| | | Zoom raises FY26 revenue outlook amid surging AI adoption and robust enterprise growth
Aug. 21, 2025 9:29 PM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Zoom Communications Inc. (ZM) Q2 2026
Management View- CEO Eric S. Yuan highlighted revenue growth at its fastest rate in 11 quarters and meaningful progress on three key priorities: “delivering world-class AI to enhance customer value, rapidly innovating Zoom Workplace, and scaling high-growth departmental solutions.” Yuan stated that "AI Companion monthly active users have grown over 4x year-over-year" and emphasized strong momentum in both meeting prep and post-meeting task management features. He noted a significant deployment at a Fortune 200 tech company and highlighted the Q2 launch of Virtual Agent 2.0, which has already helped reduce costs for customers.
- Yuan reported that Zoom Phone delivered another strong quarter with sustained mid-teens ARR growth and "gaining market share versus leading competitors." He cited a major 5-year, 7-figure ARR deal displacing Cisco. Zoom Contact Center customers with over $100,000 ARR grew 94% year-over-year to 229, and all top 10 contact center deals were displacements of leading competitors.
- The company announced a new collaboration with PwC to expand the Zoom Contact Center and AI opportunity. Yuan also spotlighted robust growth in Workvivo, with customers over $100,000 ARR up 142% year-over-year to 168.
- CFO Michelle Chang stated, “In Q2, total revenue grew 4.7% year-over-year to $1.217 billion, or 4.4% in constant currency. The result was $17 million above the high end of our guidance.” Chang added, “Non-GAAP income from operations grew 10.5% year-over-year to $503 million, exceeding the high end of our guidance by over $38 million.”
Outlook- Chang provided guidance that in Q3, revenue is expected in the range of $1.21 billion to $1.215 billion, representing approximately 3% year-over-year growth at the midpoint. Non-GAAP operating income is projected in the range of $465 million to $470 million and non-GAAP EPS in the range of $1.42 to $1.44.
- For the full fiscal year 2026, Zoom raised its outlook: “We now expect revenue to be in the range of $4.825 billion to $4.835 billion, which at the midpoint represents approximately 3.5% year-over-year growth.” Non-GAAP EPS is guided to $5.81 to $5.84 and free cash flow is now expected in the range of $1.74 billion to $1.78 billion.
- Chang reiterated the expectation for deferred revenue to be up 4% to 5% year-over-year for Q3.
Financial Results- Enterprise revenue grew 7% year-over-year and now represents 60% of total revenue. Online business churn remained low at 2.9%. Customers contributing more than $100,000 in trailing 12-month revenue grew approximately 9% year-over-year and now account for 32% of total revenue.
- Non-GAAP gross margin in Q2 was 79.8%, up 128 basis points from the prior year, driven by cost optimization. Non-GAAP operating margin was 41.3%, up 216 basis points. Operating cash flow grew 15% year-over-year to $516 million, with free cash flow climbing 39% to $508 million.
- Zoom ended the quarter with $7.8 billion in cash, cash equivalents, and marketable securities. The company repurchased 6 million shares for $463 million in Q2.
Q&A- Peter Marc Levine, Evercore: Asked about ROI from the AI Companion 2.0 and macro customer trends. Yuan responded that "feedback is pretty positive and look at the usage, right, compared to last year, in terms of monthly active users, it's 4x more..." and shared that customers are using AI to improve productivity across the meeting lifecycle. Yuan stated customers are increasingly enabling AI Companion as part of their offering.
- Meta A. Marshall, Morgan Stanley: Inquired about vertical-specific wins and broader AI Companion use cases. Yuan explained that customers who have adopted AI Companion are now seeking customized solutions connected to their content and workflows, and “that's why we offer Customized AI Companion.”
- Ioannis Samoilis, Baird: Asked about the impact of the online segment price increase. Chang replied, “I'd reiterate that same range of guidance from $10 million to $15 million still on track for that. And I continue to guide to a flat online number on the full year.”
- James Edward Fish, Piper Sandler: Questioned the outlook for Workvivo growth and forecast prudence. Yuan emphasized customer transition support and innovation, while Chang noted, “raising, for example, from 2.7% at the beginning of the year to now 3.5%... the growth rate from Enterprise that is driving the H2 outlook.”
- Additional analyst questions focused on AI monetization, funnel growth, and the impact of AI adoption timelines. Management highlighted that mature products like Contact Center Elite and ZVA are contributing to FY26, while broader monetization of newer AI offerings will likely impact FY27.
Sentiment Analysis- Analysts expressed strong interest in AI adoption, customer ROI, and the sustainability of revenue growth, with several follow-up questions focused on AI monetization and product differentiation. The tone was generally positive, but some probing questions addressed the prudence of guidance raises and the timeline for incremental revenue from new offerings.
- Management maintained a confident tone in both prepared remarks and responses, frequently referencing strong customer feedback, product innovation, and the durability of current demand. Chang stated, "we've made progress improving top-line growth, we've sustained best-in-class profitability, and reduced dilution."
- Compared to the previous quarter, both analysts and management displayed increased confidence, with fewer questions on macro headwinds and more focus on product-led growth and AI opportunities.
Quarter-over-Quarter Comparison- The current quarter featured a raised revenue and profitability outlook for FY26, compared to last quarter’s more cautious tone regarding macroeconomic uncertainty and enterprise deal scrutiny.
- AI Companion adoption growth accelerated from nearly 40% quarter-over-quarter in Q1 to over 4x year-over-year, and the company is now seeing broader usage beyond meeting summaries.
- Workvivo and Contact Center Elite customers above $100,000 ARR saw notable increases compared to Q1, and the company cited a higher number of competitive displacements in the contact center segment.
- Management’s language shifted from prudent to more optimistic, noting "partial abatement" of scrutiny in certain geographies and stronger enterprise demand.
- Analysts' questions in Q2 were more focused on monetization opportunities and product innovation than on macro risks or deal elongation, marking a shift in sentiment.
Risks and Concerns- Management acknowledged the "dynamic economic environment" but noted that scrutiny seen in earlier quarters has "partially abated."
- Chang discussed balancing investments in AI with cost efficiencies and highlighted ongoing efforts in cost optimization and cloud-to-colo migration.
- Analyst concerns centered around the timing and scale of AI monetization and the durability of enterprise revenue growth. Chang clarified that new AI offerings will be a larger tailwind in FY27, while mature AI features are already contributing to FY26 results.
Final Takeaway
Zoom’s Q2 2026 call signals accelerating adoption of AI-driven products, robust growth in Enterprise and Contact Center solutions, and a raised outlook for both revenue and profitability in FY26. Management emphasized their leading position in AI-powered collaboration and cited strong customer feedback and competitive wins, while highlighting that continued product innovation and cost discipline remain key to sustaining momentum in the coming quarters.
Read the full Earnings Call Transcript |
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