Zoom Communications Inc (ZM) 2026 Q3 法說會逐字稿

Hello, and welcome to Zoom's Q3 FY26 earnings release webinar. As a reminder, today's webinar is being recorded.

It is now my pleasure to introduce Charles Eveslage, Head of Investor Relations. Charles, over to you.

Thank you, Megan. Hello, everyone, and welcome to Zoom's earnings video webinar for the third quarter of 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.

After this call, we will make forward-looking statements, including statements regarding our financial outlook for the fourth quarter and full fiscal year 2026, our expectations regarding financial and business trends, impacts from a macroeconomic environment, our market position, stock repurchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations, and product initiatives including future product and feature releases and the expected benefits of such initiatives.

These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results which we discussed 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 is giving his prepared remarks via Zoom Custom Avatar. Eric?

Thank you, Charles. We delivered strong results this quarter with broad momentum across products, industries, and customer segments from online to our largest enterprise accounts. This performance reflects the durability of our business, driven by the growing value we are delivering for customers as we evolve from a communications leader to an AI-first platform for work and customer experience.

Our vision is to be the AI-first work platform for human connection. As we march towards this vision, we are focused on three priorities: elevating core products with AI, driving growth of new AI products, and scaling AI-first customer experience.

Pivoting to our first priority, at Zoomtopia, we unveiled AI Companion 3.0, our next-generation agentic AI that's transforming how work gets done. We're evolving Zoom into an AI-first system of action going beyond summarization to be your agent to proactively prepare for meetings, follow-up on task, and drive work forward.

AI Companion runs on our federated-AI architecture, which lets customers use Zoom's models alongside their own or trusted third-party models unlike closed systems elsewhere. Spanning meetings, phone, chat, whiteboard and soon, the web, Zoom brings intelligent assistance wherever work happens across major platforms and customers are responding. AI Companion adoption continued to surge more than 4 times year over year, underscoring demand for smarter, more seamless ways to work.

In tandem with AI Companion growth, we saw continued strength across Zoom Workplace. Team chat monthly active users rose 20% year over year. As the canvas for asynchronous work, chat turns meetings into persistent workspaces. And with AI Companion, it provides summaries, composition tools, and easier search capabilities, so customers can keep work in context, reduce apps roll, and take action faster.

Our employee experience offering continued to shine even as we lap the strong momentum of our previous Meta partnership. Workvivo logos grew nearly 70% year over year to 1,225 with customers spanning mid-market up to the Fortune 10.

Last, Zoom Phone surpassed 10 million paid seats early in Q3, marking a major milestone and reinforcing its leadership in unified communications. It continues to perform well with consistent ARR growth in the mid-teens and numerous sizable wins in financial services and health care. For example, Rothman Orthopedics, Platinum Dermatology, and a reputable clinic adopted Zoom Phone for its unified platform, advanced AI capabilities, and health care-specific integrations and compliance tools, enabling seamless collaboration and better patient care.

AI isn't just bolstering our core. It's opening new revenue streams and deeper customer value through customization and automation. Two quarters in, custom AI Companion is scaling with several Fortune 200 wins and broad interest. Oracle, already a major Zoom Workplace and Contact Center customer, chose to deepen its partnership with us this quarter. As one of the world's leaders in AI and enterprise technology, Oracle adopted Zoom Custom AI Companion to create powerful AI-powered assistance across its global workforce, helping employees turn everyday conversations into actionable insights.

We were also delighted to see Salesforce deepen its partnership with Zoom by adding Custom AI Companion.

Alongside horizontal momentum, we're extending AI into collaboration adjacent verticals as well. In Q4, we agreed to acquire BrightHire, a leading AI-powered hiring intelligence platform that elevates every stage of the hiring process, enhancing one of the most critical business workflows while also strengthening our collaboration platform. The same AI innovation powering how teams collaborate is also transforming how companies engage their customers, and Zoom is at the center.

Customer experience is one of our fastest-growing businesses and an important long-term growth vector for Zoom. In Q3, customer experience delivered a phenomenal quarter with ARR continuing to grow in the high-double digits. And early in the quarter, we were honored to be included in the 2025 Gartner Magic Quadrant for Contact Center as a Service only three years after launching Zoom Contact Center.

Within Customer Experience, AI has become a clear differentiator, creating additional monetization opportunities. 9 of our top 10 CX deals involve paid AI, such as Zoom Virtual Agent or AI Expert Assist, as enterprises use Zoom to deliver faster, more personalized service. For example, SolarWinds, LegalShield, and Bromcom, chose Zoom to replace fragmented legacy systems with one unified AI-first platform. They turn to Zoom for its integrated approach across Workplace, Phone, and Contact Center and for the innovation of Virtual Agent 2.0, which helps simplify operations and enable faster, more intelligent customer engagement.

We're encouraged by the rapid momentum of our CX portfolio reflected in external recognition and customer wins and driven by our AI differentiation and deep workplace integration. This progress advances our platform strategy to deliver a unified solution and expand long-term growth.

In summary, we're executing a clear plan, AI-led innovation, platform expansion, and disciplined durable growth. We're pairing innovation with financial rigor, delivering strong profitability and cash flow while investing for long-term growth. With accelerating adoption in marquee enterprise partnerships, we're turning our AI momentum into measurable value for customers and shareholders.

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 share Zoom's Q3 FY26 financial performance today.

In Q3, total revenue grew 4.4% year over year to $1.23 billion or 4.2% in constant currency. This result was $15 million above the high end of our guidance. Our Enterprise revenue grew 6.1% year over year, representing 60% of our total revenue, up 1 point year over year. Our Online business continues to show signs of stabilizing. In Q3, average monthly churn was 2.7%, in line with Q3 of last year and at an all-time low.

In our Enterprise business, we saw a 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers make up 32% of our total revenue. up 1 point year over year. Our trailing 12-month net dollar expansion rate for Enterprise customers in Q3 continues to hold steady at 98%.

Pivoting to our growth internationally. Our Americas revenue grew 5% year over year, EMEA grew 3%, and APAC grew 4%.

Moving to our non-GAAP results, which excludes stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, net litigation settlements, and all associated tax effects. Non-GAAP gross margin in Q3 was 80%, up 117 basis points from Q3 of last year, primarily due to cost optimization efforts. We remain focused in the near term around balancing investments in AI with cost efficiencies.

Non-GAAP income from operations grew 11% year over year to $507 million, exceeding the high end of our guidance by $37 million. Non-GAAP operating margin in Q3 was 41.2%, up 234 basis points from Q3 of last year. The operating margin improvement was driven by ongoing cost management and timing of spend.

Non-GAAP diluted net income per share in Q3 increased to $1.52 on approximately $305 million non-GAAP diluted weighted average shares outstanding. This result was $0.08 above the high end of our guidance and $0.14 higher than Q3 of last year. The EPS growth reflects strong business performance, effective cost management as well as anti-dilution driven by our buyback program and our disciplined stock compensation management.

Turning to the balance sheet. Deferred revenue at the end of Q3 grew 5% year over year to $1.44 billion towards the high end of our previously provided range. In Q4, we expect deferred revenue to be up to 4% to 5% year over year.

Looking at both our billed and unbilled contracts. Our RPO increased 8% year over year to $4 billion. We expect to recognize 60% of the total RPO as revenue over the next 12 months, down 1 point year over year. Operating cash flow in Q3 grew 30% year over year to $629 million, representing an operating cash flow margin of 51.2%. Free cash flow margin in the quarter grew 34% year over year to $614 million, representing a free cash flow margin of 50%, up 11 points year over year.

The year-over-year increase in free cash flow margins was driven by improvements in the collection process as well as stronger billings. We ended the quarter with $7.9 billion in cash, cash equivalents and marketable securities, excluding restricted cash. Under the pre-existing $2.7 billion share buyback plan, in Q3, we purchased 5.1 million shares for $44 million. As of the end of Q3, we repurchased 32.5 million shares for $2.4 billion.

Turning to guidance. In Q4, we expect revenue to be in the range of $1.23 billion to $1.235 billion. This represents approximately 4.1% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $477 million to $482 million, representing an operating margin of 38.9% at the midpoint. Our outlook for non-GAAP earnings per share is $1.48 to $1.49 based on approximately 305 million shares outstanding.

For the full year of FY26, we are excited to raise both our revenue and profitability guidance. We now expect revenue to be in the range of $4.852 billion to $4.857 billion which, at the midpoint, represents approximately 4.1% year-over-year growth. We now expect our non-GAAP operating income to be in the range of $1.955 billion to $1.96 billion, representing an operating margin of 40.3% at the midpoint.

In addition, our outlook for non-GAAP earnings per share in FY26 is increasing to $5.95 and to $5.97 based on approximately 308 million shares outstanding. As a reminder, future share repurchases are not reflected in share count and EPS guidance.

With the strong free cash flow results in Q3, an increased outlook for operating income in FY26, we now expect free cash flow to be in the range of $1.86 billion to $1.88 billion for the full year, which, at the midpoint, represents approximately 3.4% year-over-year growth. As indicated in our press release today, we are also excited to announce our Board has authorized an incremental $1 billion share repurchase. This reinforces our Board and management team's confidence in Zoom as we continue to leverage our strong cash flow and balance sheet to drive shareholder returns.

In closing, we've made progress improving top-line growth. We sustained best-in-class profitability and we've reduced dilution. We're executing on our three priorities with discipline and momentum, and remain committed to building on this success to deliver lasting value for our shareholders. Thank you to our customers, investors, and of course, the entire Zoom team for your trust and support.

With that, Megan, please queue up the first question.

(Operator Instructions)

Tyler Radke, Citi.

So really nice to see the stabilization and acceleration in the business as well as the margin expansion. Just a multi-parter here on growth. So can you -- if we look at Q4, the outlook looks very strong. How should we be thinking about that as a jumping-off point into next year?

And I ask because I know there were some price increases that you took on the Online business this year. How do you think about pricing heading into next year? And then, big picture, you're kind of near that 5% growth mark. Certainly, should be by Q4. What do you need -- what are sort of the stepping stems to get back to a 10% growth over the long run?

Yeah. I can jump in and take that one. First of all, we're not sort of at our planning process to the stage of giving FY27 guidance. We're going to go ahead and do that as per the normal kind of same process in February.

With that said, maybe to touch on a couple of your questions and with more specifics. Any pricing kind of elements we would -- we're always trying to give real clarity to investors. If we choose to do that, you would also get that in the February time zone. So maybe let me just pause a little bit and share some thoughts about how we think about kind of long-term growth.

First, with this latest forecast, Enterprise will continue to be the predominant growth driver. With this latest round, you'll see that we do expect online to be a slight increase on the full year. And really the elements that investors should have top of mind as they think about growth path for '27 or even beyond that, are the same elements that we've been talking about. First and foremost, stabilization -- excuse me, and churn. And then product diversification, moving up markets. And really those three priorities are going to be also the predominant drivers and focus of growth going forward.

Michael Funk, Bank of America.

Maybe a related question that's a slightly different way. So looking at the Enterprise net dollar expansion you reported, still below 100%. Clearly, an opportunity to help drive top-line growth if that does improve.

Several competitors though noted, they're continuing to see post-COVID seat-based contraction. So can you peel apart the pressure on NDA? And if you're also seeing post-COVID seat-based contraction? And if you are, when you expect that to turn and maybe contribute to more positive top-line growth?

Sure. First, thanks for the question. Look, we're pleased in after six quarters to see the net dollar expansion stabilizing. We're not going to get sort of guide to inflection, but certainly, inflection is the goal. What I would say in terms of how to think about it, maybe just a continued reminder for investors that when we have products like Contact Center, and Workvivo, they tend to bring in new customers to Zoom. Those will obviously take a little while to play through the dynamic of the metric.

But overall, in terms of your maybe more specific question about seat count, that's not something that we've seen be a huge element to our quarter. Certainly, all these customers here and there will have seat pressures, but we've seen overall a very strong macro demand.

Rishi Jaluria, RBC Capital Markets.

There we go. My apologies on that. Maybe just one simple one for me. Coming out of Zoomtopia, there was a conversation around M&A. And I know you've done some two small tuck-ins right now.

Is this just kind of how we should be thinking about M&A for you going forward in terms of -- it will be more technological, little tuck-in in nature, obviously, accelerating your ARR road map. Or is there a potential for maybe more transformational M&A?

Yes. Thanks, Rishi, for the question. Really, I would say our thoughts on M&A are very consistent to kind of what I've said previously, really no change, just to update investors. But let me go ahead and recap them just for everybody's knowledge.

First of all is that we're going to be very thoughtful and disciplined in both acquisitions and integrations. We're going to make sure that they're strategically aligned with synergies and obviously, coming with some financials. And for Zoom, that typically will mean small- to medium-sized investments. Think of the Bonsai and BrightHire M&A is small in nature. It's helpful. So we'll be in --

Josh Baer, Morgan Stanley.

Congrats on the [beaten race]. I wanted to double-click on growth -- Enterprise growth from one more angle. Just really double-clicking on Zoom Phone ARR, which is growing mid-teens, customer experience, high double-digit growth, Workvivo, you have rapid growth there.

Could you walk through each of those growth areas? Just wondering how you think about the sustainability of those growth vectors?

Yes. Maybe I can take that one. And maybe I'll use the opportunity as well, Josh, just to call it to investors. We made a site and tweak to the three priorities that we've been highlighting to investors. Really two themes of what we were trying to get across. One, AI and all of our priorities; and two, really just sharpening kind of the language with which we talked about our priorities.

So let me introduce them -- or reintroduce them the same as what Eric talked about in his script and give an update to sort of get at your product-specific question.

The first one is really about elevating workplace with AI. And broadly, what that means is AI over the entire meeting life cycle -- and the things that I would think about, in terms of growth and progress that we saw in Q3 there, are continued progress against churn. This is the fifth consecutive quarter on Enterprise for year-over-year declines on churn, then you obviously heard the call out in Online for record load trends. But not just that, it's the Zoom Phone, and increasingly, how much AI comes up in our win rates. You see it in the 10 million seats in the mid-teen growth.

Second big priority for us is to drive new products with AI. I should mention on the previous one, also integral to that sort of sets up the second one is getting that AI usage going. And so that's where we continue to see 4 times year-over-year [increase] in AI.

When it comes to new products in AI, we have sort of the horizontal that builds up that AI usage and you see the big names in Salesforce and Oracle. Still early days, but pleased to see that in our second quarter and building off the names we showed last quarter. And certainly, then there's vertical, be it our ZRA product, our new BrightHire acquisition.

And then last, to kind of get out your Contact Center question -- or comment, is really to scale AI-first customer experience, whether that's agent-assisted or virtual agent. Really there -- what you're seeing called out by Eric in his script is strong high digit -- high-double-digit, excuse, revenue growth, customer growth in the 60%-plus.

And then also just in the nature of the deals, a strong AI preference, 9 of the top 10 deals pulling AI, and many pulling both virtual and our agent assisted. So a lot that we're excited about as we pivot to growth going forward to update on our product side.

Ryan MacWilliams, Wells Fargo.

Really cool to see the AI Avatar in the prepared remarks. Maybe one day, I'll be asking AI Michelle about growth next year. Just kidding.

Our bots, Ryan, to talk to one another.

I don't know if you can recreate the Philly accent. But just one for Eric actually. So Zoom has had really strong product velocity historically. And as product development time line shrink even further with Agentic coding, do you think this offer Zoom the opportunity to build more product density into your existing products with new features, or expand into new product categories?

Well, Ryan, that is a great question. I think in the AI era, I think every business is, right, are facing the similar challenge and also the great opportunities. So the innovation speed is unprecedented. Look at the way engineers write the code, look at the marketing [serves] team, how they [lab] AI to automate the process. We got to lever AI to re-image everything.

The good news, I have engineer background, right? And I think I have to -- and I am also determined, right, to spend way more time than any time in my career to double down, triple down on the product side. I think there's a huge opportunity. Meaning, we have to change the company culture, and make sure every engineers, right, the way they write code is totally different. The way they troubleshoot the test also is very different. When you make every engineer, even if they write the tens of 1,000 lines of code before, they have to embrace AI now.

Back to your question, I truly believe the inefficient speed will be much faster to build a new features and new services, right? I think that's an opportunity and we are much better position. And, again, I'm figuring out a way to really spend more time on that. That's the reason why I can tell you I couldn't be more excited now. Finally, I think we are going back to the early days of Zoom, double on the product level AI. Build it in the individual services. And you are so right.

Patrick Walravens, Citizens.

Let me add my congratulations. I love the accent that you pick, Eric. I don't know what it was, but it was fantastic. Can you go into some detail and help us understand exactly how the Salesforce when it works. Like, Eric, if you're sitting there with Benioff, how do you pitch it, right? And then just give us some details on how it changes the experience for people in Salesforce.

Yes. So Salesforce is a good company. Markus is good friend, also was our investor. I'm pretty sure he's thinking about the AI every day as well. Look at the Salesforce event, right? Dreamforce is very successful. the Agentforce is even very successful, right?

So they have Agentforce framework. They also have a customer how to integrate our AI Companion -- I mean, sorry, Custom AI Companion, right, to integrate with the Agentforce the framework. Essentially, we drive the productivity, right, because they have agentic framework with our Custom AI Companion. Together for sure, that's no burner, right, to integrate it together giving our customer, why not, right, to enable this feature. That's how this composition is started. That's the reason why they decided to move forward with the Custom AI Companion.

More and more customers realize the potential of, not only for Zoom AI Companion, but also the Custom AI Companion. I think that's the reason why, in the next months, we are going to announce our Zoom AI Companion 3.0, right? So a lot of opportunity ahead of us. Salesforce, again, just one example.

Yes, I will invite you to test our AI Companion 3.0 next month, we never reach [GA]. So I'm pretty excited. So our employees really like that too.

Alex Zukin, Wolfe Research.

Eric, I'd love to test out that Virtual Avatar when it's ready for GA. Maybe just a quick one for you and a quick one for Michelle. For you, Eric, when you think about AI monetization that you're seeing in the business and in the quarter and in the coming quarters, maybe talk about that a little bit.

And then Michelle, for -- deferred revenue was a little bit light of your high end of your guide this quarter, but it seems like it's actually a pretty strong guide for next quarter. Was there anything that shifted from one quarter to the next or pushed out or pulled in that maybe explains that?

Yes. So Alex, by the way, the virtual or the feature already there, right, this is the third time of using my AI Avatar for our earnings call, right? I said free up a lot of my time. I really love that.

So back to your question to monetize AI. As Michelle mentioned, right, you look at the few priorities, elevate the Zoom Workplace with AI and double on those AI-centric product. You look at our horizontal collaboration suite, the AI Companion, as a [mature] mission, right, is look at usage year over year are 4 times more, right. But Custom AI Companion, we can monetize and form a sales team. And also we are going to have introduced the new SKU to monetize AI Companion as well online. And this is on one hand.

On the other hand, we also have vertical services like Zoom Contact Center, right, and Virtual Zoom AI Assistant, right? Also the Zoom Revenue Accelerator. For each of those [department] of applications, including the vertical market solutions like Zoom Workplace for Educators, right, and clinicians and also for the frontline workers, a lot of AI features already built in, we can monetize. Not of the mission Zoom AI Companion suite be ready next March.

I think almost everywhere, and we collaborate AI, improve productivity, improve the features. At the same time, we can monetize it as well. It's not a single thing, right? A single product, we want to monetize. It's almost everywhere across the entire product portfolio. Back to the BrightHire acquisition, the reason why we acquired that company also levered AI to improve the hiring as well. So essentially, AI is a foundation for us. We can monetize, we can innovate.

Yeah. If helpful, maybe just to tag on to Eric, and then I'll hit your deferred revenue question. We produced Zoomtopia sort of a framework of AI monetization because it does kind of monetize indirectly and directly in different ways, Happy to share that with ambassadors after.

And to Eric's point, as you go through that framework that we shared with investors, progress on every single trend in the third quarter. To your deferred revenue question, look, we ended upper end of the range, gave a very consistent guidance in Q4. So nothing really to call out. Results were sort of as expected on the deferred revenue.

Timothy Horan, Oppenheimer.

Issue with other apps that are really important to kind of improve on your overall productivity strategy for software?

The first part of the question I'm sorry cut out. Can you -- would you mind repeating that?

Yes, sure. Sorry, Michelle. An important part of the strategy, I think, is to integrate with other productivity software apps. Can you talk about some of the most critical ones and where you are in that process?

Yes. Eric, do you want to take that?

Sure. I think, first of all, we have -- we are way beyond [reconvening], right? So we have so many other services, we would like to integrate it. And at the same time, look at the ecosystem, why we're doing the good with the Google ecosystem well and the Megastore ecosystem well as well. And plus ServiceNow, Salesforce and Atlas and all those popular productivity tools, right?

We all work on the integration. Again, this is the open ecosystem. And also we listen to our customers very carefully. And whenever they tell us, hey, the more integration, we're also working on that as well.

And is AI making that easier or harder at this point?

Easy and harder. Meaning, the reason why easy, for sure from an execution perspective, for sure, easier. The harder part is because in AI every customer they want to tell us, hey, given the AI can integrate more, right? Can you release in the timely manner, right? So the requirement house is different, right? So from that perspective, a little bit harder, but [readable to execution]. So I have the confidence our team can deliver.

Seth Gilbert, UBS.

Free cash flow was a bit above what we and the Street were modeling and free cash flow margin hit 50%. I'm curious if you could call out anything additional here. Were there any one-time benefits to free cash flow?

Yes. Thanks. Obviously, we're pleased with the Q3 results and as such, it made sense to update the full-year guidance as well. So I'm pleased with the overall progress, frankly, that we made since the beginning of the year, our kind of guidance.

With that said, to your question specifically on the one-time, look, there are very durable results as part of that. You see that, obviously, in our core financials. The one thing that we did put in the script that I would make sure I emphasize with investors is, we made some changes as part of our collections process, really looking at that more end to end as a new CFO coming in. And as a result, we were able to make real notable progress on DSO.

Those are sustainable changes to our DSO. But obviously, you won't continue to see that marked progress as we go forward, meaning it won't continue to accelerate off that. So you can kind of think about that as durable, but one time a bit in nature.

Yes, by the way, our CFO, Michelle, she did a great job, really drive the team, right, dramatically improve our collection process. This is very sustainable.

James Fish, Piper Sandler.

Maybe, Eric, for you on BrightHire. Is this the start of expanding into other mission-critical business workflows? Or how should we think about -- I'm not asking about the M&A strategy, but more about that sort of broader platform expansion. And Michelle, how should we think at this point about the duration of the overall install base?

Well, this is a great question. So -- and my great friend Jim Kremer, he made a comment recently, right? And he wishes Zoom would have become more than just Zoom, right? And that's our strategy over the past few years. Double down on Zoom Phone, launched the Zoom Contact Center, level our technology, right, to focus on those business mission-critical use cases.

We are already doing that already over the past few years. BrightHire acquisition is just another way for us to double down our business mission critical applications. We cannot build everything by ourself, right? Why not? We do not have a greater remote hiring solution to target HR remote hiring use case, right?

BrightHire fits very well to our strategy. You see that more and more, we are going to leverage the AI because data AI and the focus on those mission-critical use cases, way more than just video conferencing. And this is [all our] over the past few years, and we are going to continue that strategy. So your comment is right now.

And just -- I get to your right question, your question on installed base was in regards to BrightHire or --?

No. It was a separate question around the duration that you're seeing because it seems as though you guys are doing pretty well on sort of cross-sell of existing products, and you're seeing that show up also on the long-term RPO, really driving some growth here on the overall RPO. So just trying to understand where the duration of the Enterprise contracts has gone.

Yes. Look, I think look, many quarter to quarter, you're going to see fluctuations. We've had a very consistent RPO trends in the current. Very pleased with the current quarter RPO that went up, which really reflects a couple of large contact center and AI deals in particular.

And so look, I would say it varies from quarter to quarter, but we're very pleased with the upsell progress that we have relative to our upsell base as well as kind of what I was referencing earlier, which is bringing in new customers to the Zoom ecosystem. And in particular to the duration of deals, I would say, sort of stabilized. There's obviously AI and contact center that brings in sort of longer-term nature of contracts, but a relatively stable trend within.

Mark Murphy, JPMorgan.

This is Arti Vula on for Mark Murphy. Congrats on the strong quarter. We recently spoke with a Zoom partner who is very positive on is products, pricing, just overall value prop. And they kind of called out particular momentum within the mid-market legacy migrations, adoption of contact center, AI products. From where you sit, are you seeing this relative strength in the mid-market segment as well?

Yes. I would say, [to done] I think we are -- we're seeing a strong uptick of AI usage as well as strong uptick of usage in our three-plus products. And certainly, this is, I would say, a sweet spot for sum from small business down to low-end enterprise and something that we're pleased with the results that we're seeing. And I think you can see it play out in many of our financial metrics.

By the way, to add on to what Michelle said, the reason why that mid-market is the sweetest part is, number one, those mid-market customers they really embrace technology faster than any other segment, right? To middle-market customers, we truly care about employee experience, right? And they really want to deploy the best solution is a much better total cost of ownership. That's the reason why that's our sweet spot. That's the reason why we are winning over there.

Siti Panigrahi, Mizuho.

This is Chad Tevebaugh on here for Siti. Just wondering if you could touch on sort of the broader demand environment. I know there were some moving pieces earlier in the year sort of how that shaped out during the quarter? And expectations for the rest of the year?

Yes. So look, I think in the quarter, we saw further improvement. I think you see it in metrics like our customers over $100,000, growing at 9%. Look, that doesn't mean that we're not going to see some seat pressure like we talked about earlier with certainly our business model and we won't be immune. But we saw broad, consistent demand across both the Enterprise and Online and full abatement if that was your specific question to what we referenced in our Q1 earnings.

So with respect to our forecast, it assumes similar conditions to what we saw in the third quarter. And maybe to end with sort of where Eric left us in the last question, Zoom what we're going to focus on is not any conditions from one day to the next, given we are in a dynamic environment. but on providing sustainable TCO and business value to our customers.

So sort of in the line of in uncertain conditions, you control what you can control. And to Eric's point earlier, we have a fantastic TCO story that we're leaning in with our customers.

Jackson Ader, KeyBanc.

Michelle, on the, call it, the non-revenue top-line metrics. You've talked about billings, you talked about RPO. I'm just curious like as you shift more of your business towards the Enterprise, when should we expect those non-revenue metrics to start to outgrow maybe your overall revenue metrics on the top line?

I mean in terms of the non-revenue metrics, I would point to things like our AI usage. I would point to product-momentum-type stats to which they already are outpacing our revenue growth. So I don't know Jackson, correct me if I'm sort of missing your question, but I think those are the sorts of non-specific explicit revenue drivers that I look at, and I would say they're already outpacing.

No, no, no, that's helpful. Yes. Just curious about the dynamics there.

Yes. Just to quickly, Jackson, you're right, you're so right. AI usage is really the number one. The metric is about looking at that every day. At the same time, the CSAT also look at that, right? The customers are pretty happy, not only for online customers, online bars, SMB, and all the way to interbreed customers. We also matter CSAT as well.

Peter Levine, Evercore.

Maybe just a follow-up, I think, on Jim Fish's question. If you think about, Eric, you mentioned a lot about employee experience on this call, look at BrightHire, I mean, is this like the on-ramp into like Zoom getting into the HR stack, if it's interviewing, onboarding engagement.

Just curious if you can maybe just talk about how you view is this the on ramp into HR. And then if you think about other segments that you can get into, can you maybe just help us understand like where else on can go with the platform expansion?

Well, Peter, this is a great question. If you look at our core competency, look at our technology, right, in collaboration and productivity suite under the AI, this is our core technology. And how to apply those technologies, right, into the use case, that's kind of every quarter, every year, we are looking, right? The reason why a few years ago, we introduced the Contact Center, essentially to targeted support and IT help desk, those kind of use cases depot.

We also Zoom Revenue Accelerator, right, to target the sales department, right? We also have Zoom Revenue plus also target marketing department. You look at HR. You know, HR is a huge use case. We are not going to focus on every use case at all. But we're just focused on the remote hiring, right, because we can lever our technology, that's a very different use case.

For those each department, how to leverage our products, AI and data, right, to improve the use case, that's our focus, including the vertical segment as well. Like educators, clinicians as well. So if you understand our strategy -- expanding strategy, you look at which department which vertical market might benefit from our technology AI and data, that's kind of thing we are going to focus on. So remote hiring BrightHire, for sure, fits very well to our strategy for expansion.

Tom Blakey, Cantor Fitzgerald.

Eric, Michelle, I have a couple of quick ones, really just one for you, Eric, and a clarification for you, Michelle. Eric, you were key in leading the charge in terms of the higher pricing tiers in CX, and it's great to see the success you're having there. Another Zoom heritage is just dropping markets in terms of technology and pricing and products.

You have some peers in CX talking about maybe possibly disrupting the CX market with regard to consumption-based pricing. I would love to hear your comments in terms of some forward-looking possible kind of statements there in terms of how Zoom could compete in a consumption-led CX market.

And just, Michelle, from a clarification perspective, I think you made some comment about Online growth kind of upticking off of fiscal 3Q, maybe possibly in fiscal 4Q. There was a decel in Enterprise. Can you just maybe clarify what we possibly could expect in terms of that mix would be helpful in fiscal 4Q?

Tom, thank you for a good question. Just curious, your background is what your background? [I'm not sure]

That is as fake as it can be.

Oh my God, I even do not know how techno work is so well. I did not realize that is a real figure. So any way. Yes. Thank you.

So back to your question. So you are so right on. Remember, I was Zoom Contact Center General Manager for a while, right? Very excited about our Content Center workforce management and port management, right, Zoom product over the past few years, but guess what? And because of AI, we have level AI introduced a new product, which is a Virtual Agent. It's a China-based agent or the voice agent.

I feel like it has become more and more important, right? And because we have a bot, we have the traditional contact center solution, we [act] as a virtual engine solution.

In terms of consumption of the business model, I think it will fit very well to our Virtual Agent. And because like a customer deploy technology, right, how often the user virtual agent, how many times use a virtual agent, right? So we've got to go based on how happy a customer they are, right? For every call, right, if virtual agent can truly help address the customer issues, customers should pay for us. Otherwise, this or not because you fall back to the traditional, the agentic solution, right?

I think from that perspective, we are indeed thinking about the consumption business model for the Virtual Agent or AI-based agent technology. And yes, we are working on that. This is a great question.

Just to clarify, the Virtual Agent with our agent-assisted product is a per-user model, our ZBA product that Eric is referencing is already a consumptive business model. And certainly, then, I think many in the industry talk about tying it more to outcome-based and we obviously are looking into that. But I just want to make sure it was clear that we are already consumption-based on our ZBA product.

To my comments to clarify on the online. I was just with one more quarter clarity and the full-year guidance out there. So full-year guidance of 4.1% at the midpoint, all I was trying to do in my comments is say that we've used a consistent forecast methodology. And previously to the investors, we've been saying sort of flattish Online revenue. And obviously, with now most of the year playing out and the results realized in the Online, we're just adjusting that to a tweak of slightly increasing.

William Power, Baird.

Great. Eric, maybe let's stick with your Contact Center GM hat for a moment. Can you maybe remind us and maybe update us where we are on Contact Center go-to-market? Where are you in terms of the opportunity, in terms of channel partner reach? And I guess if you extend that, the opportunity outside the US, US versus International. Is International is still on the earlier front.

Yes. So really by the way, I was the Contact Center GM, I'm not that any more, luckily. So if I do that and maybe focus on the virtual agent. But anyway, so back to your question, I think look at our -- the customers, right, so to our platform in the last quarter, many of them are switching from other cloud vendors to Zoom Contact Center, right? That's the reason why channel partners are becoming a most important go-to-market strategy for our Contact Center solution.

We are doubling down not only for US market, for international market as well because the Contact Center is very different buyers and the channel is becoming increasingly important. We already invested in that now and also we're going to invest more, right?

And for the -- in terms of the Virtual Agent -- and not only do we leverage our system channel partners, we're also thinking about the product growth. because guess what, some developers for, let's say, take SMB customers. We can [lever our], deploy those Virtual Agent technology by themselves, right? That's why I think about how to monetize Contact Center to leverage our product growth to target the developers as well. This is another area we are looking to as well.

And that's helpful -- maybe just to punctuate Eric's comments to your GTM question in particular. We look at top 10 deals in contact center is sort of reflective of the demand and the customer signal that we see. It's helpful, 9 out of 10 of our largest deals were channel driven. So it's a very important investment to us and one that we're very pleased with the results.

Arjun Bhatia, William Blair.

This is Alinda on for Arjun. Question here on just like what type of customers are adopting Custom AI Companion in particular, and what incremental value are they seeing from the Custom AI Companions versus customers using the free AI Companions?

I think for sure, we wanted to SMB medium size all the way to Enterprise customers that operate Custom AI Companion as possible. But to start up as we focus on the relatively a lot of Enterprise customers for Custom AI Companion.

The reason why the demand and other reasons is because look at our -- the value of Custom AI Companion, we can integrate with customer third-party locations. We can have agentic framework and for the data search as well.

And a lot of functionality features is built for those a little bit complicated enterprise use cases, right? And that's the reason why we start from there. So for sure, we do have -- we want to introduce SKU for online buyers as well to empower the small and medium-sized business as well.

Catharine Trebnick, Rosenblatt Securities.

This is Andrew King on for Catharine Trebnick. Just since Nick Tidd's come in and started revamping your channel partners program, can you just give us any more color to how that channel partner platform's performing. Obviously, that 9 out of 10 is a great metric to hear. Just any further color there.

And then also within that, you were one of the earliest to pivot to a partner-led professional services organization. Can you just give us a little bit of color as to how that may be helping you win certain deals?

Yes. Maybe I can lay down on. So first, for a company that's going to focus on Phone and Customer Experience, having a healthy, vibrant channel ecosystem is just part for the game, meaning it's how customers often want to buy. They're certainly part of the deployment and services after. And so Zoom offers both a deep direct as well as through a channel.

It's also to Eric's comments earlier. I think one of the questions earlier interval to sort of our international expansion, where Zoom has opportunity to go.

In terms of how to think about success, I shared the earlier Contact Center, but also, we're just very pleased with a lot of the forward-looking metrics that we see with our channel ecosystem, pipe up 30%. The majority of Contact Center deals I talked about earlier coming from partner, over 50% of our large Phone deals coming from partner. And the types of partners that are transacting with us is also [bright]. So all in all, it's been a very big investment. And to my earlier comments, something that we're very pleased with the results.

Peter Weed, Bernstein.

I guess the -- Peter's on this call are similar with me. I was really interested in BrightHire. It was -- appreciated your response around kind of the vertical-specific focus that you have, which makes a lot of sense, and I can understand why you're excited about that. How should we think about that opportunity?

Like when you think about it relative to your existing customer base, how much of this is more of an upsell opportunity to them versus expanding the TAM to new customers? And when you kind of think about the monetization, how does this add to your stack and really could expand the TAM or generate revenue upside for the business?

Yes. Maybe I can take that one. And give you sort of the finance version because Eric talked about BrightHire earlier. First of all, it starts a lot at those critical conversations. One thing Zoom is fantastic at is really just nailing those critical conversations with our customers and what there couldn't be a more critical conversation for our customers than who and how they hire.

It also offers Zoom the ability, as AI monetization plays out across different markets, to have a very tangible scenario for customers where the value point is very clear. And so certainly represents one of those vertical AI monetization scenarios. It's a large an unpenetrated market at roughly $3 billion. And so certainly allows us to help them scale and also then gives us sort of an upsell piece beyond it. And they're a category leader in sort of a large TAM that is growing. So it's something we're very excited about.

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

So yes, thank you. Thank you, Megan. Thank you for every investor, customer, and partner's greater support and trust. We truly appreciate. Thank you for every Zoom employee's hard work and dedication. Wishing you all have a wonderful holiday season. Thank you.

Thanks, everyone.

This concludes today's earnings call. Thank you all for attending, and have a happy holiday season.