Q4 2025 Summary
Published Feb 25, 2025, 9:56 PM UTC- Zoom's Contact Center is experiencing strong momentum, achieving the largest ARR deal in history with a Fortune 100 U.S. tech company for over 15,000 agents. Contact Center customers with over $100,000 in ARR grew over 100% year-over-year , demonstrating Zoom's ability to displace both on-premise and leading cloud competitors. The company expects Contact Center to contribute significantly to top-line growth, leveraging innovation with AI and channel partnerships.
- Winning major customers like Amazon, replacing their own Chime product, highlights Zoom's product superiority and opens up significant opportunities to leverage the Amazon Marketplace to drive top-line growth. Early signs of success in this channel partnership indicate potential for substantial revenue expansion.
- Zoom's AI Companion features are provided at no additional cost, enhancing customer value and trust, and offering a competitive advantage over competitors who charge extra for AI features. This strategy is leading to increased customer adoption, with monthly active users of Zoom AI Companion accelerating by 68% quarter-over-quarter , positioning Zoom favorably for long-term growth.
- Slowing Revenue Growth Guidance: Zoom is guiding for a revenue growth of 2.7% year-over-year for FY '26, which is below the previously discussed mid-single-digit target. Additionally, the company expects the Online segment to be flat or slightly down, relying heavily on enterprise customers for growth.
- Potential Margin Compression Due to Increased AI Costs: The shift towards AI contributions is leading to increased costs, and there are concerns about margin compression as investments in AI increase. The company acknowledges an "obvious increase in cost from AI" and is working to offset these, but the long-term impact on margins remains uncertain.
- Declining Revenue Per Large Customer: Analysts have observed that revenue per customer among those contributing over $100,000 in trailing 12-month revenue appears to be declining slightly, raising questions about the company's ability to upsell and grow revenue from large customers.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +3.3% | Revenue increased to $1,184.1M from $1,146.45M, reflecting steady growth largely driven by the continued strength in enterprise subscriptions and a solid revenue mix that benefited from prior period performance improvements. |
Operating Income | +33.5% | Operating income rose dramatically from $168.53M to $225.1M, demonstrating enhanced operational efficiency and effective cost management measures that built on the previous quarter’s discipline, helping to boost margins despite moderate revenue growth. |
Net Income | +23.1% | Net income grew from $298.83M to $367.9M, benefiting from improved operating performance and a more favorable cost structure compared to prior periods; these gains reflect both the operational leverage and the disciplined expense control seen in earlier performance cycles. |
EPS – Basic/Diluted | +21.2% / +19.6% | EPS improvements (Basic from $0.99 to $1.20 and Diluted from $0.97 to $1.16) were driven by stronger net income combined with share reduction initiatives such as repurchases, continuing the trend from previous periods where operational and cost improvements translated into better per-share earnings. |
SG&A Expense | −8.4% | SG&A expenses declined from $496.34M to $454.6M, reflecting ongoing cost rationalization efforts and a reduction in personnel-related and other variable expenses, building on earlier efforts to streamline spending and improve efficiency noted in preceding periods. |
Research & Development | +5.8% | R&D expenses increased from $205.28M to $217.1M, indicating a continued commitment to innovation and AI-first initiatives while maintaining a controlled growth rate relative to revenue, tying into past investments that are expected to drive long-term competitive advantage. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 FY 2026 | no prior guidance | $1.162 billion to $1.167 billion (approx. 2% YoY growth; 2.6% on constant currency) | no prior guidance |
Non-GAAP Operating Income | Q1 FY 2026 | no prior guidance | $440 million to $445 million | no prior guidance |
Non-GAAP Operating Margin | Q1 FY 2026 | no prior guidance | 38% | no prior guidance |
Non-GAAP EPS | Q1 FY 2026 | no prior guidance | $1.29 to $1.31 | no prior guidance |
Deferred Revenue Growth | Q1 FY 2026 | no prior guidance | 4% to 5% YoY | no prior guidance |
Revenue | FY 2026 | no prior guidance | $4.785 billion to $4.795 billion (approx. 2.7% YoY growth; 3.1% on constant currency) | no prior guidance |
Non-GAAP Operating Income | FY 2026 | no prior guidance | $1.85 billion to $1.86 billion | no prior guidance |
Non-GAAP Operating Margin | FY 2026 | no prior guidance | ~39% | no prior guidance |
Non-GAAP EPS | FY 2026 | no prior guidance | $5.34 to $5.37 | no prior guidance |
Free Cash Flow | FY 2026 | no prior guidance | $1.68 billion to $1.72 billion | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Contact Center Growth and Innovation | In Q1–Q3, Zoom consistently showcased strong customer wins, AI enhancements, and displacement of legacy solutions with record deals and channel‐driven successes ( , , ) | In Q4, Zoom reported its largest VRR deal, emphasized a major Fortune 100 win, boosted channel partner contributions (6 of top 10 deals), and strategically integrated AI to expand its platform ( ) | Consistent and accelerating growth with increased enterprise focus and deeper channel integration. |
AI Strategy and Monetization | Across Q1–Q3, Zoom presented an AI-first vision with free core AI Companion offerings, plans for custom tools (e.g. Custom AI Companion, Ask AI), and emerging monetization in premium offerings ( , , ) | In Q4, Zoom continued the AI narrative with an emphasis on “agentic AI,” detailed plans for a Custom AI Companion priced at $12 per seat, and integration to drive enterprise value ( ) | Evolving with deeper monetization and customization while maintaining free core offerings to drive adoption. |
Enterprise Customer Growth and Upsell Challenges | Q1–Q3 discussions focused on steady enterprise expansion (enterprise revenue moving from 57–59% to 31% from high-value customers), but upsell metrics (net expansion rate around 98–99%) remained a cautious challenge ( , , ) | Q4 reported enterprise revenue at 60% with 7% Y/Y growth in high-value customers, yet upsell remained flat (net expansion rate at 98%), highlighting steady growth amid persistent upsell challenges ( ) | Stable enterprise momentum with continuous growth but ongoing challenges in upselling consistently. |
Revenue Growth Guidance and Market Outlook | In Q1–Q3, guidance ranged from low single-digit (1–2.3%) growth, with an emphasis on enterprise drivers, regional variances, and product contributions (such as Zoom Phone and Contact Center) ( , , ) | Q4 maintained modest guidance (Q1 FY26 ~2% YoY; full-year ~2.7% YoY) with renewed focus on enterprise and strategic growth areas like Contact Center and AI-first initiatives ( ) | Consistently cautious but slightly improved growth outlook driven by selective enterprise and product expansions. |
Margin Compression Risks from Increased AI Investments | Q1–Q3 noted margin compression due to AI investments, with margins dipping from around 80.5% to 78–79%, while management remained confident in cost efficiencies and long-term targets ( , , ) | Q4 underscored continued investments in AI with methodical efficiency measures, highlighting a commitment to offset costs and maintain long-term margin guidance despite slight operating margin pressure ( ) | Persistent caution with improved cost management strategies to balance AI spending with long-term margin goals. |
New Channel Partnerships and Market Expansion | Q1 mentioned partnerships with companies like Meta and Twilio to aid customer migrations, while Q2 did not address channel expansion, and Q3 focused on channel-driven large deals without specific new platforms ( , ) | Q4 introduced a high-profile Amazon Marketplace partnership and reiterated the role of channel partners in winning key Contact Center deals (6 of top 10), showing renewed strategic emphasis ( ) | Emerging emphasis on new, strategic channel partnerships, with notable expansion into platforms like Amazon Marketplace. |
International Market Dynamics | Q2 highlighted EMEA headwinds with geopolitical issues, Q3 celebrated a breakthrough with the Spain deal (Agencia Tributaria, 20,000-seat win) showing EMEA potential, while Q1 had no specific details ( , ) | Q4 provided broader international revenue metrics (e.g. EMEA growing 2% YoY, APAC and Americas steady) without highlighting specific landmark deals | Variability in focus—a major win in Q3 contrasted with a more generalized, stable international performance in Q4. |
Shifting Customer Segment Focus | Q1 through Q3 revealed a dual narrative—enterprise growth with active transitions of low-ARR customers to online, while SMB challenges and modest EMEA performance were noted ( , , ) | Q4 reinforced an emerging enterprise emphasis with enterprise revenue reaching 60% and solid upmarket wins, with less attention on SMB issues or regional concerns | Clear shift toward enterprise segments even as overall customer segmentation transitions continue to favor higher-value, upmarket opportunities. |
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AI as a Growth Driver
Q: Will AI capabilities boost revenue growth beyond stability?
A: Eric Yuan emphasized that AI investments are already making Zoom's services more sticky, particularly with features like AI Companion offered at no additional cost to low-end customers [0]. For high-end customers, they're launching a customized AI Companion in April, creating new monetization opportunities [0]. Leveraging AI enhances value, increases customer retention, and is expected to drive higher usage and revenue growth [0]. -
AI Impact on Adoption and Guidance
Q: How does AI influence large customer adoption, and is AI investment in guidance?
A: Customers appreciate Zoom's AI features without extra charges, building trust and encouraging adoption of existing products [1]. Michelle Chang confirmed that AI investments are included in their guidance, with revenue from Custom AI Companion and AI-driven Contact Center Elite anticipated, though major contributions will ramp up in the second half [1]. -
Top Revenue Drivers for FY26
Q: What are the top 3 drivers for net new revenue in FY26?
A: Michelle identified enterprise as the dominant growth driver, with expectations of Online being slightly down [2]. The top revenue drivers are:- Improvements in core business with record low churn [2].
- Growth in adjacent markets like Contact Center and Workvivo [2].
- Revenue from AI, notably through the Contact Center Elite SKU which includes AI features [2].
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Go-to-Market Investments
Q: What go-to-market investments are driving portfolio traction, especially in Contact Center?
A: Michelle highlighted priorities like moving upmarket in enterprise, accelerating the channel strategy, and aiming to return online business to growth [3]. Eric added that in the Contact Center, 6 out of 10 top deals were driven by channel partners, emphasizing investment in channel contributions to growth [3]. -
Amazon Deal and Distribution
Q: How did Zoom win the Amazon deal, and what are the distribution prospects?
A: Eric explained that Amazon chose Zoom to enhance employee experience, moving away from their previous solution, Chime, in favor of Zoom's superior products [4]. This partnership opens opportunities to leverage the Amazon Marketplace for top-line growth, marking a win-win situation and strengthening their channel partnerships [4]. -
Macro Environment Outlook
Q: What's the demand environment post-election between Online and Enterprise segments?
A: Michelle described the macro environment as mixed but stable to positive [4]. Enterprise shows strong upmarket momentum with sequential improvements in downsells, while Online experiences record low churn rates [4]. However, external factors like layoffs contribute to a mixed sentiment [4]. -
Custom AI Companion Adoption
Q: What's the expected adoption of the $12 per seat Custom AI Companion?
A: Michelle expects initial adoption among enterprise customers, with monetization in FY26 and more significant impact in FY27 [5]. They believe the $12 price point offers a compelling total cost of ownership, differentiating them in the market [5]. Eric added that use cases include customized AI features like standard templates and third-party integrations [5]. -
Impact of Return-to-Office Policies
Q: Do increasing return-to-office policies affect Zoom's expansion?
A: Eric acknowledged that while some companies are returning to five days in office, tools like Zoom remain essential for communication, especially across geographically dispersed teams [5]. He respects each company's decision and aims to provide the best collaboration tools regardless of work arrangements [5]. -
Margin Outlook with AI Investments
Q: How will AI products affect margins and cash flow?
A: Michelle stated that while AI increases costs, efficiencies are offsetting these expenses [6]. They anticipate margins to remain strong and in line with long-term goals, without significant compression [6]. Free cash flow for FY26 is expected to grow due to operating income growth, despite changing interest and tax conditions [6]. -
Contact Center Growth Trajectory
Q: Is Contact Center revenue on track to reach 10%?
A: Eric is confident in the momentum of their Contact Center, highlighted by significant deals, including replacements of existing cloud vendors [10]. Focusing on innovation with AI, customer needs, and go-to-market strategies, they expect continued progress and aspire for Contact Center to significantly contribute to revenue, similar to Zoom Phone's trajectory [10].