Zoom Communications Inc (ZM) 2026 Q4 法說會逐字稿

(audio in progress) from the Investor Relations page at investors.zoom.com.

Also on this page, you'll be able to find a copy of today's prepared remarks and a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

During this call, we will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full fiscal year 2027, our expectations regarding financial and business trends, impacts from 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 discuss in detail in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q.

Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar.

And with that, let me turn the discussion over to Eric, who's giving his prepared remarks by Zoom Custom Avatar.

Thank you, Charles. FY26 was a pivotal year for Zoom and for our industry. We grew Q4 revenue 5.3% and full year FY26 revenue, 4.4% and an acceleration of 130 basis points over FY25. These results reflect the increasing value of our platform with innovations like AI Companion 3.0 as our platform expands and evolves into an AI-powered system of action for modern work.

The inflection in growth reflects a structural shift in the market. Organizations are moving beyond systems of record and engagement towards AI-driven systems of action that help customers and employees get real work done. Zoom is uniquely positioned to lead this transition. We bridge work both inside and outside the organization across collaboration, customer experience and employee experience using AI to take conversations all the way to completion.

And this directly connects to the three priorities we outlined last quarter to bring this system of action to life. First, elevate the workplace with AI; second, drive growth of new AI products; and third, scale AI first customer experience.

Let me start by speaking about scaling AI first customer experience. Zoom's advantage in customer experience comes from embedding it within our broader system of action, not treating it as a standalone solution as many competitors do. our CX platform is differentiated because it is built on the same platform that powers collaboration inside the organization and extend seamlessly to customer engagement and other external workflows.

By unifying internal and external workflows, we eliminate traditional silos and enable customer journeys to move continuously from conversation to completion. Within customer experience itself, Zoom delivers a cohesive set of intelligent capabilities that empower both human and virtual agents and turn live interactions into coordinated action across teams and systems to drive outcomes.

Our AI innovation across AI-assisted human agents and virtual agents is translating into improved service outcomes and cost savings for our customers and incremental revenue for Zoom. You see this in ZCX ARR continuing to grow in high double digits, and in fact, accelerating in Q4 driven by AI monetization. More concretely, you see it in the story, our deal composition tells about why customers choose us. Every one of our top 10 deals this quarter included paid AI and seven represented competitive displacements of leading CCaaS vendors.

Let me bring this to life with some Q4 customer wins. We welcomed Aeroflow Health, a medical device company who chose Zoom Contact Center and a major Q4 deal spanning ZCC Elite and ZVA Voice plus Chat to replace a leading CCaaS vendor due to our bold AI vision for CX and ability to execute.

We also saw many expansions. MLB and OPENLANE both began a Zoom Contact Center customers and in Q4, bought a combination of ZCC Elite and ZVA Voice to deliver reimagine AI-first human plus virtual agent customer service. In other cases, customers are adopting the full Zoom CX suite alongside Zoom Phone and Workplace to transform service operations end-to-end.

For example, in Q4, a major insurance provider decided to replace an expensive contact center stitched to an AI point solution with our unified Zoom Phone, Zoom Contact Center and ZVA voice to automate call triage reduce agent workload and increase overall efficiency. We also partnered with Surrey & Sussex Healthcare NHS Trust, who administers regional NHS services to modernize their manual fragmented inbound call operations through a single secure digital platform powered by Zoom Phone, Zoom Contact Center and ZVA Voice plus Chat to enable AI-powered self-service improve wait times, reduce missed appointments and enhance overall patient outcomes and call operations efficiency.

These wins also demonstrate the momentum behind Zoom virtual agent and the customer response to our voice AI within the CX suite. Only a few quarters in market ZVA voice has already been included in four of our top 10 CX deals. We are also starting to see ZVA voice bringing new customers and act as a beachhead for potential expansion into large organizations.

In Q4, we signed a nearly seven-figure ARR deal with a leading US retailer leveraging ZVA to handle inbound calls across more than 1,100 locations. ZVA 3.0 announced yesterday builds upon this growing momentum. It operates across voice and chat, taking action across systems, executing complex multistep workflows, learning continuously from how human agents resolve issues and seamlessly bringing people into the conversation with full context when needed.

That's how we are helping enterprises close the loop on customer issues at scale. And it's a powerful example of how our CX platform can drive measurable efficiency, better experiences and real business value for our customers. Our second priority is to grow AI revenue streams beyond customer experience and to extend the system of action to new AI products across vertical and horizontal workflows.

Zoom Revenue Accelerator, our revenue orchestration platform that uses the power of Zoom AI to drive prospective coaching CRM automation and more is a great example of this vertical value. ZRA had a strong quarter. The number of customers purchasing it grew 50% year over year, and its largest Q4 transaction spanned HR services, real estate, technology and automotive sectors.

Another great example of vertical workflows is BrightHire, which we were very excited to close in Q4 and bring similar conversation AI value to recruiting and hiring. Bright hire is early in its growth path Together, we have a tremendous opportunity to combine BrightHire's domain-specific AI capabilities with Zoom's product breadth and distribution advantages to transform how organizations recruit, hire and retain talent.

We are also making progress with custom AI companion, which brings horizontal value to workflows across Zoom Workplace and beyond. We're proud to welcome the following new customers showing the breadth of what this product can unlock. Harmonic, a leader in virtualized broadband and video streaming solutions added Custom AI Companion wall-to-wall to their Workplace deployment to integrate across multiple third-party tools and support knowledge retention, sales enablement and employee onboarding.

Custom AI Companion also made headway in sectors like education, where AI literacy is of paramount importance for both students and administrators. In Q4, Grand Valley State University adopted it wall-to-wall alongside Zoom work for education, supporting their efforts to streamline help desk and other student-facing processes by connecting administrators and community members more seamlessly with internal knowledge bases and workflows.

At the same time, they added ZVA to their existing Zoom Contact Center to provide students with more responsive omnichannel support.

Last, the foundation of our system of action sits within Zoom workplace, spanning the full meetings and work life cycle where context is created and work moves forward. by evolving collaboration into an engine of action while preserving the flexibility of an open ecosystem, Zoom Workplace remains simple, reliable and deeply preferred by solopreneurs and Fortune 10 companies alike.

Q4 marked a big step forward with the launch of AI Companion 3.0, advancing our system of action by turning meetings from one-off events into engines of ongoing work. As innovation accelerates adoption continues to grow and broaden.

In Q4, AI Companion monthly active users more than tripled year-over-year MAUs engaging AI through the side panel more than doubled quarter over quarter. And within Zoom Phone, MAUs using AI features increased 35% sequentially. This momentum reflects not only scale, but expanding depth of engagement across workflows.

We also revitalized our core Zoom Workplace client simplifying the user experience with refreshed interfaces and streamlined navigation to make action even more intuitive. Our product master continues to translate into competitive wins and meaningful displacements across Meetings, Phone, Chat and beyond. Zoom Phone had some great competitive wins and phone ARR continues to grow in the mid-teens. Let me highlight some customer wins to bring this to life.

In Q4, we landed a Fortune 10 customer on Zoom Phone in a large and competitive deal for 140,000 seats replacing Cisco Calling. We also secured two major US financial institutions on Zoom Workplace and Phone displacing teams and Cisco Calling.

Additionally, we significantly expanded our footprint with a leading global bank, adding nearly 50,000 Zoom Phone seats in Q4 and bringing their total deployment to an incredible 150,000 seats. These financial sector wins highlight our ability to meet the complex, highly regulated needs of the industry. our customer-centric approach to innovation, particularly around AI and security, enables institutions to ensure compliance, mitigate regulatory risk and modernize operations.

The momentum is similar in healthcare, where we witnessed a growing number of Workplace and Phone wins that also added customer experience. They are choosing Zoom not only for sector-specific capabilities, but for the differentiation offered by our cohesive AI-first system of action, spanning patient engagement, care coordination and back-office collaboration.

In the age of AI, Zoom becomes more essential. We are building the system of action that turns conversations into coordinated execution across work inside the organization and with the world outside including customer engagement, sales, recruiting and more. By connecting collaboration to action, Zoom drives measurable outcomes, and we're still early in what this system can unlock.

Now let me turn it over to Michelle to take us through the financials. Michelle?

Thank you, Eric, and hello, everyone. I'm excited to be with you today to share Zoom's Q4 and full FY26 financial performance. In Q4, total revenue grew 5.3% year over year to $1.25 billion or 4.8% in constant currency. This result was $12 million above the high end of our guidance.

Our Enterprise business continues to be strong with revenue growing 7.1% year over year, representing 61% of our total revenue, up 1 point year over year. And our Online business continues to show signs of stabilizing. In Q4, average monthly churn was 2.9% as compared to 2.8% in Q4 of FY25 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 now make up 33% of our total revenue, up 2 points year over year. Our trailing 12-month net dollar expansion rate for enterprise customers in Q4 continues to hold steady at 98%.

Pivoting to our growth internationally. Our Americas revenue grew 6% year over year. EMEA grew 5%, and APAC grew 3%. Moving to our non-GAAP results, which, as a reminder, exclude stock-based compensation expense and associated payroll taxes, met litigation settlements, acquisition-related expenses, impairments of assets, charitable donations of common stock, tax benefits from discrete activities net gains on strategic investments and all associated tax effects.

Non-GAAP gross margin in Q4 was 79.8%, up 1 point from Q4 of last year. primarily due to continued cost optimization efforts, while we remain focused on investing in the. Non-GAAP income from operations grew 4.6% year over year to $490 million, exceeding the high end of our guidance by $8 million. Non-GAAP operating margin for Q4 was 39.3% as compared to 39.5% in the prior year period. The slight margin decline was due to changes in our bonus structure and investments in AI.

Non-GAAP diluted net income per share in Q4 increased by $0.03 year over year to $1.44 and on approximately 303 million non-GAAP diluted weighted average shares outstanding. This result included a headwind of approximately $0.11 and from higher-than-expected taxes due in part to tax true-ups discrete to the quarter.

Turning to the balance sheet. Deferred revenue at the end of Q4 grew 5% year over year to $1.42 billion, above the high end of our previously provided range. For Q1, we expect deferred revenue to be up 1% to 2% year over year. which takes into account the recent trend of larger and longer duration competitive takeouts in Phone and Contact Center that often include credits to defray transition costs.

Looking at both our build and unbilled contracts, our RPO increased over 10% year over year to approximately $4.2 billion. We expect to recognize 57% of the total RPO as revenue over the next 12 months, down 2 points year over year.

In Q4, we had operating cash flow of $355 million as compared to $425 million in the prior year period. Free cash flow was $338 million, as compared to $416 million in the prior year period. Our Q4 operating cash flow and free cash flow margins were 28.4% and 27.1%, respectively. We ended the quarter with $7.8 billion in cash, cash equivalents and marketable securities, excluding restricted cash.

Under the current $3.7 billion share buyback plan in Q4, we repurchased 3.8 million shares for approximately $324 million. That brought our total repurchase under the plan to 36.3 million shares for $2.7 billion at the end of Q4. Looking into FY27 and beyond, we intend to leverage buybacks to at a minimum offset dilution on a yearly basis. reflecting management's confidence and long-term commitment to shareholder value creation.

Pivoting from Q4, I'd like to highlight some of the major financial milestones for the full FY26. Total revenue for FY26 grew 4.4%, and our enterprise revenue grew 6.5%, both accelerating 130 basis points year over year. Along with the top-line progress, we also improved margins. We reached a non-GAAP gross margin of 79.7%, up 80 basis points from the prior year, and a non-GAAP operating margin of 40.4%, up 100 basis points from the prior year. Free cash flow grew 6.4% to $1.9 billion.

And finally, we continue to be strong stewards of shareholder capital. We reduced stock-based compensation expense by 18% in FY26. That, combined with the continued execution of our buyback allowed us to reduce our diluted weighted average shares outstanding by 2.5%.

Turning to guidance. In Q1, we expect revenue to be in the range of $1.22 billion to $1.225 billion. This represents 4.1% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $487 million to $492 million, representing an operating margin of 40% at the midpoint. Our outlook for non-GAAP earnings per share is $1.40 to $1.42 based on approximately 304 million shares outstanding.

For FY27, we expect revenue to cross the $5 billion milestone and land in the range of $5.065 to $5.075 billion, which at the midpoint represents 4.1% year-over-year growth. We expect our non-GAAP operating income to be in the range of $2.05 billion to $2.06 billion, representing an operating margin of 40.5% at the midpoint. This margin guidance includes a temporal tailwind of 180 basis points related to an accounting amortization change, offset by 70 basis points of pressure from the second era of our shift from SBC to cash bonus compensation.

In addition, our outlook for non-GAAP earnings per share in FY27 and is $5.77 to $5.81 based on approximately 300 million shares outstanding. Included in this guidance is an interest income headwind of approximately $50 million in FY27 due to lower yields in the declining rate environment. As a reminder, future share repurchases are not reflected in the share count and our EPS guidance.

For FY27, we expect free cash flow to be in the range of $1.7 billion to $1.74 billion. which includes approximately $75 million of incremental CapEx related to the post-pandemic refreshment cycle of assets across our US data centers as well as similar interest income headwinds previously mentioned. As we end FY26 and we move into FY27, we're thrilled with our progress. and we're excited about our differentiated vision as an AI-first system of action. This success gives us confidence in our ability to grow durably beyond $5 billion in revenue across progress in meetings continued growth in foam, scaling our AI-first customer experience and in introducing new AI revenue streams.

We're excited to do all of this and still maintain our focus on profitability, cash flow generation and shareholder returns. Thank you to our customers, investors and of course, the entire Zoom team for your trust and your support.

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

(Operator Instructions) Arjun Bhatia, William Blair.

Eric, maybe one for you, we'll start. I'm just curious how you think about AI monetization progress in fiscal 2027? You called out a couple of examples of customers adopting custom AI companion and going wall-to-wall. How do you think that and your broader portfolio of sort of AI products evolves in terms of adoption and contribution to revenue next year?

Yes, it's a great question. So we're very optimistic about our AI technology monetization in FY27, driven by, first of all -- and customized AI combined. More and more in the customers, they see the value and if we like cause company or be for free, but customer combined is different, we can monetize. That's -- and expect, right, to drive the monetization.

At the same time, we have very solid AI combining three foundation and the team working so hard to innovate. We leverage that technology to empower other use cases like ZVA, Zoom Konica Center, Zoom Phone and ZRA almost every -- those product lines for customer experience or sales experience even for wave, we can have to empower those -- the vertical use cases.

Also, we can monetize it. Again, take the ZCX, for example, right? Look at top 106 deals we closed for of the order attest with Zoom Voice Agent, right? Zoom was is built upon our AI technology. We see more and more opportunity like that. I cannot be more excited than before because of AI and because of our monetization strategy for AI.

Allan Verkhovski, BTIG.

Awesome. Congrats on the strong quarter here. Great to see the acceleration and Zoom customer experience. Michelle, I wanted to ask you, and I'll stick to a question here, but on the Q1 deferred revenue growth guidance of 1.5% the midpoint, can you just quantify the impact from the larger competitive takeouts?

And for the fiscal '27 revenue guidance, can you just give us some color like what you're assuming for enterprise and online revenue growth?

Sure. No problem. Let me touch on the deferred revenue one because I think this is one that's really important for investors to understand and maybe not read into it as you traditionally might. First of all, it's important to note this is a billing dynamic and not sort of a rev rec thing. What we saw was a recent trend that's actually great for Zoom's business of wins in large and longer competitive platforms where we're providing a grace period to our customers to help them with that transition.

This is good for Zoom. This is intentional. And I think maybe just one other piece for investors. You can see that the fruits of that so much in Eric's script and you can see it in the long-term RPO that's up 15% relative to 3% in Q3. So a couple of thoughts on different revenue.

In terms of the guide, at 4.1%, One other thing that I want to make sure we call out to investors is included in that guide is a 40 basis headwind on of pressure from a single large competitor white labeling that churned at the end of FY26. Setting that aside to your broader question, we expect online to have slight growth sort of in the range of what they had this year.

And really, it's going to be an enterprise that's the headline for the growth. And it's going to be the source of things that we talked about in this earnings and that, frankly, we've been talking about with investors which is progress in AI monetization, progress and product diversification and building out new routes to market, upmarket and with our channel.

Awesome. Congrats on the strong quarter, guys.

Peter Levine, Evercore.

Eric, one for you. I think in a world where AI models or provider or the AI model providers are essentially they're controlling the intelligence layer and theoretically could build AI native collaboration suites on top of their capabilities. So I guess, question -- like what's like in terms of technology or with structural barriers, I think, prevent them from disintermediating Zoom? Like what's the moat that you be all like we'll defend your market data of the infrastructure, it's the enterprise relationships, brand equity?

But like -- or is it something deeper? I guess it's like, how do you think about that risk? And then how would you debunk the concerns that like AI could ultimately replace you guys?

Wonderful question. I think -- if you think about the mission-critical communication like Zoom, reliability is extremely important, right? It's got to work every time and cannot see todays meeting, we now work, tomorrow might work, no one is going to use it, right? And security also extremely important, right? You need all kind of security features as being plus ease of use.

The reason why the customer choose to use Zoom. Back to the AI. I think I'm an engineer, right? I also now starting writing code as well with the AI coding tools, I think it's extremely hard to replicate what we built over the past many years because, first of all, a lot of code still sit pass code to open out the video all a lot of things, right?

Today, you look at AI according to sits so hard to build a very scalable and the leverage, the native OS over build all kind of code. It's not as straightforward. You can build a very easy system high-end choice. But it's more like toys, nobody going to use that because this is a collaboration. It's not a system of record or database or store information, even UI don't know work.

You know how to use that, right? It's fine. But with any company missing critical video collapsing tools like Zoom is really hard to leverage the AI coding to replicate what we ship. I have very high confidence. And by the way, no matter what we do, we still need tools like Zoom, right, human to human connection, interaction is still very important.

Michelle, a follow-up on net retention, 98%. Can you maybe just help us first to get all the new products that you're having. You're seeing upsell contact center of voice. When does that reflection? When can we see that in the model?

Yes. So great question on NDE. Look, we've said that it will rebound in the long term, we've not put guidance. And when it rebounds, it's going to be off of so many of the drivers that we're talking about here, progress in churn phone and mid-teens, contact center in high double digits and obviously, the onset of look, we're going to run the business sort of to revenue growth and you have our 2017 guidance there. But a couple of notes maybe for investors about headwinds relative to NDE.

First of all, I just want to go back to that white label churn that we talked about of competitive white label churn that will obviously put some pressure -- and then the other thing that I'd call out for investors is actually good pressure, which is with Workvivo and contact center, we're seeing them bring in new customers to Zing.

And look, in the fullness of time, that will replicate through our net dollar expansion. But obviously, it will take a little bit more time. So just two more mechanical things to take into consideration.

Siti Panigrahi, Mizuho.

Chad on here for Citi. I think the Americas revenue growth trend has been pretty clear and quite strong throughout this fiscal year. I was wondering if you could dive a little bit into the trends you're seeing internationally and sort of any key initiatives there for the up the current year to reaccelerate growth there?

Eric, do you want to take one, or do you want me to?

Yes, go ahead.

Yes. I mean, look, I would point to -- we're pleased. I think we give the constant currency growth rates, but they're up and growing across our international business. Maybe the thing that I would call out is, I think as we move into areas like contact center, and phone as well as Workvivo, that's giving us together with investments in channel, an opportunity really to break into international markets.

So it is something that we're investing in. We've also done maybe more local investments like UK data center. But it's something that we're focused on and with our broader product expansion, AI monetization, as well as channel investments is something we think will grow in the future.

Alex Zukin, Wolfe Research.

I'll maybe make mine pretty quick. There's been a lot of questions around, I think, just your ownership structure of some of the larger foundation model companies. I know we haven't talked about it or asked about it, but given it's such a wide-ranging topic, maybe I'll let you address it to the extent that you want to specifically maybe on the anthropic stake.

And then Michelle, for you just any comments about how clearly the growth on phone contact center was really, really strong this year. As you look at the guide implicit, I know you don't give product level guidance, but as we think about the sustainability of mid-teens growth in phone, the sustainability of whatever very high rates of growth are in Zoom contact center.

How should we think about those particularly since you don't want us to pull any kind of forward link dimension from the deferred?

Perfect. So let me hit on profit purse and then we will round Alex, with the product question. Look, in our results, you will see a total strategic investment. Zoom has a Zoom ventures that we use to strategically invest in tech that we feel like is important to Zoom. And you'll see the total balance of that $1.6 billion.

And in Q4, you'll see a gain of $532 million pretax. This is due mainly, of course, to the change in the valuation of anthropic after their last round. Look, we have a minority stake that Anthropic is a critical partner Zoom has long standing, talked about our federated approach to AI and Anthropic is key to our road map and a great partner in our federated approach.

On the sort of durability, if I get your question right, Alex, on phone. I really look at just we've seen continue, I'm going to hit phone and then I'll wrap with contact center. Phone. We've been seeing very durable mid-teens growth. Look, we haven't updated our penetration stats in Zoom.

But in Zoomtopia, I think in '24, we said it was 19% of our meeting space. I think that just both speaks to progress and opportunity going forward. And then look, on the phone side, I just look at all the examples that Eric talked about, leading insurance, Cisco win and F10, Cisco win, major fast food chain, RingCentral wind and really feel like a major US bank of Microsoft, Cisco win.

So we feel great about the share gains on phone. On contact center, what I would point to there is just multiple quarters, now four quarters at high double digit and actually Q4 accelerating off that. But really, and I think, Alex, you've been a great noter of this is to look at the makeup of contact center as reflective of where we will go.

For many quarters, we've been talking about the majority of the top 10 deals being large displacements. We've been talking for quarters about the value really coming in AI, now 10, up 10. And to Eric's point, 4 of 10 in voice, which has been a new entrant for zoom in the summer. We did a 2.0 refresh. And even yesterday, we announced 3 0.

And really, maybe if I could wrap with one stat, which is how often times these things come together. And I think it's a great example of what Eric introduced in the system action of both inside the organization and outside just what a powerful element that is. And 6 of our 10 largest contact center deals, as an example, pulled through foam as well.

So just quickly, Alex, it's such a great question to add on to what Michelle said. We talk about the top 10 Zoom phone deals, Zoom contact center deals are doing very well. This is more like a lot of enterprise I think this year, you look at SMB, also a huge opportunity.

The reason why we was -- AI, our AI is very affordable, federal approved, right? You look at the last December, I look at a test. Zoom rank number one for a while, right? So because those investments because of the price and also the latency of the technology, I think we have a huge opportunity for all of those SMB costs as well because of AI.

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

Josh Baer, Morgan Stanley.

Great. Thank you very much for the question. And congrats on a strong quarter. You obviously have the horizontal tools that every single knowledge worker in the world can use, but you're also building this portfolio of very departmental solutions, marketing, sales, HR, contact center.

So a strategy question for you, Eric. How do you balance addressing additional departments and roles with new products versus going deep into these areas, rolling out more solutions in these departments that you're already in and balancing all of that with the horizontal play?

Josh, wonderful questions. Speaking of what it goes to (inaudible) a lot of my time, right? I use that for 3 quarters already. As you can see, the quality is getting better and better, right? It's kind of one of the vertical use case for marketing team. Having said that, I think given the AI evolution AI coding tools, I think we have a foundational technology. Now we can do both.

On horizontal front, right, we keep innovating and more feature services, right? And the delivery happens to customers. You see the companies a little bit announced in the last December. And also in terms of innovation, a lot of thing going to new innovations announced at Enterprise Connect, that's on the horizontal front.

Look at each vertical use case, either departmental use case or vertical market use cases I think because of AI, I think we can monetize. That's why we also want to double down on those use cases. customer support, my example, CRE, webinar, BrightHire, almost are in vertical use is, I think we can lever eye to quickly penetrate into those markets. We never thought out before. That's why we are very excited because of AI.

Tyler Radke, Citi.

I wanted to ask you about the custom AI companion. You noted some good wins, I think, in higher education and some other verticals in the quarter. But how are you thinking about that in terms of a driver for FY27. And is this something where you're seeing list price sort of be realized in the field? Or is there still sort of heavy discounting? Just give us an understanding of sort of how that rolls out from a go-to-market perspective.

So you got the customer AI combining. Again, AI combining is part of our offering. It's for free, it's become more and more powerful. But the way for us to monetize AI combining is to go through the customer and combine, in particular for medium and large customers because with the third-party applications, connectors and also building a workflow and no code workflow to the build agent.

And that's kind of our vision right from a composition to completion. If you do not have a very flexible workflow builder, so how do you build an agent, how can you complete a task, right? So because it used to be zoom just collaboration.

Now with the customer and company with workflow connecting with all the third-party applications, more skills, more agent and the then we can achieve from a composition to completion. And also not only workflow, but also customer company also can give you the enterprise now retrievable functionality, right?

You can connect so many third-party applications, right? I do not need to log into different systems. With Zoom AI combined interface, I can search for any information and help you write a document to achieve the task. Essentially customer company is a customized workflow builder and also the information search capabilities to connect with all kinds of third-party enterprise applications is extremely powerful, and we can monetize for those targeted enterprise customers.

I think Tyler maybe have --

Can you hear me?

Yes, yes.

Sorry, just any way to -- is that going to be a contributor to FY27? Or is it still kind of early days in terms of that monetization of the premium AI custom copay?

It already contributed, right, to our group. So all close the big customer combines in the quarter and Q3 and Q4 with more innovation, for sure, it's going to help us more in FY27.

Seth Gilbert, UBS.

Maybe just one, if I hold the online growth, online year-over-year growth at about 1.2% for fiscal '27 that would imply that the enterprise decelerates by about 1 point from the 4Q exit rate of 7%. So maybe a question for you, Michelle. Can you talk about some of the puts and takes here that could cause enterprise to outperform?

Yes. Is there a question on Q4? Or is it more on guidance going forward?

It's more on guiding going forward. So yes, sorry.

Yes. Look, let me talk about online, and then I'll finish with enterprise. I think online, so pleased to see it return to growth. It was the first time we've had growth since fiscal '22. And look, that growth comes off of adding value in our portfolio of workplace portfolio as well as AI. And that's why we're able to realize on a price increase as well as keep record low churn.

Our guide assumes an additional price increase on the annual SKU. So in line with monthly, it's really just intended to do the same thing as the prior but bring them into value. But look, Seth, to your more meta question, Enterprise is going to be the durable driver for growth going forward. And I'll just continue to hit home the components.

It's making progress in meeting churn. It's keeping Phone in that sort of mid-teens growth range. It's continuing with that better together story to pull along Contact Center and realize the AI value. That is by far where we are seeing the most immediate pulls of the incremental AI monetization in both agent-assisted AI as well as the ZVA that Eric and I talked about.

And then look, there's so much coming on from an AI monetization perspective, both in product, Workvivo phone. But additionally, beyond that in new SKUs. We've now opened up a note taker SKU to our free base as well as making continually products like ZRA even better.

So we look out to the forward and we're excited about the progress that we made this year, 130 bps kind of up year over year, and we're equally excited, if not more, on the go forward.

Tom Blakey, Cantor Fitzgerald.

Eric, or Michelle, I'd like to hear about maybe some quantifying of these credits that you called out, that was interesting. And even if it's -- you can't call it out numerically, just how they're trending. I think the numerical help would kind of understand, help us as a group understand what kind of headwinds we're talking about that as I know, Eric, you're managing this business for a multiyear basis here as they -- you guys are innovating and taking share when they come off, like what that would look like?

And I have a follow-up, if I may.

Yes, I can take that. So look, it's in line with what I said earlier, which is Again, I just want to continue to emphasize that investors don't read into this as normal, these are great competitive wins where we're providing a grace period, so that in exchange for a larger and longer-term competitive platform win.

Think of this as helpful in sizing, Tom, is really the primary driver between the decel in Q4 relative to the guide in Q1. And if helpful on the other side, maybe what I'd point to is connecting you to that uptick in long-term RPO as helping.

Yes, that would be helpful. And then, Eric, just combining you and Michelle's comments here, Michelle is guiding us to grow online kind of relatively flat, but you seem awfully excited about the SMB opportunity to maybe equally do as well. I know it's early days in terms of maybe tackling the successes that you've had on the enterprise side with CX and phone, but is it safe to assume that that's maybe not imply or imputed in that one kind of watch out guide for fiscal '27 online?

Yes. So mission SMB customers more like a high end higher not online bars like SMB customers, right? It used to be let's look at a multiple solution now because of power for AI. And also, I think we have a huge opportunity to serve those SMB customers. Because we have a very rich product portfolio, great AI capabilities yes. is not of what the individual for online buyers, yes.

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

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

And this is a product where we have similarities with really taking AI value to rethink, poring kind of approach, more insights, efficiencies as well as then you have Workvivo on the other side of sort of thinking about the life cycle of kind of human talent. So it's something that they use Zoom and all of their interviews. And so we look at it and there's natural synergies in there relatively small.

This is a small acquisition. You can see the size of it, sub-100 to the total.

Samad Samana, Jefferies.

So I wanted to ask about pricing. You guys have continued to create a lot of value. You've obviously -- part of it is to drive better retention, which we've seen over the years. Some of it is to be expressed in kind of monetary terms. How are you thinking about that balance for fiscal '27, Michelle? And what are you assuming in the guidance, if anything, from a price increase perspective?

And to the extent -- I'm sorry, 11-part question. I'm learning from some of my peers. But if you have, can you give us a sense of like timing around that assumption as well?

All right. I may hit explicitly be online, and then I'll move and talk about our enterprise because I think the dynamics look a little bit different. So our online guide includes a price increase of 6% to go on effective mid-March to our annual SKU. So think of this as this is really the flip side of what we did last year. And I really encourage investors not to think about it as a price increase. Price increase is just one mechanism for realizing incremental value to customer.

So price increase ongoing, if you will, is not something that Zoom is going to use. It's going to come with incremental value. In this case, it came with much more value across chat calendar meetings, whiteboard, et cetera, et cetera, in our workplace as well as AI value. So that's really what's behind that. So that's sort of how to think about the online side.

And on the enterprise side as well, one, important to note that those prices then impacted the enterprise. But look, there, we're going to focus much more on total contract value, things like discounting and contracts, sorry, duration. And those would be baked into our guide given.

Ryan MacWilliams, Wells Fargo.

This is Chris on for Ryan. Eric, you've mentioned in the past a doubling down on the product side. And so we were curious if in the last few months, you've seen any product velocity improvements from agentic coding tools like you're mentioning. And if you're thinking about product investments any different this year compared to last year?

Yes. So a while back, so we already adopt AI coding tools, it's getting more and more powerful. And especially for the new product development, right, or new service, right, certainly accelerated our pizza of innovation. But at the same time, we also have a lot of existing services, right, and a lot of code written by up engineers, right? I do know in the AI coding tools is powerful enough, right, to maintain all those millions of the less of a quarter yet, right?

So I mean, started that, you look at not only for engineers, but also the UI designers, product managers, almost every we connect AI cold intros to improve our productivity. Essentially, we drive the innovation, the speed. And you get the product area we invest like ZVA, for sure, is really a great example, and we're kind of building a lot of new features.

And it's probably in terms of speed, and better than any time in our company's history, right? That's the reason why over the past few months, the cost of feedback, wow, you add this feature, the other feature, a much better position. This is a great example because the AI coding tools, and also because of the way we embrace the AI. So again, not only for engineers, but entire the product development, the life cycle.

Jackson Ader, KeyBanc.

Great. The question I have is on is around the channel. And I think you guys have made a bunch of improvements and enhancements to the channel partner program, the last few quarters and last year. And so really, I'm curious, number one, any kind of continued enhancements that you definitely know are going to be implemented here that should help for growth in 2027?

And then also, it seems like -- I understand there are some kind of headwinds, tailwinds to the margin. for fiscal '27. And I'm just curious, is that due to the mix of the type of investments you're making, meaning channel versus direct? Or is it just the overall amount of investments that you're making?

Yes. Let me go ahead and take that, and then Eric can pepper in as he see fit. Look, channel, if you think about sort of those durable elements of revenue growth is going to be essential to things like its own business and the contact center. And it's just how customers procure in that space. And also, it just speaks to beyond just the software, the consulting deployment, just how customers interact with partners.

And look, we're very -- this is something we've been very intentional about, and I think you could see it in our revenue growth inflection. Look, in terms of quick couple of stats and things of why we feel great about our investments. You can see it in our large contact center wins mine of 10 in channel, our channel base continues to grow.

And frankly, the proportion of new customers coming from channel to me is especially exciting. The kinds of things that we're investing in to your question, look, it's around incentives. We made starting last year a lot of system capabilities and portals so that we really help enable especially to all of the product value that Eric mentioned, in things like ZVA coming out at incrementally past levels, we want to make sure that our ecosystem is ready there with us, and so we'll invest in that.

And then maybe the last channel investment that I would mention is we're bridging that into things like systems providers, which we think is going to be really important going forward. On the operating margin guide, let me make some comments because I want to make sure that people really understand the bigger picture here. So we guided to 4.5% at the midpoint.

We want to, obviously, beyond the mechanics of reminding that we've used as a consistent forecast methodology. We really want to make sure the investors understand the two dynamics, which are not channel were up 180 basis points due to the amortization change that we referenced in the script. And then that's offset in part by the comp changes we're in our second year of shifting from stock-based compensation to cash. So those are really the headlines to think about in terms of the op margin versus anything channel.

William Power, Baird.

Eric, really encouraging to see continued progress on Zoom Phone and obviously the broader ARR growth trends. But I'm particularly interested in the Cisco displacements. I think historically, there's just been a lot of inertia with some of these legacy phone systems, especially the large enterprises have.

So I'm just kind of curious, is this just a function of working through the sales cycle? Is it a function of enterprises just becoming that much more comfortable with Zoom Phone quality what's kind of putting you over top here? And maybe just help us kind of understand the sustainability of some of these large opportunities.

Yes. That's a wonderful question. Believe it or not, actually look at the total FUM deployment. A lot of -- I think probably still more than 5%. I did not get the new number, still on-prem deployment, I mean, for large interest customer, right? And deployed the on-prem phone from Cisco for a long time and said, yes, it's okay. It's not great, and why they want to hurry to migrate to the cloud, right? This is kind of assortment entirely before.

Now with AI, as a strong reason for those the very lining of the customer, they cannot have the for the on-prem, right? So that's why I would say that will be acceleration for those large integrated customers migrate away from on private cloud, Zoom is much better positioned. We win quite a few very large, very completed phone deployment for on-prem to the cloud. Again, AI is a driver and for those customers to migrate the AI first cloud from system. And that's -- yes, that's the driver.

And maybe just to put the numbers to what Eric said, it's about 130-plus million seats in the cloud and about 150-ish million on-prem. So Eric spot on, right at 50-50.

So lots of opportunity.

Yes. Yes. Huge, because if not beat, it's hard to comment them. They say, is okay. I used it for 20 years, it's okay. But now it's great opportunity ahead of us.

Maybe the last thing that I'd mention is just increasingly how the deals reflect it's not just one alone as a workload. It's that sort of wanting that whole system of action. I think that's why you see so many contacts on our phone and deals coming together. And so as we think about large competitive displacements I think the inability to kind of have that full portfolio is one of the reason.

Catharine Trebnick, Rosenblatt Securities.

Okay. Thanks for speaking in. A quick question on the channel. So I get the fact that you go direct with the phone in the contact center, and you did mention systems. And you did talk this quarter that you had many more deals that were bundled.

So are you seeing a different buying pattern from the enterprise and the SMBs that are forcing you or maybe being more or the system integrators are more attractive to you? Can you pull that back, but for me?

Your question, Catherine, is are we seeing, I mean, I would --

Yes, it seems like you had more bundles this quarter than you have typically discussed. So how is that changing your go-to-market motion and you're working with the different partners because most of the partners typically just sell the phone at the contact center. So it seems to me if it's a more complex deal that you're going to need either a direct sales force or more of a system integrator.

Yes. I mean, I would say what we saw in Q4 was just an intensification of the pattern that we've seen previously, which is just what a natural sale it is for phone and contact center a chem together. And then frequently, that also comes with a meetings portfolio.

And look, in a lot of the deals, did they also include other great IM products, yes. I think it speaks to sort of where the market is going, that system of action that we talked about, also stitching the AI value in. And then certainly, content investments that you've noted and your step about investments in the channel.

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

Yes. I mean, I'll jump in and then, Eric, you should certainly jump in as well. I do think -- and you're seeing in a lot of those large deals, those platform things. I don't think it means all of them. I don't think like anything, there's a binary answer. But maybe just as a quick data point, like if you look at our top 10 deals and contact center of 10 included phones. So I think it's just an indicator that there is both those that really want that platform, that whole system of action stitch together with AI.

And then there's others that are just going to have their own technology and come at it in different ways. But look, I think maybe just to the third revenue conversation, I see that as a great sign. It's these all-in with Zoom, large, longer-term deals. So I think there's some really great things on the future for our Contact Center business.

Just quickly add on to want to Michelle said. So the Zoom workplace is our UCaaS platform. Contact Center is a CCaaS especially for those large invite customers, right? When they look at it from on-prem to club, maybe from the pre-AI solutions to AI solutions.

If you can combine those two consolidated those two systems into one platform, one vendor, why not? This is a great ROI. That's the reason why quite often you say both UCaaS and CCaaS will bring in together. So that's the reason.

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

Thank you for Zoom employees, customers, partners and investors for your greater support and we should appreciate. We are very, very optimistic about FY27. So see you next quarter. Thank you.

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

Thank you all.