Hello everyone, and welcome to Zoom's earnings webinar for the second quarter of fiscal year 2027. I'm joined today by Zoom's Founder and CEO, Eric Yuan, and Zoom's CFO, Michelle Chang.

Today, I'm giving my prepared remarks by Zoom Custom Avatar, and so will Eric and Michelle. After the scripted portion of the call, Eric and Michelle will be on camera live to answer your questions.

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 third 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, including our AI strategy and investments, 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 is also giving his prepared remarks via Zoom Custom Avatar.

Thank you, Charles. FY 2027 continues to progress well.

Total revenue grew 4.9% with Enterprise revenue growing 7.8%, its strongest rate in 3 years. The Enterprise acceleration was driven by our focused execution against our 3 priorities of elevating workplace with AI, scaling AI-first customer experience, and driving growth in new AI products.

This progress reflects our success in bringing our AI-first system of action vision to life, helping customers reduce costs and create greater business value. That vision is grounded in Zoom Workplace, which we continue to enhance with AI.

Across Workplace and our broader communications platform, AI is becoming increasingly embedded in how users work throughout the communication and collaboration lifecycle. Licensed monthly active users of our AI features in Workplace grew 125% year-over-year.

We are even more encouraged by the broadening engagement, which has expanded from reactive communication summaries into active querying and building workflows, turning insights into action and conversations into outcomes. Our wins in Q2 speak to our growing ability to win as a system of action for modern work.

We saw one of the largest US tech companies renew Zoom Workplace in a deal that expanded its ARR by $1.9 million, driven by the deep employee appreciation for the Zoom Meetings and Rooms experience, our AI vision, and our ability to integrate and coexist with Google Workspace. With ARR growing in the teens, Zoom Phone continues to demonstrate its value both as a natural add-on to Zoom Workplace and increasingly as a driver to broader platform adoption.

We saw both dynamics in Q2. A major US wealth manager upgraded to Zoom Workplace Enterprise Premier, including a wall-to-wall rollout of Zoom Phone, replacing multiple vendors.

Zoom Phone is also creating pull-through for our broader platform. For example, QXO, a large North American distributor and installer of building products, chose Zoom Phone company-wide for roughly 8,000 employees alongside Zoom Contact Center to unify their UCaaS and CCaaS systems, integrate with Microsoft Teams, and automatically drive CRM updates from live interactions.

We were also very pleased with the progress of our employee experience offering within our system of action. In Q2, a leading US insurer and major Zoom Workplace and Phone user expanded into Workvivo, marking one of Workvivo's largest ever deals as it also surpassed $100 million in ARR.

We are also priming Workvivo for the AI era by launching Workvivo HQ, an AI-native digital headquarters built on Zoom's AI technology, bringing communication, knowledge, and action together for every employee. On a global luxury retail brand selected Workvivo HQ as their employee experience platform and will deploy Workvivo HQ Agent to give thousands of frontline workers faster access to answers from their policies and databases.

As you can see, customers are choosing Zoom as an AI-first, secure, integrated, multi-product system of action, sometimes displacing multiple vendors, other times coexisting with them. This progress exemplifies our ability to meet customers where they are, turn conversations into business value, while driving durable platform expansion for Zoom.

Customer experience is a clear example of our platform strategy translating into growth and direct AI monetization. In Q2, Zoom CX ARR continued to grow at a high double-digit year-over-year rate, and we set a record for the number of 7-figure ARR deals.

AI continues to drive this momentum, with paid AI in 9 of the top 10 Zoom CX deals, showing growing demand for a system of action that connects automation, human agents, and intelligence. We saw rapid adoption in Zoom Virtual Agent, both as a Zoom Contact Center attach and as a standalone offering, with its customer count growing more than 250% year-over-year.

ZVA's voice and chat agents go beyond simply answering questions; they resolve issues, complete multistep workflows, and escalate to human agents with full context when needed. This validates our vision of moving customers from chatbots to resolution agents, turning conversations into resolved outcomes at scale.

Increasingly, customers are going all-in on Zoom CX, combining our virtual agent and agent-assisted AI solutions to enable seamless transitions from automated self-service to human support. For example, in Q2, one of the largest US banks chose ZVA while expanding its existing ZCC Elite deployment to enable self-service alongside AI-assisted human support, helping them scale to meet surging help desk volume.

For others, the value is in breaking down the fragmentation between UCaaS and CCaaS solutions and bringing communications onto a unified platform. In Q2, a leading enterprise software company selected ZVA Voice as a natural extension to Zoom Phone as they look to modernize their customer experience.

We also saw a major US cybersecurity company select Zoom Contact Center to replace multiple vendors and securely unify their UCaaS and CCaaS solutions, building on their use of Zoom Video in customer interactions and allowing agents to escalate voice calls to ZCC video sessions seamlessly and natively. It is not only customer recognition.

Early this month, Zoom was named a leader in the IDC MarketScape for Agentic CCaaS. This progress demonstrates the momentum behind Zoom CX and validates our differentiated approach, a unified AI-first system of action that connects self-service, human support, and internal communications to deliver better customer outcomes at scale.

Our progress in enhancing Workplace and scaling customer experience gives us a natural foundation from which to deliver new AI value to our customers in horizontal and vertical scenarios. In horizontal AI, we launched Zoom Docs in June, bringing our system of action strategy to life for our Workplace users through AI-first productivity tools, agentic search, and agentic workflows.

We've already seen interest spanning our Zoom Workplace base, from small businesses to the world's largest enterprises. By combining Zoom conversation data and proprietary intelligence with other enterprise systems, Zoom Docs turns conversations into completed work and business value.

In Q2, we were delighted to see the University of Newcastle in Australia, already a full platform Zoom customer, add Zoom Docs to further enhance its collaboration and communication capabilities. As we expand the system of action across the enterprise, we are using Zoom's unique position in live communications to capture context and intent and apply that intelligence to vertical workflows.

Sales is a strong example. Zoom Revenue Accelerator, our revenue orchestration solution, turns live sales conversations into intelligence that supports coaching and action to improve seller productivity and win rates.

ZRA had another strong quarter with paid customers growing 41% year-over-year. Common Room extends this value upstream, creating a fuller end-to-end revenue intelligence and orchestration solution together with ZRA and the broader Zoom platform.

We closed the acquisition in mid-July, adding buyer intelligence that unifies fragmented signals to identify in-market accounts, key buyers, and the right reasons to engage. In Q2, Okta expanded their Common Room contract as they look to further capture the value that AI-driven buyer intelligence delivers by consolidating customer insights across platforms and surfacing real-time buyer signals to convert deals into wins faster.

Across our 3 priorities, the common thread is clear: Zoom is deepening its value to our customers as a system of action. We are embedding AI across our platform to turn conversational context into action and deliver what customers want: real AI value that produces outcomes.

We are encouraged by the momentum across our platform and proud of our progress expanding AI monetization to durable growth and, most importantly, deliver enduring value for our customers. Michelle, via Zoom Custom Avatar, will now take us through our Q2 financial results.

Michelle?

Thank you, Eric, and hello everyone. I'm excited to be with you today to share Zoom's Q2 FY 2027 financial performance.

In Q2, total revenue grew 4.9% year-over-year to $1.28 billion, or 4.7% in constant currency. This result was $7 million above the high end of our guidance.

Our Enterprise business drove the outperformance, with revenue growing 7.8% year-over-year, representing 62% of our total revenue, up 2 points year-over-year. In our Online business, Q2 average monthly churn was 2.9%, in line with Q2 of last year.

Within our Enterprise business, we saw 8% 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 1 point year-over-year.

Our trailing 12-month net dollar expansion rate for Enterprise customers in Q2 was 99%, up 1 point from the prior year period and in line with the prior quarter. Looking at our international growth, Americas revenue grew 6% year-over-year, EMEA grew 2%, and APAC grew 4%.

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, net gains or losses on strategic investments, and all associated tax effects. Non-GAAP gross margin in Q2 was 79.1%, compared to 79.8% in Q2 of last year.

We continue to deliver strong gross margins as we broaden our AI product portfolio and optimize for scaling customer adoption. Non-GAAP income from operations grew 1% year-over-year to $510 million, in line with our guidance.

Non-GAAP operating margin for Q2 was 40%, compared to 41.3% in Q2 of last year. We continue to deliver very strong operating margins while improving top-line growth as we further invest in our growing portfolio of AI products and drive future efficiencies in our AI infrastructure.

Non-GAAP diluted net income per share in Q2 increased to $1.55 on approximately 300 million non-GAAP diluted weighted average shares outstanding. This result was 8 cents above the high end of our guidance and 2 cents higher than Q2 of last year.

The EPS growth reflects strong top-line performance as well as anti-dilution driven by our buyback program and disciplined stock compensation management. Turning to the balance sheet.

Deferred revenue at the end of Q2 grew 6% year-over-year to $1.56 billion, above the high end of our previously provided range of 2% to 3%. For Q3, we expect deferred revenue to be up 3% to 4% year-over-year.

Looking at both our billed and unbilled contracts, our RPO increased 14% year-over-year to approximately $4.5 billion, driven by non-current RPO growth of 25%. The strong growth in RPO reflects our continued success landing larger, longer-term multi-product platform deals, demonstrating growing demand for our AI-first platform.

In Q2, operating cash flow was $495 million, representing an operating cash flow margin of 38.7%. Free cash flow in the quarter was $472 million, representing a free cash flow margin of 37%.

We ended the quarter with $7.2 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. In Q2, we repurchased 3.7 million shares for approximately $352 million.

Across our $4.7 billion share repurchase plan, we've repurchased a total of 44.2 million shares for $3.4 billion. Turning to guidance.

For Q3, we expect revenue to be in the range of $1.275 to $1.280 billion, representing 3.9% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $510 to $515 million, representing an operating margin of 40.1% at the midpoint.

Our outlook for non-GAAP earnings per share is $1.46 to $1.48 based on approximately 301 million shares outstanding. For the full year of FY 2027, we are excited to raise our revenue and EPS guidance.

We now expect revenue to be in the range of $5.085 to $5.095 billion, which represents 4.5% year-over-year growth at the midpoint. Our increased revenue outlook assumes Enterprise revenue growing faster than expected, partially offset by flat Online growth.

We continue to expect our non-GAAP operating income to be in the range of $2.065 to $2.075 billion, representing an operating margin of 40.7% at the midpoint. In addition, our outlook for non-GAAP earnings per share in fiscal year 2027 is increasing to $6.08 to $6.12 based on approximately 301 million shares outstanding.

As a reminder, future share repurchases are not reflected in share count and EPS guidance. We are also pleased to raise our free cash flow outlook for the full year, which we now expect to be in the range of $1.78 to $1.82 billion.

This raise reflects the strength in free cash flow in the first half, as well as a downward revision in our CapEx spend for the year. In closing, Q2 was a good quarter with continued execution across our 3 priorities and growing adoption of Zoom as an AI-first system of action.

We are pleased with our progress in AI monetization, led by customer experience and early momentum across new AI revenue streams. We remain on track to surpass $5 billion in revenue this year while maintaining 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 support. With that, Catharine, please queue up the first question.

Thank you, Michelle. We will 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 Matt Bullock with Bank of America.

Hey everyone. Good to see you, Michelle and Eric.

It's nice to be working with you again. I was maybe hoping, Michelle and Eric, you could elaborate on what you're seeing in terms of Phone demand and customer purchasing behavior in the second quarter, and then maybe help us think through the outlook for modeling the rest of the year.

Thanks.

Your latter part of your question, Matthew, is on the entirety of the business or Phone uniquely?

Phone specifically.

Yep. Eric, did you want to lead off or I'm happy to take this one as well.

Go ahead. Please.

Yeah. Look, we're really encouraged with our Phone results.

You saw us highlight a lot of the things about it continues to be in teen growth. Maybe give a little bit of the context and color, Matthew, to other dimensions that we're seeing.

I think we're seeing strong takeout motions. 10 of our top 10 deals were takeouts.

We're seeing continued strength in verticals and international. We're seeing that continued UCaaS and CCaaS.

Then maybe 2 new elements within Phone before I flip to talking about the revenue guide that I would call out is I think, increasingly, it's going to be a great pathway to other AI monetization, meaning we're seeing it set up a lot of ZRA deals, Zoom Docs deals, Zoom virtual AI receptionist deals, we're encouraged by that. We're also seeing strong momentum in our Teams integration.

With respect to our guide, look, it represents a constant currency beat and raise. We're pleased with the progress to the full year.

It's a raise from where we came in at the beginning, which was at 4.1% growth, now guiding at the mid of 4.5%. That's up versus last year.

Also, I'll remind investors about that headwind of a white-label deal that we had that had about a 6—or 40 bps, excuse me, impact to the top line. Look, the fundamental headline in our growth inflection is Enterprise.

You saw from Eric the 3-year highest growth rate. I'm sure we'll get to talking more about that.

Then we tempered it slightly with results in Online.

That's great. Maybe just one more to follow up if I could.

It looks like the strongest RPO quarter in a few years, really nice step-up. You mentioned a couple of things, landing larger, longer duration contracts, but was hoping you could expand maybe on some of the underlying drivers of what you think's driving the strength and the step-up in bookings in the quarter.

Yeah. Look, I think it tells the story of our Enterprise business at large.

Look, if you look at that 7.8%, the strongest in 3 years, that's even with that white-label churn headwind that I talked about that had about a 60 bps impact to Enterprise. You see it in the NDE inflection.

Look, it's really what we've been telling investors we would work on: product diversification, AI monetization, moving upmarket, expanding in new routes to market with channel while working our churn. Look, as we move into these different businesses and we move into that deeper relationship that Eric talked about with our customers, it will come with longer, larger AI-related deals.

Great. Thanks.

Our next question comes from Samik Chatterjee with J.P.

Morgan. Hey.

Hi, Eric and Michelle. Thanks for taking my question.

Maybe if you can talk a bit more about the record 7-figure deals that you highlighted for the quarter. How is the composition of these deals changing as you sort of see these record deals come through?

Is this being more driven by contact center seats or are you seeing more AI attach sort of starting to make these deals larger in size? Just curious in terms of whether it's certain products that are driving some of the deal sizes to expand over time and how should we think about that.

A quick follow-up for you, Michelle, just on the gross margin side. How are you looking to sort of continuously navigate the increasing compute cost as well, particularly as we saw gross margins moderate slightly in the quarter?

How do we think about sort of managing those on an ongoing basis? Thank you.

Thanks for taking my questions.

Let me start with the first one. Look, I think it's both, and it's all the elements that I just talked through with Matthew on sort of the Enterprise business, I won't repeat it.

The stat that I think you're referencing, however, was in Contact Center, let me maybe make some comments about what we're seeing in Contact Center before I hit gross margin. Look, we continued to see it in high double-digit.

We're clearly taking share. It's driven by AI.

We're winning in upmarket, we saw a record quarter of $1 million-plus deals in Contact Center, as well as we saw strength in over $100,000 and $1 million in our all-up business. Look, it's the same dynamics that we've been highlighting quarter in and quarter out with investors.

We're displacing big competitors. It's off the backs of AI.

We're encouraged by our investments in channel really being part of that. Look, when it comes to gross margins, look, I think the teams have done a beautiful job in holding gross margins best in class.

They go and they can have some variability from any quarter, one to the other. We've been able to hold that as we shift to an Enterprise business and AI usage goes up.

We had a little bit of a growth in expenses this quarter as we saw AI usage spike with some of our new products. Look, as is everyone, we will work to optimize that in the second half, and we continue to reiterate our comments about holding to long-term margins.

Maybe let me say, I'll give you kind of the quick version of what gives us confidence in working to those margins is our federated approach in AI: being able to take the best model for the right time at the right cost, and be able to fluidly direct traffic in between that while we work to bring high volumes onto the Zoom SLM. Additionally, we sort of create products once in our core, and then we take those core technologies and we infuse them throughout our products.

That together with additional kind of areas of improvement in our core gives us confidence on the long-term 80%.

Thank you. Thanks for taking the questions.

Up next, we have a question from James Fish with Piper Sandler.

Hey, good afternoon, guys. Thanks for the questions here.

Maybe just on ZVA, a lot of consumption models out there for paid AI, interesting seeing it attach across Contact Center and as a standalone. I guess how are you guys balancing or looking at consumption or usage models rather than kind of per-seat monetization, how that impacts the model?

Then secondly, you guys increased Online, the price, back in mid-March probably by mid-single digits. Still not seeing much churn activity really, and you're even seeing that 16-month-plus cohort move higher in terms of the growth rate.

I guess how much more price elasticity do you guys think you have, understanding you guys don't typically increase price just for the sake of it? Thanks, guys.

Eric, do you want to take the consumption or I'm happy to take it, too.

You go ahead. Yeah.

Look, we benefit broadly from per-user models. That's what's been the norm.

Look, the market at large is shifting to more consumptive, and so you've seen us in ZVA, which was sort of where the root of your question was, but we also employ full consumptive, outcome-based, and a combination of per-user with a certain amount of consumptive. Look, I think there's benefits to customers on both sides of the fence, and there's learnings for everyone involved.

Broadly, our approach is to match what makes sense relative to market and competitive dynamics, and ultimately what's in the customer's best interest. Your second question about progress in Online, look, I'm not going to make any comments about future pricing in that other than to just reiterate what you were sort of noting.

This is our second round of price increase. We did one to the monthly and then one annual, you can kind of think about it as one all-up of roughly 6% in our Online business.

To your point, we didn't really see a massive or really any change in our churn. It remained low, and to your point, those customers that have been with us for over 16 months just continues to inflect up.

Look, we think that's a really good sign about the stability of our base. In our Online business, we're going to work on sort of land and expand.

Look, we contemplate price increases as we think they make sense, and we work discounts down in the Enterprise. There's really nothing that I'd sort of add to it about any future plans.

Thanks, Michelle.

Yep.

Our next question comes from Peter Levine with Evercore.

Thank you for taking my question. I guess if you look at Phone ARR, it's still growing teens, even at size and scale.

I guess the question is how much more runway remains in Phone, particularly within your existing kind of Workplace installed base? If you look at Phone today, is it still acting as an entry point for CX or is it still an add-on to Meetings?

Just more curious how much room do you have left for Phone. Then, Michelle, similar question with Contact Center.

How much of those net new deals that you saw this quarter, which was impressive to see, were net new customers to Zoom, or were these all just kind of renewals, upsells that you kind of saw just through execution? Thank you.

Let me hit Phone first, and then I'll I'll get to Contact Center. Look, I think we've been growing in the in the teens for a while and and clearly gaining share.

Look, if you think about it from a market perspective, there's about a I think 130-some-odd cloud seats and about 150 million equivalent on-prem. We're winning in both and feel good about our ability to capture competitor share there.

This quarter was no different. 10 of our top 10 deals involved takeouts.

I'll note, it can differ here from one quarter to the next, but this quarter saw a large percent of the percentage of those in Online. Look, to your question of kind of the UCaaS/CCaaS synergies, about 5 of our top 10 Phone deals had Contact Center in them, it gives you the sense that both like you're bringing in customers outside of that, and then clearly there's a a UCaaS/CCaaS connection.

Then, when I go to Contact Center, I think we're clearly seeing a lot of new inroads. Why what I say by that is some of them, of course, come from Phone.

If you look at it, I think 3 of the top 10 deals in Contact Center had Phone on them. Then there's also a clear signal that some of them are just coming for Contact Center in and of themselves.

Look, sometimes that comes and I I think you saw the customer examples in Eric's prepared remarks, some coming in through ZVA, some coming in through Contact Center, and some going all-in with Zoom from day one. Clearly clearly, there's an AI story in Contact Center.

Clearly, there's a competitive displacement across both. I think these represent durable drivers for Zoom for the foreseeable future.

Thank you, Michelle.

Yeah.

Our next question comes from Elizabeth Porter with Morgan Stanley.

Great. Thank you so much.

I wanted to follow up on the Enterprise revenue acceleration, and you highlighted that that was the strongest growth in 3 years while the trailing 12-month Enterprise NDR remained about that 99%. How should we think about the balance of acceleration between some of these new logos, larger initial lands, where you have lines and displacements, and expansion of the installed base?

Are there any products, whether it's Phone, CX, or paid AI, that are more influential in moving that NDR sustainably above 100%? Thanks.

There's a lot in there, keep me honest, Elizabeth, if I don't get to some of the nuances in your question. Let me start with NDE and then I'll kind of work back to Enterprise and kind of the fundamental drivers and broadly kind of the balance of new versus expansion if I got sort of the framework of your questions.

From an NDE perspective, look, I think we've said for a long time that the goal is obviously to move that up and 100 and beyond. You're seeing it go up to 99 now for the second quarter.

I will remind investors we have that white-label churn that will come in a touch more in the second half. Look, broadly, it tells the story of Enterprise.

It tells the 7.8% growth in Enterprise, a 60 bps increase even quarter-over-quarter. Then factor in again that white-label churn headwind, and you can kind of get a sense of where the Enterprise growth is.

It's off product diversification, all these same factors that kind of play through net dollar expansion. We're diversifying our product set.

Big headlines there are obviously Phone, Contact Center, but also the onset of a lot of AI monetization that the teams have been working very hard on. If helpful, the way we think about it, the way we talk to investors, the way we run the company, allocate resources, are those 3 priorities that we frame in our prepared remarks are really the fundamental building blocks for our long-term growth.

They're at different stages, but we feel good about those. Those are kind of durable things that you can continue to watch.

Maybe the last thing that I'll say is we continue to make progress in churn and deal dynamics in the Enterprise space. Certainly that plus moving upmarket, we think are durable elements to continue.

Maybe one last comment on sort of new versus expansion. It's clearly coming from both.

I guess I'd go back to kind of I think it was Peter's question on Contact Center and Phone. Clearly, we're benefiting from a Zoom base and our customers there, but increasingly with AI monetization, new routes and new products being delivered plus Contact Center, it's also helping us to bring in net new customers to Zoom, and that's supported by our investments in our channel.

Yeah. By the way, to add on to what Michelle said, right, just look at the contact center, for example, right?

Customer not only want to look at the cloud-based contact center, but also look at agentic capability. Look at the latest report from IDC MarketScape for agentic CCaaS, Zoom was named a leader in a much better position than a lot of traditional cloud contact center vendors, right?

It does speak of the capability of Zoom Contact Center with agentic capability and a much better position, I think.

Next up, we have a question from Samad Samana with Jefferies.

Hi. Good evening and thanks for taking my question.

Maybe just on the Common Room acquisition, help us think through what the contribution there was to the guidance, and then from a strategic perspective, how should we see that maybe pairing with the Revenue Accelerator offering that you already have? How does it fit into kind of this overall theme of adding more robust functionality that's maybe borderline front-office functionality, if I would put it that way?

Eric, do you want to maybe start with the thesis of why Common Room, and then I'll jump in with sort of the numbers component?

Absolutely. In terms of strategic value, you look at our AI capabilities, we build federated AI, and also not only do we add those capabilities to the horizontal product lens, but also we focus on the lens of the business, right, like a contact center and ZRA as well.

ZRA, I think, become more and more important because we add more and more capabilities to our ZRA. Right, we built those product organically, and also how to accelerate the ZRA portfolio, right?

That's why we acquired Common Room. With Common Room, with ZRA, plus upcoming the engagement or other forecast, a lot of new capabilities in the pipeline.

Our ZV is also uniquely positioned to win in the sales space. Essentially, we have an AI vertical product to target the sales department.

I think that's a big opportunity for the future quarters. We are very excited about that synergy between ZRA as well as and the Common Room opportunity.

Maybe just to give a little bit more in terms of the guidance. Obviously, our prior guidance included acquisitions like BrightHire.

Common Room was folded in here. Look, these are early-stage companies.

While Common Room was Zoom's largest acquisition to date at $250 million, these are early-stage companies, and so they're going to be de minimis to the impact of our revenue to a $5 billion base. For all the things Eric said, we're excited about what they can mean to our future growth, to our system of action vision, and I think the combination of ZRA together with Common Room is a perfect example of what we're talking about in system of action, moving into a different layer of value, now helping our customers help drive their revenue.

We're really excited about the future potential. Then maybe just a comment.

Of course, when you do acquisitions like this, they don't come with Zoom best-in-class margins, and so maybe an element of why we kind of met margins and held them on the full year is we obviously folded that in, and we'll continue to work those as the businesses scale and abate that difference.

Yeah.

By the

way, a little bit more color about that integration because Common Room is based in Seattle. We have a large AI team over there.

I think engineering integration, product integration, even the sales integration are doing very well just a few weeks after closing the deal. This is very promising.

Great. Thank you, both.

Thank you.

Our next question comes from Siti Panigrahi with Mizuho.

Thank you. Thanks for taking my question.

I just wanted to dig into the Contact Center. This is one area you see most of the AI-driven innovations coming, and it's been a few years.

Also recently we saw OpenAI's presence there, and even some of the CRM vendors trying to get into native voice and CX capabilities. How are you seeing this competitive landscape evolving, and what's the Zoom's win rate against some of the other new entrants in the market?

It's a great question. Many players in that market, it's good news, right, because this market is growing.

A lot of opportunities ahead of us. At the same time, you look at our the ZVA, right?

I think a unique position because for those look at the AI, I think you have access to all the data in a way better than those other vendors, right? They only focus on one piece, right, UCaaS or CCaaS or just the ZVA.

We have everything. That's one.

Two, you look at our technology and federated AI, our AI stack technology, I think it's one of the best the technology in the world, right? Look at the latency, and also we built all those technologies by ourselves.

We also can leverage third party as well. I think a federated AI approach put us in a unique position.

You look at latency and the speech quality, ASR, TTS, right, we know keep improving those features. I think also better positioned.

Also, we already won the trust, in particular for a lot of enterprise customers over the past many years, and they deployed the Meetings, we tell them we give them the Phone, doing very well. We tell them we build the Contact Center, also doing very well.

Now, we added the ZVA, and they trust our brand as well. With UCaaS, CCaaS, ZVA, plus our AI technology, we have high confidence we can execute very well compared to any other vendors.

Thank you.

Appreciate it. I like your virtual background, Siti.

Our next question is from Jackson Ader with KeyBanc.

Great. Hey guys.

Good to see you. I actually had a question on that particular topic, Eric, on the difference in Contact Center.

You guys talked about seeing strength in Contact Center and Virtual Agent, and that sometimes it was combined and sometimes Virtual Agent would be sold separately, it's a standalone product. Just curious, we're talking a lot about bundling, we're talking a lot about consolidating onto a single platform, and so I'm curious how prevalent is it for Virtual Agent to be sold on a standalone basis and what are the kind of merits of that?

Then, Michelle, just quickly, any kind of net expansion rate you can share on the Contact Center piece? Is this a land and expand motion or is it just big lands and not much expansion afterward?

Thank you, both.

Speaking of ZVA, right, in Q2, a leading enterprise software company, they deployed Zoom Phone service before, they deployed ZVA Voice and natural extension to Zoom Phone. Meaning customers, they say they deploy Meetings, they might look at ZVA.

They deploy Phone, also might be looking at ZVA as well. Oh, for sure for contact center customers also look at ZVA as well.

Essentially, we can bundle ZVA and Contact Center together as one solution, and also we sell the ZVA separately as well, right? Even some customer, they do not use Zoom Meeting or Phone, even Contact Center.

They also look at ZVA as well because it's something new, and this is a new market opportunity. We focus on the two things: the product experience and make sure and build something customer really like.

The second thing, we own the technology. The speed of innovation is always something customer really like, and that's why I think you look at ZVA opportunity, I think we are much better positioned.

Even if we announced ZVA a little bit late compared to some startup vendors, but as you look at our speed of innovation, we have a higher confidence we're going to keep gaining market share.

Maybe just to layer on with sort of maybe some stats in terms of thinking about kind of the typical motions that we see. The short answer is it's a variety of that, and that's why in our prepared remarks we wanted to kind of paint the different picture of what we're seeing in our customers.

Maybe just to give you a couple stats: In our top 10 ZVA deals, 6 of 10 came with Contact Center. I think it gives you a sense that it is both a sell-with motion, meaning when they want that full platform that Eric is talking about, and they want to go all-in with Zoom, and it also paints the picture that some of the customers are starting in ZVA, and then it gives us an opportunity to land and expand from there.

Similar sort of comments, I think, on the Contact Center side. Of our top 10 deals, 7 of 10 were Elite, so that's an agent being assisted by AI, and 4 of our top 10 were ZVA.

All of that a way of sort of numerically saying there's many paths to the growth here, and we think for that reason, it gives us a lot to go on going forward.

Okay. Thank you, guys.

Thank you.

Our next question comes from Ryan MacWilliams with Wells Fargo.

Hey, thanks for taking the question. Two-part question for me.

For Michelle, just on the Online segment, seems like growth is slightly lower than last quarter. Anything to call out on SMBs more broadly or is it due to generally lapping the price increase?

Then for Eric, as we're seeing AI models improve and organizations build systems around their data and AI, how are your leading-edge AI customers building AI use cases off the data they gather over Zoom, and how do you think this data gravity helps Zoom and your stickiness in enterprises going forward? Thanks.

Let me comment about our online business. Look, I would characterize our Q2 results as solid.

We saw low churn, and I think that low churn says, and I think there was an earlier question on this, but we're having success at demonstrating customer value even amidst the backdrop of a price increase, and you saw the stability of the base go up even further. Look, we took an opportunity, and I'll emphasize it here, to sort of temper out of prudence our full-year guidance, which have been slight increase to flat, and we're adjusting that really due to dynamics that we saw in Q2 at the top of funnel across the industry where people are just discovering products in different ways, and we're aggressively working to address that, meaning they're going from search to more AI.

We're active in addressing that, and the prudence is really just a near-term statement of expectations. The big picture is to continue to work to that business to return to growth that comes with components of working churn, which we feel very good about, product expansion, which we've never had such a broad portfolio expansion products that we can open up to our online customers due to our AI innovation, and then just continuing to work things like what does this look like in an AI world where we think our brand is also going to be very helpful to us, and working on conversion.

We have a great TCO story that I might also end with from an SMB perspective that I feel like we're going to be able to do great with the audience.

Ryan, yeah, back to the second part of the question. I think data, as we all know, is extremely important for customers to leverage AI.

We look at all of our services, we want to make sure we look at everything from customer perspective, meaning how to make sure our data accessible by customer because they might use other large language models. Let take my Notes, for example, we expose the context layer, right?

That's the one. Two, it's customers, yeah, we also can leverage Zoom AI service as well, like a Zoom Docs, right?

Zoom Docs can search for all the customer content, not only Zoom data, but also the third-party content as well, give a customer capability and to search, to create an agent, drive workflow as well. Essentially, you look at for both sides.

We expose our data API through MCP, and also the customer can leverage our AI service as well. Essentially, those two are extremely important for us to leverage the AI because of the data.

So.

Excellent. Thank you.

Thank you.

Up next, we have a question from Alex Zukin with Wolfe Research.

Hey guys. Thanks for taking the question in the time.

Maybe just two quick ones. Eric, can you talk a little bit about the contribution from your new pricing models, both the outcome-based pricing and the consumption-based pricing?

When would you expect that to start actually showing up more meaningfully in the net retention rates and in revenue? Then, Michelle, just really, I think the strongest calculated bookings growth and billings growth in a long time.

How much should we read into that from a forward-looking perspective around the potential for continuing to see accelerating Enterprise growth over the coming quarters?

Alex, in terms of usage-based pricing as well as outcome-based pricing, it's more like for the new AI product. I do not think that works for Meeting or Phone, right?

Speaking of the opportunity, take a ZVA, for example. By and large, it's still usage-based, but we are embracing outcome-based pricing as well because some customers like that, some customers still like a usage-based as well.

We have flexibility to support that. As we gain more and more market share for ZVA, I think we will see more and more the outcome-based pricing probably can contribute to our top-line growth.

Again, this is something new, and the market ZVA also is a new product as well. We have a confidence to support all kinds of monetization opportunities, especially for enterprise customers, given the token cost.

I think more and more we'll embrace the outcome-based pricing.

Look, on the RPO, I think it's a little bit of both. Look, in our best of quarters, let me remind that we always tell investors that the best indicator of future performance is our revenue guide, you have that.

At the same time, look, you're seeing the trend in RPO inflect all-up, and it's coming off long-term RPO, and it's because of durable drivers. It's because we're moving our business, diversifying in products that come with larger deals, longer-term deals.

From that standpoint, those would be durable elements. Moving upmarket even further, those would be elements that would be durable.

In terms of doing calculus to get that back into revenue, we continue to point to our revenue guide.

By the way, Alex, speaking of outcome-based pricing, we also look at other services as well, like ZRA and BrightHire as well. We look at all those vertical AI product, right, whenever it makes sense for us to support the outcome-based pricing model, we would like to do that because this is good for customers as well.

Maybe I'll sneak one in, Eric, on voice and any exciting elements that we should think about as it seems like you have a meaningful opportunity to lean in on voice again, maybe following from that consumption-based pricing opportunities as well.

Right on. API is great, consumption-based, right?

Also we already have I think probably the best ASR model, right, based on our smaller model with post-training and doing very well. We published the API as well, and also based on all the tests, ASR is a much better position.

At the same time, to have full-featured speech API sets, we also need to support the TTS as well. The team is working hard on that.

If we have both ASR and also TTS, and also along with other services, we have a full, I think, speech AI opportunity ahead of us. We're very excited about that, yeah.

Our next question comes from Patrick Walravens with Citizens.

Oh, great. Thank you.

My favorite part of your call was your custom avatars, Eric, and I think it's such a good real-time example of voice AI for us. Charles, yours, and you had to do the dreaded—

Oh, Patrick, I think you're on mute.

—a thing, few Oh, really?

It's okay. Go ahead.

Okay. Is that okay?

Charles had fairly uniform pacing, few pauses, and his intonation consistently fell at the end of the phrase. Eric, yours was better.

Michelle, did you actually use your custom avatar?

I did. I did.

Yours was fantastic. Yours was really great.

Just help us understand what causes the difference, and if a bank wants to use them or if we want our virtual agents to sound really human, what do we have to do to train them so they sound as much like Michelle as possible?

I'll answer this, Eric, because I will admit when Eric had nudged me to do this, I was a laggard in the adoption curve here. It literally took me 2 minutes to set up.

There's some kind of tips that I think like being as natural as you possibly can, but it literally takes I think under 2 minutes to basically get your avatar set up. Then, of course, we have human-in-the-loop and making sure we review what the avatar says.

A really fun way, I think, to demonstrate our technology, and super easy. For me, Eric, you can give the tech version of this answer, but for me, it was just being as natural as you possibly can in the setup of the avatar, because then it just sort of flows through.

Patrick, your observation about Michelle's voice is right on. The reason why, this is the first time for Michelle to use customized AI avatar, meaning she's using the latest version.

The AI avatar I created is 6 months ago.

Meaning

our technology is getting better and better, and maybe next quarter, I'm going to create a new one to leverage our latest version. By the way, and it's not only for AI avatar.

Down the road, I would like maybe someday my avatar can answer to any question as well. Then I can sit here just to listen to the call.

That's our dream.

All right. Great.

Thank you. We'll watch next quarter and we'll see the difference.

Thank you, guys.

Thank you, Patrick.

Our next question comes from Tyler Radke with Citi.

Thanks for taking the question. The Enterprise bookings and raise on Enterprise looked pretty solid.

I was wondering if you could help us understand just where we are in terms of Contact Center milestones. I think 5 quarters ago, you talked about it hitting $100 million of ARR for Zoom CX.

You've talked about high double-digit growth for multiple quarters, will you update this at $200 million, $250 million? Is that kind of the biggest driver of the Enterprise raise that you're seeing?

Then just a quick follow-up question for Michelle: Can you just touch on what's driving the lower CapEx for the year as well?

Sure. Sure.

Look, I think in regards to milestone, look, we're going to give them periodically as it makes sense. That doesn't mean they come every 100.

Look, you have when it sort of crossed the 100, and then I think since then we've saying high double digits, you can sort of guestimate from there. Look, the components to the Enterprise inflection are the same things I've been highlighting.

It's product diversification, of which CX is a piece of that; it's AI monetization, of which CX is part of that; it's moving upmarket, CX is part of that, but you know the theme being it's building out a channel and CX is part of that, but it's certainly not just CX alone. The other thing that I will say on maybe the core Enterprise standpoint, and I think this is a one that investors frequently ask about, the year-over-year churn has gone down, and that's been a steady trend over the last year to 2.

Then, people will ask on occasion about pricing elements and all of that, and that's been something that we've been working very hard on in finance together with sales to really make sure that we're getting discounts down and deal terms up and auto-renewals. Look, all of that a long way of saying that many components go into that Enterprise growth, and certainly CX is part of that.

On the CapEx, look, I would say I think when we went in the year, the guidance was $70 million of CapEx, and just to remind investors, FY 2026 was really a low year in CapEx, and so we were returning more to normal states. Look, we took a decision that benefited our free cash flow raise by about $40 million to simply extend in one of our data centers the useful life of the asset by 2 years.

Because CapEx was sort of a lumpy kind of story going into the free cash flow and more so because of the anomalous year in FY 2026, we just simply wanted to update to investors. Worth also saying we're not a huge CapEx business, and none of this is really AI, it's more just dynamics in our core.

Thank you.

Our next question comes from Allan Verkhovski with BTIG.

Hey there. Thanks for taking the questions.

Michelle, I have a two-parter for you. One, can you share what trends you're seeing in Enterprise Workplace seat growth across larger versus smaller customers?

Then the second part is, given the updated fiscal 2027 constant currency total revenue guide implies roughly $30 million more Enterprise revenue, can you talk through the main drivers of confidence in such a strong raise, and is it fair to assume, given the prior comments, that Common Room is contributing about $10 million or less than that to that updated guidance?

Yeah. Okay.

A lot in there, let me try and get to them. Look, from a Workplace perspective, what we typically talk about with investors is an online churn rate.

Look, you've seen that continue to be low. I think at our lowest, we were 2.7.

2.9 is very much in the norm. To my earlier comments, we feel great about what that says about both the stability of our business with our customers over 16 months going up 75%, as well as the incremental value that we've put in our platform in AI.

On the Enterprise side, what we talk to with investors is the dollars of the churn going down year-over-year, and certainly Q2 continued in that. We don't really give too much disclosure other than those two, but I would broadly call the trends very much in line with what we've been seeing.

On the constant currency and the Enterprise, look, for the sake of re-repeating myself, it's all the same dynamics that I've been highlighting on our Enterprise growth: product diversification, AI monetization, moving upmarket, building out a channel, and keeping that churn low. Then obviously, we folded in our Common Room in this.

Just because it's a small component of our revenue, we're not going to get into sort of quantifying it, but it certainly was folded into the revenue guide. Then, I'll just reiterate my comment that these are very early-stage companies that were very encouraged with the growth and what they can mean to our system of action, to all the things Eric commented on earlier, but relative to a $5 billion base, these are de minimis kind of impact.

Makes sense. Thank you, guys.

Our last question comes from William Power with Baird.

Great. Thanks for sneaking me in here.

Maybe two, then, if I can. Let me start on Workvivo.

That was a nice milestone update in the quarter. Kind of love to understand the ongoing cross-sell opportunity.

My suspicion is probably still early, but how we think about that and what that kind of portends for the continuing growth in that product? Then, Michelle, just given the strength they're seeing in Enterprise, RPO, I'm just trying to kind of square that with the full-year revenue raise versus the beat in Q2.

Feels like some conservatism, just anything to think about in the second half of the year on that front.

Sure, absolutely. I think speaking of Workvivo opportunity, we are very excited about that because, look at the opportunities we won over the past few quarters, quite often those customers are not Zoom customer at all.

They deployed the Workvivo. Meaning for all of our, a lot of enterprise customer installed base, more opportunities for us to upsell Workvivo.

Also, Workvivo launched the Workvivo HQ, an AI-driven product as well. Because in the AI era, data becoming more and more important, right?

The employee engagement is becoming more and more important, right, to drive company culture. With Workvivo HQ, I think Workvivo is better positioned than before with new launch.

We're very excited about more and more opportunities in the enterprise space to win more deals.

Then, maybe with the guide, let me just talk to kind of the full year and the dynamics that I think about. Look, from a constant currency, it represents a beat of 7.5 and a raise of 9 on the full year.

We feel good about kind of the dynamics underlying that. Already guiding to 4.5% growth halfway through the year, and considering, I'll just continue to remind investors of that white-label churn that has a 40 bps point, you can kind of look at that relative to the growth rate of last year.

Look, fundamentally, I think I've drained it in so many questions. What's behind that is our Enterprise growth inflection.

You saw this quarter was one of the best growth rates we've had in 3 years. It's product diversification, it's AI, moving upmarket, keeping churn low, and delivering against those 3 priorities that we talk about, which are going to be the durable elements of our growth going forward.

Maybe the only one, we talked about it earlier, but to your question of kind of how to reconcile it, we took the opportunity to kind of slightly temper the expectation on Online. We'd said previously slight growth, we adjusted that in this earnings to flat, really because of a dynamic that we saw in Q2.

Continued to see low churn to all the conversation earlier, but saw some changes, I think, along with the rest of the industry in top of funnel in terms of customers and how they discover us, and we're actively working to adjust those and just wanted to be prudent with the near-term guidance.

Great. That was great.

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 to all Zoom employees, customers, and partners, and also investors. We truly appreciate for your support.

We will continue innovating to build something we feel proud and also delight our customers. Thank you so much.

See you next quarter.

Thank you.

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