Zoom Communications Inc Earnings - Q4 2025 Analysis & Highlights
Zoom Communications reported accelerating revenue growth driven by AI monetization across its platform, with strong performance in Phone and Contact Center products, while maintaining profitability and returning capital to shareholders through buybacks.
Key Financial Results
Q4 FY 2026 revenue grew 5.3% year-over-year to $1.25 billion, exceeding guidance by $12 million, with full-year FY 2026 revenue growth of 4.4%, representing a 130 basis point acceleration over FY 2025.
Non-GAAP gross margin in Q4 was 79.8%, up 1 percentage point from Q4 of the prior year, primarily due to continued cost optimization efforts while remaining focused on investing in AI.
Non-GAAP operating margin for Q4 was 39.3%, compared to 39.5% in the prior-year period, with the slight decline due to changes in 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 on approximately 303 million non-GAAP diluted weighted average shares outstanding.
Full-year FY 2026 non-GAAP gross margin reached 79.7%, up 80 basis points from the prior year, and non-GAAP operating margin reached 40.4%, up 100 basis points from the prior year.
Free cash flow grew 6.4% to $1.9 billion for the full year.
Business Segment Results
Enterprise business revenue grew 7.1% year-over-year, representing 61% of total revenue, up 1 percentage point year-over-year.
Online business continues to show signs of stabilizing, with average monthly churn of 2.9% in Q4 compared to 2.8% in Q4 of FY 2025.
Customers contributing more than $100,000 in trailing 12-month revenue grew 9% year-over-year, now making up 33% of total revenue, up 2 percentage points year-over-year.
Trailing 12-month net dollar expansion rate for Enterprise customers in Q4 continues to hold steady at 98%.
Americas revenue grew 6% year-over-year, EMEA grew 5%, and APAC grew 3%.
Zoom Contact Center (ZCX) ARR continues to grow in high-double digits and accelerated in Q4, driven by AI monetization, with every one of the top 10 deals in Q4 including paid AI and seven representing competitive displacements of leading CCaaS vendors.
Zoom Revenue Accelerator (ZRA) had strong growth, with the number of customers purchasing it growing 50% year-over-year.
Zoom Phone ARR continues to grow in the mid-teens.
AI Companion monthly active users more than tripled year-over-year in Q4, with MAUs engaging AI through the side panel more than doubling quarter-over-quarter, and within Zoom Phone, MAUs using AI features increased 35% sequentially.
Capital Allocation
In Q4, Zoom repurchased 3.8 million shares for approximately $324 million under the current $3.7 billion share buyback plan.
Total repurchased shares under the plan reached 36.3 million shares for $2.7 billion at the end of Q4.
Zoom intends 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.
Stock-based compensation expense was reduced by 18% in FY 2026, and combined with continued execution of the buyback, allowed Zoom to reduce diluted weighted average shares outstanding by 2.5%.
For FY 2027, Zoom expects approximately $75 million of incremental CapEx related to the post-pandemic refreshment cycle of assets across US data centers.
Industry Trends and Dynamics
Organizations are moving beyond systems of record and engagement toward AI-driven systems of action that help customers and employees get real work done.
Zoom is uniquely positioned to lead the transition by bridging work both inside and outside the organization across collaboration, customer experience, and employee experience, using AI to take conversations all the way to completion.
The inflection in growth reflects a structural shift in the market toward AI-powered systems of action for modern work.
Large enterprise customers are increasingly motivated to migrate from on-premises phone systems to cloud-based solutions, with more than 50% of total phone deployments still on-premises, driven by the inability to leverage AI capabilities with on-premises systems.
Competitive Landscape
Zoom is winning significant competitive displacements across multiple product categories, including seven of the top 10 Contact Center deals representing displacements of leading CCaaS vendors.
Zoom Phone competitive wins include displacement of Cisco Calling, with a Fortune 10 customer win for 140,000 seats and two major US financial institutions displaced from Teams and Cisco Calling.
Zoom's competitive advantage comes from embedding customer experience within its broader system of action, not treating it as a stand-alone solution as many competitors do.
Zoom's differentiated CX platform is built on the same platform that powers collaboration inside the organization and extends seamlessly to customer engagement and other external workflows.
Zoom's product mastery continues to translate into competitive wins and meaningful displacements across meetings, phone, chat, and beyond.
Management believes it is extremely hard to replicate Zoom's capabilities due to the complexity of building scalable, mission-critical video collaboration tools with native OS integration, which AI coding tools are not yet powerful enough to replicate.
Macroeconomic Environment
No specific macroeconomic headwinds or tailwinds were explicitly discussed in the earnings call regarding inflation, recession, or other macroeconomic factors affecting the business. [N/A]
Growth Opportunities and Strategies
Scaling AI-first customer experience is a key priority, with Zoom's CX platform differentiated by unifying internal and external workflows to enable customer journeys to move continuously from conversation to completion.
Growing AI revenue streams beyond customer experience through vertical and horizontal workflows, including Zoom Revenue Accelerator for sales, BrightHire for recruiting and hiring, and Custom AI Companion for horizontal value across Zoom Workplace.
Elevating the workplace with AI through AI Companion 3.0, which advances the system of action by turning meetings from one-off events into engines of ongoing work.
Zoom Virtual Agent (ZVA) Voice is a new product with significant momentum, included in four of the top 10 CX deals in Q4 and bringing in new customers, with 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 operates across voice and chat, taking action across systems, executing complex multi-step workflows, learning continuously from how human agents resolve issues, and seamlessly bringing people into the conversation with full context when needed.
Custom AI Companion is being monetized for medium and large enterprise customers through flexible workflow builders, third-party application connectors, and enterprise knowledge retrieval functionality.
BrightHire acquisition closed in Q4 to bring conversational AI value to recruiting and hiring, with opportunity to combine BrightHire's domain-specific AI capabilities with Zoom's product breadth and distribution advantages.
Channel investments are being made to support growth in Phone and Contact Center, with 9 of 10 large Contact Center wins coming through channel partners.
Investments in systems integrators are being made as an important go-to-market strategy going forward.
Product velocity has been accelerated through AI coding tools, enabling faster innovation across new products and services, with ZVA Voice as a key example of rapid feature development.
Financial Guidance and Outlook
Q1 FY 2027 revenue is expected to be in the range of $1.22 billion to $1.225 billion, representing 4.1% year-over-year growth at the midpoint.
Q1 FY 2027 non-GAAP operating income is expected to be in the range of $487 million to $492 million, representing an operating margin of 40% at the midpoint.
Q1 FY 2027 non-GAAP earnings per share is expected to be $1.40 to $1.42 based on approximately 304 million shares outstanding.
FY 2027 revenue is expected to cross the $5 billion milestone and land in the range of $5.065 billion to $5.075 billion, representing 4.1% year-over-year growth at the midpoint.
FY 2027 non-GAAP operating income is expected to be in the range of $2.05 billion to $2.06 billion, representing an operating margin of 40.5% at the midpoint.
FY 2027 margin guidance includes a temporal tailwind of 180 basis points related to an accounting amortization change, offset by 70 basis points in pressure from the second year of shift from stock-based compensation to cash bonus compensation.
FY 2027 non-GAAP earnings per share is expected to be $5.77 to $5.81, based on approximately 308 million shares outstanding.
FY 2027 guidance includes an interest income headwind of approximately $50 million due to lower yields in a declining rate environment.
FY 2027 free cash flow is expected to be in the range of $1.7 billion to $1.74 billion.
Q1 FY 2027 deferred revenue is expected to be up 1% to 2% year-over-year, taking 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.
Deferred revenue at the end of Q4 grew 5% year-over-year to $1.42 billion, above the high end of previously provided range.
RPO increased over 10% year-over-year to approximately $4.2 billion, with expectation to recognize 57% of total RPO as revenue over the next 12 months, down 2 percentage points year-over-year.
Online business is expected to have slight growth in FY 2027, in line with FY 2026 performance.
Enterprise business is expected to be the headline for growth in FY 2027, driven by progress in AI monetization, product diversification, and building out new routes to market.
A 40 basis point headwind from a single large competitor white labeling churn is included in the FY 2027 guidance.
Online guidance includes a 6% price increase effective mid-March to the annual SKU, coming with incremental value across chat, calendar, meetings, whiteboard, and AI capabilities.
AI Monetization Strategy
AI monetization is expected to be a significant driver of growth in FY 2027, with Custom AI Companion, AI Companion 3.0, and vertical use cases like ZVA, Zoom Contact Center, Zoom Phone, and ZRA all leveraging AI technology.
Custom AI Companion is built-in for free as AI Companion, but Custom AI Companion is a monetizable offering for enterprise customers.
Every one of the top 10 ZCX deals closed in Q4 already attached with Zoom Voice Agent, demonstrating the monetization opportunity across product lines.
Management is very optimistic about AI technology monetization in FY 2027, driven by Custom AI Companion and the ability to leverage AI Companion 3.0 technology to empower other use cases.
