Zoom Communications, Inc.

Hello, everyone, and welcome to Zoom's Q4 FY2026 Earnings Release Webinar. I will now hand things over to Charles Evislage, Head of Investor Relations. Charles, over to you.

Thank you, Catherine. Hello, everyone, and 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 are market position, stock for purchase 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. And with that, let me turn the discussion over to Eric, who's giving his prepared remarks via Zoom custom avatar. Thank you, Charles.

FY26 was a pivotal year for Zoom and for our industry. We grew Q4 revenue 5.3% and full year FY26 revenue 4.4%, an acceleration of 130 basis points over FY25. 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 and 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 and 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. And 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 C-Cast 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 lifecycle 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. Additionally, 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. Now, let me turn it over to Michelle to take us through the financials. Michelle?

Thank you, Eric, and hello, everyone. I'm excited to be with you today to share Zoom's Q4 and full FY26 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 one point year-over-year. And our online business continues to show signs of stabilizing. In Q4, average monthly turn was 2.9%, as compared to 2.8% in Q4 of FY25. 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 America's 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 one point from Q4 of last year, primarily due to continued cost optimization efforts while we remained focused on investing in the app. 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 3 cents year-over-year, to $1.44 on approximately 303 million non-GAAP diluted weighted average shares outstanding. This result included a headwind of approximately 11 cents from higher than expected taxes due in part to tax true-ups discreet 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% to 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 two 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, 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 FY27 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 FY26. Total revenue for FY26 grew 4.4%, and 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, and 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. And finally, we continue to be strong stewards of shareholder capital. We reduced stock-based compensation expense by 18% in FY26. 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 to $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 to $492 million, representing an operating margin of 40% at the midpoint. Our outlook for non-GAAP earnings per share. is $1.40 to $1.42, based on approximately 304 million shares outstanding. For FY27, we expect revenue to cross the $5 billion milestone and land in the range of $5.065 to $5.075 billion, which at the midpoint represents 4.1% year-over-year growth. We expect our non-GAAP operating incomes to be in the range of $2.05 to $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 era of our shift from SBC to cash bonus compensation. In addition, our outlook for non-GAAP earnings per share in FY27 is $5.77 to $5.81, based on approximately 308 million shares outstanding. Included in this guidance is an interest income headwind of approximately $50 million, and FY27 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 FY27, we expect free cash flow to be in the range of $1.7 to $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 FY26 and we move into FY27, we're thrilled with our progress and we're excited about our differentiated vision as an AI-first system of action. The 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.

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.

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 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?

Yes, great question. So, well, you know, very optimistic about our AI technology monetization in FI27. Joined by, first of all, and customized AI company. You know, more and more in the customers, they see the value and they would like it, you know, because AI company all built in for free. But customer AI company is different. We can monetize. That's its own. and when an aspect right to drive the ai you know monetization at the same time we have very solid air companies throughout the foundation and the team working so hard to innovate we we leverage that technology to empower other use cases like zva you know zoom economy center Zoom Phone, and ZRA, almost every, you know, those are 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. Also, we can, you know, monetize. Again, you know, take the ZCX, for example, right? Look at top 10 ZCX deals we closed in Q4, right? four of them already attached with Zoom voice agent. Zoom voice agent built upon our AI technology. We see more and more opportunity like that. I cannot be more excited than before because of AI and because of our modernization strategy for AI. Thank you.

Our next question comes from Alan Frykowski from BTIG.

Hey, guys. Can you hear me? Yep. Awesome. Congrats on the strong quarter here. Great to see the acceleration in Zoom customer experience. Michelle, I wanted to ask you, and I'll stick to a question here, but on the Q1 deferred revenue growth guidance of 1.5% at the midpoint, can you quantify the impact from the larger competitive takeouts? And for the fiscal 27 revenue guidance, can you just give some color, like what you're assuming for Q1? enterprise and online revenue growth?

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 markets. where we're providing a grace period to our customers to help them with that transition. This is good for Zoom. This is intentional. And 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. So a couple of 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 FY26. 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. And really, it's going to be enterprise that's the headline for the growth. And 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 channels.

Awesome. Congrats on the strong quarter, guys. Thank you.

Our next question will come from Peter Levine from Evercore.

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. So I guess the question is like, what's, In terms of technology or what structural barriers I think prevent them from disintermediating Zoom, what's the moat that you feel will defend your markets, data, the infrastructure, it's the enterprise relationships, brand equity, 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 AI could ultimately replace you guys?

Yeah, wonderful question. I think 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 at today's meeting we know work tomorrow might work no one's going to use that right and security also extremely important right you need all kind of security features also into the building plus ease of use that reason why the customer they choose to use zoom you know back to the ai i think yeah i'm an engineer right i also now starting writing code as well with iod ai coding tools i think it's extremely hard to replicate what we built over the past many years because first of all a lot of our code is still c plus plus code you have to operate on the video audio a lot of things right today look at the ai coding tools this is so hard you know to build a very scalable and uh you know the the the leverage the native os build all kinds of code it's not as straightforward you can build a very easy system you know high-end tools but it's more like a toys nobody can use that because this is collaboration it's not of a system record or or database or i mean store uh uh information you know even you i don't know work you know how to use that right it's fine But when it comes to mission-critical video collaboration tools like Zoom, it's really hard to leverage AI coding tools to replicate whatever chip. I have very high confidence. And by the way, no matter what we do, we're still using tools like Zoom, right, to human connection or interaction. It's still very important.

Michelle, a follow-up on net retention, 98%. Can you just help us bridge the gap? All the new products that you're having, you're seeing upsell, context-centered voice. When is that inflection? When can we see that in the model? Thank you.

Yeah, so great question on the NDAE. 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 and churn, phone and mid-teens, contact center and high double digits, and obviously the onset of AI monetization. Look, we're going to run the business sort of to revenue growth, and you have our 27 guidance there. But a couple of notes maybe for investors about headwinds relative to NDE. First of all, I just want to go back to that, you know, white label churn that we talked about, a competitive white label churn that will obviously put some pressure. And then 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. And look, in the fullness of time, that will replicate through our net dollar expansion. But obviously, it'll take a little bit more time. So just two more mechanical things to take into consideration.

Thank you. Thank you, Ari. Thank you, Michelle. Thank you.

Our next question comes from Siti Pinagrahi from Mizuho.

Hey, guys, thank you for taking the question chat on here for Citi. 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.

Eric, do you want to take the honor or do you want me to?

Yeah, go ahead, please.

Yeah, I mean, look, I would point to, you know, we're pleased. I think we gave 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 work vivo, that's giving us, together with investments in channel, an opportunity really to break into international markets. So, yeah. You know, it is something that we're investing in. We've also done maybe more local investments like UK 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.

Next up, we have a question from Alex Zukin with Wolf 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. And then, Michelle, for you, just any comments about how clearly the growth – On phone, contact center was really, 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 deferreds?

So let me hit entropic person, and we'll round 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. And 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 talked 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 going to hit phone and then I'll wrap with contact center. Phone. We've been seeing, you know, very durable mid-teens growth. Look, we haven't updated our penetration stats in Zoom. But in Zoomtopia, I think in 24, we said it was 19% of our meetings base. I think that just both speaks to progress and growth. opportunity going forward. And then look, you know, on the phone side, I just look at all the examples that Eric talked about. Leading insurance, you know, Cisco win, an F10, a Cisco win, major fast food chain, RingCentral win, and really feel like a major U.S. bank, a Microsoft Cisco win. So we feel great about the share gains on the phone. On contact center, you know, what I would point to there is just multiple quarters, now four quarters at high double digit, and actually Q4 accelerating off that. But 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. And to Eric's point, 4 of 10 in voice, which has been, you know, a new entrant for Zoom in the summer. We did a 2.0 refresh, and even yesterday we announced a 3.0. And really, maybe if I could wrap with one stat, which is how oftentimes these things come together. And 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. And six of our ten largest contact center deals, as an example, pulled through phone as well.

So just quickly, Alex, it's such a great question to add on to what Michelle said. We talk about the top 10, you know, Zoom phone deals, Zoom contact center deals are doing very well. This is more like a lot of enterprise. I think this year, if you get SMB, also a huge opportunity. The reason why, because of AI. You know, our AI is very affordable, federally approved, right? Look at the last December, I look at a human, you know, X-ray test, you know, Zoom ranked number one for a while, right? So, you know, because of those investments, 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.

And especially true, you know, just to mark Eric's comment because it's such a good one, that is especially true in ZVA. So great to see the new product value, which will really open up new opportunities down the market.

Thank you both. Thank you, Alex.

Up next, we have a question from Josh Baer with Morgan Stanley.

Great. Thank you very much for the question. And 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. So 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.

Josh, wonderful question. You know, speaking of vertical solution, you know, I love my AI avatar, right? I use that for three quarters already. As you can see, the quality is getting better and better. right it's kind of one of the vertical use case you know for marketing team having started that i think given the the ai evolution you know ai coding tools you know i think we have you know foundational technology now we can do both on horizontal front right we we keep innovating and more features and services, right? And deliver happiness to our customers. You see the AI Companions announced last December. And also, in terms of innovation, a lot of things are going to announce, new innovations announced 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 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, Bright High, you know, almost every vertical use case. I think we can leverage AI to quickly penetrate into those markets we never thought about before. That's why we're very excited because of AI.

Thank you.

Thank you.

We have a question from Tyler Radke with Citi.

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 FY27? And 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.

So you get a customer AI company. Again, AI company is part of offering. It's for free. It's become more and more powerful. But, you know, the way for us to monetize AI company is to go through the customer AI company, in particular for medium and large enterprise customers, because with the third-party applications, you know, connectors, and also we're building a workflow and no-code workflow to build an agent. And that's kind of our vision, right, from composition to completion. If you do not have a very flexible workflow builder to help you build an agent, how can you complete a task, right? So, you know, because, you know, it used to be all Zoom, just, you know, the collaboration. Now, with the Zoom customer and company, with workflow, connecting with all the third-party applications, more skills, more agents, and then we can achieve from completion to completion. and you know also not only workflow but also customer company also can give you you know the enterprise knowledge you know retrieval you know functionality right you can connect so many uh uh third-party applications right i do not need to log into different system i visit the zoom air company interface i can search for any information and help you write it you know and a document you know to achieve the task essentially your company customer company is uh customized you know workflow builder and also the information search capabilities to connect with all kinds of third-party enterprise applications is extremely powerful and we can monetize for those for to target enterprise customers up next yeah tell you go ahead i think tell maybe have oh can you hear me

Yeah, yeah. Oh, sorry. Just any way to – is that going to be a contributor to FI27, or is it still kind of early days in terms of that monetization of the premium AI custom campaign?

It already contributed, right, to our growth. So I want to close the big customer A company deals in Q3 and Q4 with more innovations for sure. It's going to help us more in FI27. Great. Thank you.

Thank you.

Up next, we have a question from Seth Gilbert with UBS.

Hey, thanks for the question. Maybe just one. If I hold the online growth, online year-over-year growth at about 1.2% for fiscal 27, that would imply that the enterprise decelerates by about one point from the 4Q exit rate of 7%. So 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.

Yeah. Is your question on Q4 or is more on guiding going forward?

Oh, it's more on guiding going forward. So, yeah, sorry.

Yeah. Look, let me talk about online and 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 22. And look, that growth comes off of adding value online. in our portfolio of workplace, you know, workplace portfolio, as well as AI. And that's why we're able to realize a price increase as well as, you know, keep record low churn. Our guide assumes an additional price increase on the annual skew. So in line with monthly, it's really just intended to do the same thing as the prior, but bring them into value. But, look, to your more meta question, enterprises is going to be the durable driver for growth going forward. And 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. is 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 the incremental ai monetization in both agent-assisted ai as well as the zva that eric and i talked about um and then look there's so much coming on from an ai monetization perspective both in product work vivo phone But additionally, beyond that, in new SKUs, we've now opened up a no-ticker SKU to our free base, as well as, you know, making continually products like ZRA even better. So we look out to the forward, and we're excited about the progress that we made this year, 130 bps kind of up year over year, and we're equally excited, if not more, on the 27 go forward.

Got it. Thank you.

Up next, we have a question from Tom Blakey with Cancer Fitzgerald.

Hey, guys. Thanks for taking my question. Eric, 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 you can't call it out numerically, just how they're trending. I think the numerical help would kind of understand, help us understand, 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. And I have a follow-up, if you may.

Yeah, I can take that. So, look, it's in line with what I said earlier, which is, again, I just want to continue to emphasize to investors, don't read into this as normal. These are great competitive wins. We're providing a grace period so that I, you know, in exchange for a larger and longer-term competitive platform win. Think of this, if helpful, in sizing, Tom, as really the primary driver between the detail in Q4 relative to the gut in Q1. And if helpful on the other side, maybe what I'd point to is connecting you to that uptick in long-term RPO as helpful.

Yeah, that would be helpful. And then, 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 successes that you've had on the enterprise side with CX and phone, but is it safe to assume that that's, you know, maybe not implied or imputed in that kind of 1% guide for fiscal 27 online?

Yeah, so... When I mention SMB customers, it's more like a high-end, you know. Higher end. Yes. Not online buyers, you know, like SMB customers, right? It used to be, you know, they used to look at multiple solutions. Now, because of the power of AI, and 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.

Michelle, could you comment on anything on the top or bottom line impact in fiscal 27? And that's it for me. Thank you.

Yeah, so it closed mid-Q4, so think of the impact to Q4 as sort of de minimis. The guide reflects, obviously, bride hire, and I would just say that it's a perfect example, I think, of what Eric laid out in the earlier question with regards to vertical and horizontal values. So this is a business where we share common customers, so there's sort of mutual benefits. And this is a product where we have 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. So it's helpful.

Excellent. Very helpful. Thank you, guys. Thank you, Bill.

Our next question comes from Samad Samana with Jefferies.

Good evening. Thanks for taking my question. So 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 27, Michelle? And what are you assuming in the guidance, if anything, from a price increase perspective? And to the extent, I'm sorry for the 11 part question. I'm learning from some of my peers. But if you have, can you give us a sense of like timing around that assumption as well? Yeah. Thank you so much.

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. So our online guide includes a price increase of 6% to go ineffective mid-March to our annual skew. So think of this as this is really the flip side of what we did last year. And I really encourage investors not to think about it as a price increase. Price increase is just one mechanism for realizing incremental value to customers. So 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. So that's really what's behind that. So that's sort of how to think about the online side. And on the enterprise side as well, you know, one important to note that those prices then impact the enterprise. But look, there we're going to focus much more on, you know, total contract value, things like discounting and contract duration. And those would be baked into our guide given.

Great. Thank you so much. Appreciate it. Thank you.

Our next question comes from Ryan McWilliams with Wells Fargo.

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. And so 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.

Yeah. a while back right so we all adopt you know ai you know coding tools it's getting more and more powerful and uh especially for the new product the development right or new service right certainly accelerated our piece of innovation but at the same time we also have uh you know a lot of the the you know existing services right and a lot of you know code written by other engineers right i do not think that the ai coding tools is powerful enough to maintain all those things, millions of lines of code yet. So having said that, you look at it not only for engineers, but also the UI designers, product managers, almost everywhere, why we can leverage AI coding tools to improve our productivity. Essentially, we drive the innovation, the speed. And you get the product area we invest. Like ZVA for sure is a great example. And we kind of built in a lot of new features. And it's probably, in terms of speed, better than any time in our company history. That's the reason why over the past few months, customers feel like, wow, you know you had this feature that feature you know much better position this is a great example because the ai coding tools and also because the the way we embrace the ai so again not only for engineers but entire you know the product development you know the life cycle so awesome thank you guys thank you our next question comes from jackson aider with key bank

Great evening, guys. Thanks for taking our questions. The question I have is on is around the channel. And I think you guys have made a bunch of improvements and enhancements to the channel partner program the last few quarters and last year. And so really, I'm 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. And then also it seems like, you know, I understand there are some kind of headwinds, tailwinds to the margin for fiscal 27. And 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.

Yeah, let me go ahead and take that, and then Eric, you can pepper in as easy as he said. 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. And also it just speaks to, you know, beyond just the software, the consulting, the deployment, just how customers, you know, interact with partners. And, look, we're very – this is something we've been very intentional about, and I think you can see it in our revenue growth and flexion. 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, 9 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, look, 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, We want to make sure that our ecosystem is ready there with us, and so we'll invest in that. And 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. So we guided to 40.5 at the midpoint. WANA, obviously, beyond the mechanics of, you know, reminding that we've used a consistent forecast methodology, really want to make sure that investors understand the two dynamics which are not channeled. 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. So those are really the headlines to think about in terms of the op margin versus anything channel.

Got it. Thank you very much, guys. Thank you.

Our next question comes from William Power with Baird.

Okay, 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 the large enterprises have. So 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 help us kind of understand the sustainability of some of these large opportunities.

Yes, that's a wonderful question. Believe it or not, actually, look at the total phone deployment. You know, 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 customers, right? And they deployed the on-prem phone system for a long time. They said, yeah, it's okay, it's not great, and why do you want to hurry to migrate to the cloud? This kind of sort of mentality before. Now with AI, it's a strong reason. For those very large internet customers, you know, they cannot leverage AI for the on-prem, right? So that's why I would say that there will be an acceleration for those large internet customers to migrate away from on-prem to cloud. Zoom is a much better position. You know, we've been in quite a few very large, very complicated phone departments for on-prem, you know, to the cloud. Again, AI is a driver. You know, and for those customers who might go to the, you know, AI first, you know, cloud, you know, phone system. And that's a, yeah, that's a driver.

And maybe just add the numbers to what Eric said. It's about 130 plus million seats in the cloud and about 150-ish on Chrome. So Eric's spot on on the raw 50-50.

So lots of opportunity.

Yeah. Yeah, huge. Because if not because of the AI, it's hard to miss them. It's okay. I use it for 20 years. It's okay. But now, you know, it sucks. Great opportunity ahead of us. Thank you.

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. And so, 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.

Thank you. Thank you.

Our last question for today comes from Catherine Trebnick with Rosenblatt Securities.

Okay. Thanks for sneaking me in. Quick question on the channel. So 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. So are you seeing a different buying pattern from the enterprise and the SMBs that are forcing you or maybe the system integrators are more attractive to you? Can you peel that back for me? Thanks.

Your question, Catherine, is are we seeing – I mean, I would – What are you seeing?

Yeah, it seems like you had more bundles this quarter than you have typically discussed. So 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. So it seems to me if it's a more complex deal that you're going to need either direct sales force or more of a system integrator.

Yeah, I mean, I would say what we saw in Q4 was just an intensification of the pattern that we've seen previously, which is, you know, just what a natural sale it is for a phone and contact center to come together. And then frequently that also comes with a meetings portfolio. And 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. And then certainly, Catherine, investments that you've noted and your stuff about investments in the channel.

Well, and the other part is, are you seeing the enterprise want to move more towards a platform that, like they are in security, and that you're feeling you have enough product pieces now to be part of that platform play.

Yeah, I mean, I'll jump in, and then Eric, you should certainly jump in as well. I do think, and 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, but Maybe just as a quick data point, like if you look at our top 10 deals in contact center, six of 10 included phones. So 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 going to have, you know, their own technology and come at it in different ways. But look, I think, you know, maybe just to the deferred revenue conversation, I see that as a great sign. It's these all in with Zoom, large, longer term deals. So I think there's some really great things on the future for our contacts and our business.

Just quickly to add on to what Michelle said, so the Zoom workplace is our U-cause, you know, the platform. You know, contact center is a C-cause, especially for those large individual 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 it can combine those two, consolidate those two systems into one platform, one vendor, Why not? No, this is a great ROI. That's the reason why quite often you say both UCaaS and CCaaS will be new together. So that's a reason.

Thank you.

Thank you.

Thank you. This concludes the Q&A portion of today's call. I'll now turn it back over to Eric for closing remarks.

Thank you for Zoom employees, customers, partners, and our investors for your great support. And we truly appreciate. We are very, very optimistic about I-527. So see you next quarter. Thank you.

This concludes today's earnings call. Thank you all for attending and have a great rest of your day.

Thank you all.