Zoom(ZM) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue grew 4.4% year over year to $1.23 billion, exceeding guidance by $15 million [12] - Enterprise revenue increased by 6.1% year over year, accounting for 60% of total revenue [12] - Non-GAAP gross margin improved to 80%, up 117 basis points from the previous year [13] - Non-GAAP diluted net income per share rose to $1.52, $0.14 higher than Q3 of last year [14] - Operating cash flow grew 30% year over year to $629 million, with a margin of 51.2% [16] Business Line Data and Key Metrics Changes - AI Companion adoption surged more than four times year over year, indicating strong demand for AI-driven solutions [6] - Team Chat monthly active users increased by 20% year over year [6] - WorkVivo logos grew nearly 70% year over year to 1,225 [7] - Zoom Phone surpassed 10 million paid seats, marking significant growth in unified communications [7] Market Data and Key Metrics Changes - Americas revenue grew 5% year over year, EMEA grew 3%, and APAC grew 4% [13] - The number of enterprise customers contributing over $100,000 in trailing 12-month revenue grew by 9% year over year [12] Company Strategy and Development Direction - The company aims to evolve into an AI-first platform for work and customer experience, focusing on elevating core products with AI and driving growth of new AI products [5] - The acquisition of BrightHire is part of the strategy to enhance collaboration and customer engagement through AI [9] - Customer experience is identified as a fast-growing business segment, with high double-digit ARR growth [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's durability and the ongoing demand for AI solutions [5] - The company anticipates continued growth in enterprise revenue and a slight increase in online business for the full year [22] - Management highlighted the importance of stabilizing churn and diversifying products as key growth drivers [24] Other Important Information - The board authorized an incremental $1 billion share repurchase, reflecting confidence in the company's financial health [18] - Deferred revenue grew 5% year over year to $1.44 billion, with expectations for continued growth [15] Q&A Session Summary Question: How should we think about growth heading into next year? - Management indicated that they are not yet at the planning stage for FY2027 guidance, but enterprise growth will continue to be a key driver [22] Question: Can you discuss the pressure on net dollar expansion and seat-based contraction? - Management noted that net dollar expansion is stabilizing, and while some seat pressures exist, overall demand remains strong [27] Question: What is the outlook for M&A in the future? - Management reiterated a disciplined approach to M&A, focusing on small to medium-sized acquisitions that align with strategic goals [32] Question: Can you elaborate on the growth sustainability of Zoom Phone and customer experience? - Management highlighted strong growth in Zoom Phone and customer experience, driven by AI integration and customer demand [38] Question: How is the company addressing the demand for integration with other productivity software? - Management confirmed ongoing integration efforts with major ecosystems like Google and Microsoft, while also adapting to AI-driven customer demands [58] Question: Were there any one-time benefits to free cash flow this quarter? - Management clarified that improvements in the collections process contributed to free cash flow, which is expected to be sustainable [61]