Core Insights - Zoom Communications, Inc. has expanded its enterprise agentic AI platform, introducing new workflow orchestration capabilities across its products, which aim to automate tasks and enhance business outcomes from meetings, calls, and customer interactions [1][2] Group 1: AI Platform Enhancements - The new AI Companion 3.0 is being rolled out across various Zoom applications, significantly increasing its capabilities to connect conversations and enterprise data, resulting in a tripling of monthly active users year-over-year in Q4 FY26 [3][4] - Custom AI Companion add-ons allow organizations to create tailored AI agents that streamline activities such as retrieving insights and automating workflows across third-party systems like Salesforce and Slack [4][6] - New third-party integrations and no-code orchestration capabilities enable users to synthesize enterprise data across applications, enhancing actionable insights [6][5] Group 2: User Experience and Workflow Automation - The introduction of new AI canvases (Zoom AI Docs, AI Sheets, and AI Slides) facilitates the conversion of meeting insights into structured documents and presentations, promoting real-time collaboration [7] - Zoom Phone has been enhanced to deliver intelligent call summaries and automated follow-ups, improving customer engagement and operational efficiency [10][11] - The Zoom Customer Experience (CX) platform is seeing high-double-digit growth, with AI features included in top CX deals, indicating strong competitive momentum [14]

Core Insights - Zoom Communications reported a fourth-quarter revenue of $1.25 billion, reflecting a year-over-year increase of 5.3% and exceeding guidance by $12 million [2] - The company emphasized its transition into an "AI-powered system of action for modern work," with fiscal 2026 being a pivotal year for growth [3][4] - Zoom's enterprise revenue grew by 7.1% year-over-year, accounting for 61% of total revenue, driven by larger corporate deals and international product expansion [6][12] Financial Performance - Non-GAAP operating margins were near 40%, with a reported free cash flow of $338 million in Q4 and $7.8 billion in cash reserves [5][15] - The company repurchased 3.8 million shares for approximately $324 million during Q4, totaling $2.7 billion in buybacks year-to-date [16] - For fiscal 2027, Zoom projected revenue between $5.065 billion and $5.075 billion, indicating a growth of 4.1% at the midpoint [18] AI and Customer Experience - Zoom's Contact Center annual recurring revenue (ARR) grew in high double digits, with AI features playing a significant role in displacing legacy vendors [6][7] - The launch of AI Companion 3.0 led to a tripling of monthly active users year-over-year, indicating strong engagement with AI features [11] - The company highlighted successful customer implementations of its AI solutions, including significant deals with major retailers and healthcare providers [8] Strategic Outlook - Management expressed optimism about fiscal 2027, with a focus on AI monetization and expanding customer experience offerings [10][21] - A price increase of 6% on annual SKUs is planned for mid-March to reflect added value in Workplace and AI [20] - The company aims to leverage larger, longer-term platform deals that integrate Zoom Workplace, Phone, and Contact Center, increasingly through channel partners [21]

Financial Data and Key Metrics Changes - In Q4 FY 2026, total revenue grew 5.3% year-over-year to $1.25 billion, exceeding guidance by $12 million [18] - Full year FY 2026 revenue increased by 4.4%, with enterprise revenue growing 6.5% [24] - Non-GAAP gross margin in Q4 was 79.8%, up 1 point year-over-year, while non-GAAP operating margin was 39.3% [21] - Free cash flow for FY 2026 grew 6.4% to $1.9 billion [24] Business Line Data and Key Metrics Changes - The enterprise business revenue grew 7.1% year-over-year, representing 61% of total revenue [18] - Average monthly churn in the online business was 2.9%, slightly up from 2.8% in Q4 FY 2025 [18] - The number of enterprise customers contributing over $100,000 in trailing 12-month revenue grew by 9% year-over-year [19] Market Data and Key Metrics Changes - Revenue growth in the Americas was 6%, EMEA grew 5%, and APAC grew 3% [19] - Deferred revenue at the end of Q4 grew 5% year-over-year to $1.42 billion [22] Company Strategy and Development Direction - The company aims to leverage AI to enhance customer experience and drive growth in new AI products [6][8] - Focus on integrating AI into customer experience platforms to eliminate silos and improve service outcomes [9] - Plans to continue share buybacks to offset dilution and enhance shareholder value [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about AI technology monetization in FY 2027, highlighting strong customer interest in Custom AI Companion [31] - The company anticipates revenue growth to cross the $5 billion milestone in FY 2027, with a focus on profitability and cash flow generation [26][28] Other Important Information - The company reduced stock-based compensation expense by 18% in FY 2026 [25] - The balance sheet showed $7.8 billion in cash equivalents and marketable securities at the end of Q4 [23] Q&A Session Summary Question: AI monetization progress in FY 2027 - Management is optimistic about AI technology monetization, particularly through Custom AI Companion, which is expected to drive revenue growth [31] Question: Impact of competitive takeouts on deferred revenue growth - Management clarified that recent competitive wins involve providing grace periods to customers, which is beneficial for long-term business [38] Question: Structural barriers preventing disintermediation by AI model providers - Management emphasized the importance of reliability, security, and ease of use in their offerings, which are difficult to replicate [42] Question: Net retention rate and future growth - Management indicated that net dollar expansion will rebound in the long term, driven by improvements in churn and AI monetization [48] Question: Trends in international markets - Management noted that investments in products like Contact Center and Phone are expected to help penetrate international markets [55] Question: Pricing strategy for FY 2027 - Management indicated that pricing increases are assumed in the guidance, aimed at reflecting the added value in their offerings [105]

Financial Data and Key Metrics Changes - In Q4 FY 2026, total revenue grew 5.3% year-over-year to $1.25 billion, exceeding guidance by $12 million [18] - Full year FY 2026 revenue increased by 4.4%, with enterprise revenue growing 6.5% [24] - Non-GAAP gross margin in Q4 was 79.8%, up 1 point year-over-year, while non-GAAP operating margin was 39.3% [21] - Operating cash flow for Q4 was $355 million, down from $425 million in the prior year [23] Business Line Data and Key Metrics Changes - The enterprise business revenue grew 7.1% year-over-year, representing 61% of total revenue [18] - The online business showed signs of stabilization with average monthly churn at 2.9% [18] - The number of enterprise customers contributing over $100,000 in trailing 12-month revenue grew by 9% year-over-year [19] Market Data and Key Metrics Changes - Revenue growth in the Americas was 6%, EMEA grew 5%, and APAC grew 3% [19] - Deferred revenue at the end of Q4 grew 5% year-over-year to $1.42 billion [22] Company Strategy and Development Direction - The company aims to leverage AI to enhance customer experience and drive growth in new AI products [6][8] - The focus is on creating a unified system of action that integrates collaboration and customer engagement [7][17] - The company plans to continue its share buyback program to offset dilution and enhance shareholder value [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about AI technology monetization in FY 2027, highlighting strong customer interest in Custom AI Companion [31][32] - The company anticipates revenue growth to cross the $5 billion milestone in FY 2027, with a focus on profitability and cash flow generation [26][29] Other Important Information - The company reduced stock-based compensation expense by 18% in FY 2026 [25] - The company is investing in international markets and local data centers to support growth [54] Q&A Session Summary Question: How does the company view AI and monetization progress in FY 2027? - Management is optimistic about AI technology monetization, particularly through Custom AI Companion, which is expected to drive revenue growth [31][32] Question: Can you quantify the impact from larger competitive takeouts on deferred revenue growth? - Management noted that the recent trend of larger competitive wins is intentional and beneficial for the business, providing a grace period for customers [36] Question: What are the structural barriers preventing AI model providers from disintermediating Zoom? - Management emphasized the importance of reliability and security in mission-critical communication tools, which are difficult to replicate [42][43] Question: How does the company balance addressing additional departments with new products versus deepening existing areas? - Management stated that AI allows for both horizontal innovation and vertical market penetration, enabling the company to monetize across various use cases [68][70] Question: What is the expected impact of BrightHire on financial performance? - Management indicated that BrightHire's impact on Q4 was minimal, but it is expected to contribute positively in FY 2027 [100]

Financial Data and Key Metrics Changes - In Q4 FY 2026, total revenue grew 5.3% year-over-year to $1.25 billion, exceeding guidance by $12 million [18] - Full year FY 2026 revenue increased by 4.4%, with enterprise revenue growing 6.5% [23] - Non-GAAP gross margin in Q4 was 79.8%, up 1 point year-over-year, while non-GAAP operating margin was 39.3% [20] - Free cash flow for FY 2026 grew 6.4% to $1.9 billion [23] Business Line Data and Key Metrics Changes - The enterprise business revenue grew 7.1% year-over-year, representing 61% of total revenue [18] - The online business showed signs of stabilization with average monthly churn at 2.9% [18] - The number of enterprise customers contributing over $100,000 in trailing 12-month revenue grew by 9% year-over-year [19] Market Data and Key Metrics Changes - Revenue growth in the Americas was 6%, EMEA grew 5%, and APAC grew 3% [19] - Deferred revenue at the end of Q4 grew 5% year-over-year to $1.42 billion [21] Company Strategy and Development Direction - The company aims to leverage AI to enhance customer experience and drive growth in new AI products [5][6] - Focus on integrating AI into customer experience to eliminate silos and improve service outcomes [6][7] - Plans to continue share buybacks to offset dilution and enhance shareholder value [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about AI technology monetization in FY 2027, highlighting strong customer adoption of AI products [29] - The company anticipates revenue growth to cross the $5 billion milestone in FY 2027, with a focus on profitability and cash flow generation [25][27] - Management noted the importance of reliability and security in maintaining competitive advantage in the market [41] Other Important Information - The company reported a significant increase in AI Companion monthly active users, which more than tripled year-over-year [14] - The company has made strategic investments, including a minority stake in Anthropic, which is seen as a critical partner for AI development [54] Q&A Session Summary Question: How does the company view AI and monetization progress in FY 2027? - Management is optimistic about AI technology monetization, particularly through Custom AI Companion, which is expected to drive revenue growth [29][31] Question: Can you quantify the impact from larger competitive takeouts on deferred revenue growth? - Management explained that the recent trend of larger competitive takeouts is beneficial for Zoom's business, providing a grace period for customers [35] Question: What are the structural barriers preventing AI model providers from disintermediating Zoom? - Management emphasized the importance of reliability, security, and ease of use as critical factors that differentiate Zoom from potential competitors [41] Question: How does the company plan to balance addressing additional departments with new products? - Management indicated that the company can innovate both horizontally and vertically, leveraging AI to penetrate new markets while enhancing existing solutions [66][68] Question: What is the expected contribution of Custom AI Companion to FY 2027? - Management confirmed that Custom AI Companion has already contributed to growth and is expected to continue doing so with further innovations [74][80]

Summary of the Conference Call on US Software Industry Outlook for 2026 Industry Overview - The conference call focuses on the US Software industry, particularly the impact of AI on budgets and spending trends for 2026 [1][3][5]. Key Insights and Arguments 1. **Budget Growth and IT Spending**: - The 4Q25 CIO Survey indicates a significant acceleration in IT budget growth, with expectations of a +3.3% increase over the next 12 months, up from +1.9% in the previous quarter [3][18]. - There is a strong likelihood of a budget flush at the end of 2025, which is expected to positively impact companies like ServiceNow (NOW) and HubSpot (HUBS) [18][11]. 2. **AI Demand and Capacity**: - Demand for AI capabilities is anticipated to outpace current capacity, with a focus on scaling AI solutions within enterprises [5][23]. - The year 2025 was characterized by experimentation with AI, and 2026 is expected to see significant expansion in use cases that deliver high ROI [5][23]. 3. **Company Ratings and Growth Drivers**: - Zoom (ZM) and Palantir (PLTR) have been upgraded to Buy ratings due to improved growth visibility and strong catalysts [6][8]. - ZM is projected to achieve over 5% top-line growth, driven by its Contact Center and Custom AI Companion, while PLTR is expected to see a +51% year-over-year revenue growth, primarily from the US Commercial sector and government spending [8][9]. 4. **Market Dynamics and Risks**: - Despite the positive outlook for AI, there are ongoing concerns regarding the terminal value of application software, which may continue to pressure valuations [4][29]. - The software market is experiencing significant disruption risks from AI, particularly affecting traditional application vendors [29]. 5. **Investment Priorities**: - Data Analytics, Generative AI, and Data Warehousing have become the top investment priorities, reflecting the shift towards AI-driven solutions [18][26]. - Companies like Snowflake (SNOW), MongoDB (MDB), Microsoft (MSFT), and Oracle (ORCL) are favored for their AI capabilities and consumption models [26]. Additional Important Points - **Performance Metrics**: - The performance of various software companies in 2025 showed significant disparities, with PLTR achieving 147% sales growth, while others like HubSpot (HUBS) faced a decline of 43% [12][46]. - The overall sentiment indicates that while some companies are positioned well for growth, others are struggling with multiple compression and lower growth expectations [45][47]. - **Future Expectations**: - The environment for 2026 is expected to remain volatile, with a focus on growth in value, cyclical, and small/mid-cap names [30]. - Anticipated rate cuts in 2026 may positively impact software investments, particularly in AI, due to lower borrowing costs [34]. This summary encapsulates the key themes and insights from the conference call, highlighting the evolving landscape of the US Software industry as it adapts to AI advancements and changing budget dynamics.

Core Insights - Zoom Communications (ZM) shares are trading at a significant discount with a forward 12-month Price/Earnings ratio of 14.82X compared to the Zacks Internet - Software industry's 40.19X, indicating potential undervaluation [1] - The company has transformed from a pandemic-era video conferencing tool into a broader workplace collaboration platform, including unified communications, contact center solutions, and AI-powered productivity tools [1] - Despite diversification into hybrid work solutions, Zoom continues to trade at a discount compared to peers like Microsoft, Cisco, and Alphabet [1] Valuation and Performance - Zoom shares have returned 5.7% Year to Date (YTD), while the Zacks Internet - Software industry and the Zacks Computer and Technology sector have returned 24.1% and 20.3%, respectively [3] - At a forward P/E of 14.82X, ZM appears undervalued as enterprise, AI, and global growth gain momentum [6] - Technical indicators suggest potential momentum shifts, with shares trading above both their 50-day and 200-day simple moving averages [8] Revenue Growth and Business Momentum - In Q2 of fiscal 2026, Zoom's total revenues reached $1.22 billion, representing 4.7% year-over-year growth, with enterprise revenues rising 7% [12] - Customers contributing over $100,000 in trailing 12-month revenues grew 8.7% to 4,274, indicating steady upmarket traction [12] - The Zacks Consensus Estimate for Q3 fiscal 20265 revenues is $1.21 billion, indicating 2.99% growth year over year [13] AI Integration and Product Diversification - The strategic implementation of AI capabilities has led to a significant increase in AI Companion monthly active users, growing over 4X year over year [14] - Zoom's expansion into contact center and unified communications markets has shown strong growth, with Contact Center customers with over $100,000 annual recurring revenue growing 94% year over year [15] - Employee experience solutions through Workvivo have also shown strong momentum, with customers generating over $100,000 in annual recurring revenues reaching 168, up 142% year over year [16] Conclusion - Zoom Communications represents a compelling investment opportunity at current valuation levels, supported by attractive metrics, accelerating business fundamentals, and successful product diversification [17] - The company currently holds a Zacks Rank 1 (Strong Buy), suggesting that investors should consider accumulating the stock [18]

Zoom Communications Q2 FY26 Earnings August 21, 2025 © 2025 Zoom Communications, Inc. Use of non-GAAP financial measures In addition to the financials presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this presentation includes the following non-GAAP metrics: Revenue in Constant Currency, non-GAAP gross profit, non-GAAP gross margin, non-GAAP R&D expense, non-GAAP S&M expense, non-GAAP G&A expense, non-GAAP operating margin, non-GAAP income from operations, non-GAAP net in ...

Financial Performance - Total revenue reached $1,175 million, a 3% year-over-year increase[31] - Enterprise revenue grew by 6% year-over-year[26] - The number of customers contributing over $100,000 in TTM (trailing twelve months) revenue increased by 8% year-over-year[30] - TTM net dollar expansion rate for enterprise customers was 98%[30] - Non-GAAP operating income was $467326 thousand, resulting in a non-GAAP operating margin of 398%[31,42] - Free cash flow was $463 million, representing a free cash flow margin of 394%[35] Customer and Product Growth - Revenue Accelerator licenses increased by 72% year-over-year[16] - Workvivo total customers increased by 106% year-over-year[18] - CC (Customer Care) customers increased by 65% year-over-year, with ZVA (Zoom Virtual Agent) achieving its largest deal to date[21] Future Outlook - The company projects Q2 FY26 revenue to be between $1,195 million and $1,200 million and the full fiscal year 2026 revenue to be between $4,800 million and $4,810 million[36] - Non-GAAP EPS is projected to be between $136 and $137 for Q2 FY26 and between $556 and $559 for the full fiscal year 2026[36]