ZM Q2 2026: Contact Center Growth Soars, Gross Margin Near 80%
- Dynamic AI Innovation: Zoom’s continual expansion of AI capabilities—including the rapid adoption of its AI Companion and upcoming product enhancements—drives productivity improvements and a superior customer experience, which can spur future revenue growth.
- Competitive Contact Center Wins: The company is replacing leading contact center providers, evidenced by strong wins where a majority of top deals involve AI enhancements. This competitive edge in the contact center segment and associated sales in Zoom Phone bolster its market position.
- Resilient Enterprise Demand: With low churn, flat online revenue despite a price increase, and robust enterprise customer expansion, Zoom demonstrates durable demand and solid recurring revenue growth, supporting a bullish outlook.
- Margin pressure from rising AI costs: The executives acknowledged that increasing investments in AI and higher inferencing costs need to be offset by one-time cost efficiencies and ongoing operational adjustments, which may not fully mitigate long-term margin compression.
- Dependence on enterprise growth amid macro uncertainty: The guidance and growth outlook assume sustained enterprise demand; however, if broader macro conditions or shifts in customer spending adversely affect enterprise adoption, revenue growth could slow.
- Reliance on rapid innovation and execution: Much of the growth and competitive differentiation hinges on continuously launching and integrating new AI and contact center innovations. Any delays or missteps in product execution could undermine customer adoption and revenue expansion.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 FY2026 | $1.195 - $1.2 billion | $1.21 - $1.215 billion | raised |
Non-GAAP Operating Income | Q3 FY2026 | $460 - $465 million | $465 - $470 million | raised |
Non-GAAP Operating Margin | Q3 FY2026 | 38.6% | 38.6% | no change |
Non-GAAP EPS | Q3 FY2026 | $1.36 - $1.37 | $1.42 - $1.44 | raised |
Revenue | FY2026 | $4.8 - $4.81 billion | $4.825 - $4.835 billion | raised |
Non-GAAP Operating Income | FY2026 | $1.865 - $1.875 billion | $1.905 - $1.915 billion | raised |
Non-GAAP Operating Margin | FY2026 | 38.9% | 39.5% | raised |
Non-GAAP EPS | FY2026 | $5.56 - $5.59 | $5.81 - $5.84 | raised |
Free Cash Flow | FY2026 | $1.68 - $1.72 billion | $1.74 - $1.78 billion | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI Innovation | Discussed extensively across Q1 (AI Companion, custom solutions ), Q4 (AI Companion 2.0, advanced agentic capabilities ) and Q3 (AI Companion 2.0 enhancements ). | Q2 emphasizes significant AI Companion growth, broader AI features, and integration across products. | Consistent focus reinforced with accelerated growth and richer feature integration in Q2. |
Contact Center Expansion | Q1 featured strong deal wins and integration (Contact Center Elite, Virtual Agent ); Q4 highlighted record deals and AI-powered solutions ; Q3 focused on large wins and channel-driven growth. | Q2 highlights displacing competitors, incorporating AI features, and channel-driven success. | Ongoing expansion with deepening AI integration and strong competitive wins across periods. |
Enterprise Demand Amid Macro Uncertainty | Q1 noted prudent sales elongation and scrutiny ; Q4 described a mixed yet stable environment with record low churn ; Q3 showed enterprise revenue and customer growth amid macro challenges. | Q2 shows resilient enterprise demand and decreasing churn despite broader uncertainty. | Steady enterprise strength with lower churn and cautious optimism despite macro challenges. |
Online Business Performance | Q1 reported stable performance with record low churn and price increases ; Q4 showed stability with low churn ; Q3 revealed continuous improvement in churn metrics. | Q2 demonstrates online stability with flat, low churn rates and sustained customer retention. | Consistent stability and modest improvements in customer retention across all periods. |
Margin Pressure from Rising AI Costs | Q1 noted slight decline in margins due to AI investments ; Q4 explained a methodical approach to offset rising AI costs ; Q3 discussed cost pressures from AI while anticipating long-term returns. | Q2 reports maintained or improved margins through cost optimization despite rising AI costs. | Ongoing cost pressures are being mitigated through optimization, with margins showing improvement over time. |
Channel Partnerships and Strategic Integration | Q1 mentioned new partnerships (Bell Canada) and process transformations ; Q4 stressed channel-led Contact Center wins and strategic integrations with Amazon and Workvivo ; Q3 detailed integrations with ServiceNow and Athenahealth. | Q2 emphasizes channel contributions in top deals and highlights seamless product integration as a competitive differentiator. | A steady and growing emphasis on channel partnerships and integration is evident, reinforcing market reach. |
International Expansion Opportunities | Q1 highlighted a unified global strategy with strong EMEA performance ; Q4 focused on regional revenue growth and deferred revenue increases ; Q3 labeled international expansion as a key growth vector. | Q2 reports revenue growth in all regions with international outpacing Americas in some areas. | Consistent international growth with a unified strategy, particularly strong in EMEA, is reinforcing future potential. |
Execution Risks in Rapid Innovation | Q1 briefly touched on safeguards in AI content and efficiency efforts ; Q4 referenced the need to overcome marketing challenges to support rapid execution. | No explicit mention of execution risks in Q2. | Less emphasis on explicit execution risks in Q2 as focus shifts to efficiency and built-in safeguards. |
Declining Revenue per Large Customer | Q4 included a question about a potential decline, with management noting growth in customer numbers but leaving detailed concerns unaddressed ; Q1 and Q3 did not mention it explicitly. | No mention in Q2. | Previously raised as a concern in Q4, but not mentioned in Q2, suggesting it may have been resolved or deprioritized. |
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CCaaS & Phone
Q: What sequential momentum in CCaaS and Phone?
A: Management highlighted another quarter of high double-digit growth in CCaaS and mid-teens growth in Zoom Phone, underscoring strong recurring revenue from seamless integration and enhanced AI features. -
Margin Outlook
Q: How are AI costs affecting margins?
A: Despite heavy AI investments, strategic cost optimization and a federated cloud-to-colo approach have helped boost non-GAAP gross margins to 79.8%, with durable savings offsetting incremental AI spending. -
Competitive Displacement
Q: Why are customers switching to Zoom’s contact center?
A: Customers are choosing Zoom over legacy providers because of its modern, integrated solution that offers robust AI capabilities and a consistent experience, driving impressive contact center wins. -
Revenue Beat
Q: What drove the top-line beat in Q2?
A: Strong enterprise performance, key product innovations, and strategic wins (including WorkVivo gains) led to a $17 million beat, while online revenue remained flat despite a modest price increase. -
Monetization Timing
Q: How does AI adoption affect revenue timing?
A: Expanding AI usage across the product suite is expected to accelerate monetization, though some new features will impact fiscal 2027 numbers; management is mindful of managing CRPO metrics amidst this shift. -
Auto Dialer
Q: What revenue impact from the AI auto dialer?
A: The newly launched AI First Auto Dialer is seen as opening additional wallet share in outbound sales, with positive early feedback and international growth partly supported by FX dynamics in EMEA. -
Custom AI Companion
Q: What feedback on custom AI companion add-on?
A: Early adopters praise the flexibility and integration of the custom AI Companion, with usage trends suggesting benefits will materialize more fully in 2027, reinforcing its long-term value proposition. -
AI ROI & IT Budgets
Q: What ROI and IT budget signal for AI?
A: Management noted a fourfold year-over-year increase in monthly active users for AI-enhanced features, indicating that customers are embracing AI for productivity gains without extra standard charges, reflecting a robust IT budget appetite. -
One-Time Margins
Q: Clarify one-time margin benefits and future drivers?
A: One-time margin enhancements from professional services and cost efficiencies contributed to Q2, while sustainable revenue growth going forward is expected to be driven primarily by enterprise momentum and enduring product improvements.
Research analysts covering Zoom Communications Inc.