the AI coding tools to improve our productivity.
Essentially, we drive the innovation, you know, the speed. You look at the product area we invest, you know, like ZVA for sure is really a great example. You know, we kind of building in a lot of new features, you know, and it's probably in terms of speed and better than any time in our company history, right? You know, that's the reason why over the past few months, you know, customers feel like, wow, you know, you add this feature, the other feature, you know, much better position. This is a good example, because AI coding tools and also because the way we embrace the AI. Again, not only for engineers, but entire, you know, the product development, you know, the life cycle, so.
Speaker 17
Awesome. Thank you, guys.
Eric Yuan (Founder and CEO)
Thank you.
Operator (participant)
Our next question comes from Jackson Ader with KeyBanc.
Jackson Ader (Managing Director)
Great. Good evening, guys. Thanks for taking our questions. The question I have is on is around the channel. I think you guys have made a bunch of improvements and enhancements to the channel partner program the last few quarters and last year. I'm really curious, number one, any kind of, you know, continued enhancements that you definitely know are going to be implemented here that should help for growth in 2027? Also, it seems like, you know, I understand there are some kind of headwinds, tailwinds to the margin for fiscal 2027. I'm just curious, is that due to the mix of the type of investments you're making, meaning channel versus direct? Or is it just the overall amount of investments that you're making? Thank you.
Michelle Chang (CFO)
Yeah. Let me go ahead and take that. Then Eric, you can pepper in as easy you could. Look, channel, if you think about sort of those durable elements of revenue growth, is going to be essential to things like a phone business and a contact center. It's just how, you know, customers procure in that space. Also it just speaks to, you know, beyond just the software, the consulting, the deployment, just how customers, you know, interact with partners. Look, this is something we've been very intentional about, and I think you can see it in our revenue growth inflection. Look, in terms of quick couple of stats and things of why we feel great about our investments, you can see it in our large Contact Center wins, nine of 10 in channel.
Our channel base continues to grow, and frankly, the proportion of new customers coming from channel, to me, is especially exciting. The kinds of things that we're investing in, to your question, like, it's around incentives. We made, starting last year, a lot of system capabilities and portals so that we really help enable, especially to all of the product value that Eric mentioned and things like ZVA coming out at incrementally fast levels. You know, we want to make sure that our ecosystem is ready there with us, and so we'll invest in that. Then maybe the last channel investment that I would mention is we're bridging that into things like systems providers, which we think is going to be really important going forward.
On the operating margin guide, let me make some comments because I want to make sure that people really understand the bigger picture here. We guided to 40.5% at the midpoint. Wanna obviously, beyond the mechanics of, you know, reminding that we've used as a consistent forecast methodology, really want to make sure that investors understand the two dynamics which are not channel. We're up 180 basis points due to the amortization change that we referenced in scripts, and then that's offset in part by the comp changes. We're in our second year of shifting from stock-based compensation to cash. Those are really the headlines to think about in terms of the op margin versus anything channel.
Jackson Ader (Managing Director)
Got it. Thank you very much, guys.
Eric Yuan (Founder and CEO)
Thank you.
Operator (participant)
Our next question comes from William Power with Baird.
William Power (Senior Research Analyst of Cloud Software)
Hey, great. Thanks for taking the question. you know, Eric, really encouraging to see, you know, continued progress on Zoom Phone, obviously the broader, you know, ARR, you know, growth trends, but I'm particularly interested in the, you know, the Cisco displacements. You know, I think historically, there's just been a lot of inertia with some of these legacy phone systems, especially that large enterprises have. I'm just kind of curious, is this just a function of working through the sales cycle? Is it a function of enterprises just becoming that much more comfortable with Zoom Phone quality? What's kind of putting you over top here and maybe just to help us kind of understand the sustainability of some of these large opportunities?
Eric Yuan (Founder and CEO)
Such a wonderful question. Believe it or not, actually, look at it, a total phone deployment. A lot of, I think probably still more than 50%, I did not get the new number, still on-prem deployment. I mean, for a lot of enterprise customer, right? They deployed the on-prem phone system for a long time and said, "It's okay. It's not great, and why they want to hurry to migrate to the cloud." Right? This kind of sort of a mentality before. Now, with AI, it's a strong reason for those of the very large enterprise customer, they cannot leverage AI for the on-prem, right? That's why I would say that will be an acceleration for those large enterprise customers to migrate away from on-prem to cloud.
Zoom is a much better position, you know? We win quite a few very large, very competitive phone deployment for on-prem, you know, to the cloud. Again, AI is a driver, you know, and for those customers to migrate to the, you know, AI-first, you know, cloud, you know, phone system. That's a driver.
Michelle Chang (CFO)
Maybe just to add the numbers to what Eric said, it's about 130+ million seats in the cloud and about 150-ish on-prem. Eric's spot on the rough 50/50.
William Power (Senior Research Analyst of Cloud Software)
Lots of opportunity?
Michelle Chang (CFO)
Yeah.
Eric Yuan (Founder and CEO)
Yeah, huge. Because if not because of AI, it's hard to convince them. They say, "It's okay, I use it for 20 years. It, you know, it's okay." Now, you know, it's a great opportunity ahead of us. Thank you.
Michelle Chang (CFO)
Maybe the last thing that I'd mention is just increasingly how the deals reflect. It's not just phone alone as a workload, it's that sort of wanting that whole system of action. I think that's why you see so many Contact Center, Phone, deals coming together. You know, as we think about large competitive displacements, I think the inability to kind of have that full portfolio is one of the reasons.
William Power (Senior Research Analyst of Cloud Software)
Thank you.
Eric Yuan (Founder and CEO)
Thank you.
Charles Eveslage (Head of Investor Relations)
Our last question for today comes from Catharine Trebnick with Rosenblatt Securities.
Catharine Trebnick (Managing Director)
Okay, thanks for sneaking me in. Quick question on the channel. I get the fact that you go direct with the Phone and the Contact Center, and you did mention systems, and you did talk this quarter that you had many more deals that were bundled. Are you seeing a different buying pattern from the Enterprise and the SMBs that are forcing you or maybe being more...? Are the system integrators more attractive to you? Can you peel that back a bit for me? Thanks.
Michelle Chang (CFO)
Your question, Catherine, is, are we seeing, I mean—
Catharine Trebnick (Managing Director)
What are you seeing? Yeah, it seems like you had more bundles this quarter than you have typically discussed. How is that changing your go-to-market motion and your working with the different partners? Because most of the partners typically just sell the phone or the contact center. It seems to me, if it's a more complex deal, that you're gonna need either direct salesforce or more of a system integrator.
Michelle Chang (CFO)
I mean, I would say what we saw in Q4 was just an intensification of a pattern that we've seen previously, which is, you know, just what a natural sale it is for Phone and Contact Center to come together. Frequently, that also comes with a meetings portfolio. Look, you know, in a lot of the deals, did they also include other great Zoom products? Yes. I think it speaks to sort of where the market is going, that system of action that we talked about, also stitching the AI value in. Certainly, Catharine, investments that you've noted in your stack about investments in the channel.
Catharine Trebnick (Managing Director)
The other part is, are you seeing the Enterprise want to move more towards a platform like they are in security, and that you're feeling you have enough product pieces now to be part of that platform play?
Michelle Chang (CFO)
Yeah, I mean, I'll jump in, and then Eric, you should certainly jump in as well. I do think, you're seeing in a lot of those large deals, those platform things. I don't think it means all of them. I don't think like anything, there's a binary answer, maybe just as a quick data point, like, if you look at our top 10 deals in contact center, six-10 included phone. I think it's just an indicator that there is both those that really want that platform, that whole system of action stitched together with AI, and then there's others that are just gonna have, you know, their own technology and come at it in different ways.
I think, you know, maybe just to the per revenue conversation, I see that as a great sign. It's these all-in with Zoom, large, longer-term, deals. I think there's some really great things on the future for our contact center business.
Eric Yuan (Founder and CEO)
Yeah, just quickly add on to what Michelle said. The Zoom Workplace is our UCaaS, you know, the platform. You know, contact center is a CCaaS, especially for those large enterprise customers, right? When they look at it from on-prem, you know, to cloud, or maybe from the pre-AI solutions to AI solutions, if they can combine those two, consolidate those two systems into one platform, one vendor, why not? You know, this is a great ROI. That's the reason why quite often you see both UCaaS and CCaaS will renew together. That's a reason.
Catharine Trebnick (Managing Director)
Thank you.
Eric Yuan (Founder and CEO)
Thank you.
Michelle Chang (CFO)
Thank you.
Operator (participant)
Thank you. This concludes the Q&A portion of today's call. I'll now turn it back over to Eric for closing remarks.
Eric Yuan (Founder and CEO)
Thank you for Zoom employees, customers, partners, and our investors, for your great support, and we truly appreciate. We are very, very optimistic about FY 2027, so see you next quarter. Thank you.
Michelle Chang (CFO)
Take care.
Charles Eveslage (Head of Investor Relations)
This concludes today's earnings call. Thank you all for attending, and have a great rest of your day.
Eric Yuan (Founder and CEO)
Thank you all.
