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01/10 19:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Zoom's earnings call highlights strong AI-driven growth, strategic partnerships, and a robust share buyback program, with positive guidance for revenue and operating income. The Q&A session reveals positive sentiment towards AI innovations and stable customer churn despite price increases. While some uncertainty remains about AI's future financial impact, the overall sentiment is positive, with raised guidance and strong customer engagement in AI and Contact Center products. These factors suggest a likely positive stock price movement in the short term.
Total Revenue $1.217 billion, a 4.7% year-over-year increase. This growth was driven by strong performance in the Enterprise business and stabilizing Online business.
Enterprise Revenue 7% year-over-year growth, representing 60% of total revenue, up 1 point year-over-year. Growth attributed to increased customer investments and adoption of AI solutions.
Non-GAAP Gross Margin 79.8%, up 128 basis points from Q2 of last year. Improvement due to cost optimization efforts.
Non-GAAP Income from Operations $503 million, a 10.5% year-over-year increase. Growth driven by ongoing cost management and timing of spend.
Non-GAAP Operating Margin 41.3%, up 216 basis points from Q2 of last year. Improvement attributed to effective cost management and timing of spend.
Non-GAAP Diluted Net Income Per Share $1.53, $0.14 higher than Q2 FY '25. Growth reflects strong business performance, effective cost management, and less dilution from buyback programs.
Deferred Revenue $1.48 billion, a 5% year-over-year increase. Growth slightly ahead of expectations.
Operating Cash Flow $516 million, a 15% year-over-year increase. Growth driven by timing of tax payments and reduced PP&E investments.
Free Cash Flow $508 million, a 39% year-over-year increase. Growth attributed to timing of tax payments and reduced PP&E investments.
Zoom Phone ARR Growth Mid-teens growth, sustaining market share gains and displacing competitors like Cisco.
Zoom Contact Center Customers with $100,000+ ARR 229 customers, a 94% year-over-year increase. Growth driven by adoption of AI-first tools and large account wins.
Workvivo Customers with $100,000+ ARR 168 customers, a 142% year-over-year increase. Growth driven by transitions from competitors like Meta Workplace.
AI Companion: Monthly active users have grown over 4x year-over-year, with millions using AI for meeting lifecycle tasks, call summaries, and content generation for Zoom Docs.
Zoom Custom AI Companion: Deployed by a Fortune 200 U.S. tech company for 60,000 employees to enhance meeting productivity and streamline IT service operations.
Virtual Agent 2.0: Launched in Q2, delivering cost savings and revenue opportunities through agentic AI tools.
Zoom Workplace: Adopted by Hubspot to enable hybrid work globally, reduce costs, and simplify billing via AWS Marketplace.
Zoom Phone: Sustained mid-teens ARR growth and gained market share, including a major 5-year, 7-figure ARR deal displacing Cisco.
Zoom Contact Center: Grew customers with over $100,000 ARR by 94% year-over-year, with top 10 deals displacing competitors.
Non-GAAP gross margin: Improved to 79.8%, up 128 basis points year-over-year due to cost optimization.
Free cash flow: Increased 39% year-over-year to $508 million, driven by tax payment timing and reduced PP&E investments.
Share buyback program: Repurchased 6 million shares for $463 million in Q2, increasing shareholder value.
Collaboration with PwC: Expanded Zoom Contact Center and AI opportunities, co-selling large deals with global enterprise customers.
Workvivo: Reached 168 customers with over $100,000 ARR, up 142% year-over-year, including a major deal with Marubeni Corporation.
Macroeconomic Environment: Zoom's financial outlook and business trends are subject to risks from the macroeconomic environment, which could impact performance and financial results.
Competitive Pressures: Zoom faces competition from other collaboration and communication platforms, as highlighted by the need to displace competitors in major deals and the return of customers who had tried other services.
AI Integration and Adoption: While AI adoption is growing, the success of AI-driven products depends on customer acceptance and the ability to demonstrate measurable outcomes, which could pose challenges.
Customer Retention and Churn: Although churn rates are low, maintaining customer retention, especially in the Enterprise segment, is critical for sustained revenue growth.
Regulatory and Compliance Risks: Zoom's operations and financial results are subject to regulatory risks, as mentioned in their filings with the SEC.
Supply Chain and Operational Efficiency: Cost optimization efforts and operational efficiency are critical to maintaining profitability, but any disruptions could impact margins.
Revenue Growth Sustainability: Zoom's revenue growth, while improving, remains modest, and sustaining this growth in a competitive market is a challenge.
Stock Repurchase Program: The execution of the stock repurchase program could impact financial flexibility and shareholder value if not managed effectively.
Q3 FY '26 Revenue: Expected to be in the range of $1.21 billion to $1.215 billion, representing approximately 3% year-over-year growth at the midpoint.
Q3 FY '26 Non-GAAP Operating Income: Expected to be in the range of $465 million to $470 million, representing an operating margin of 38.6% at the midpoint.
Q3 FY '26 Non-GAAP Earnings Per Share: Expected to be $1.42 to $1.44 based on approximately 307 million shares outstanding.
Full Year FY '26 Revenue: Expected to be in the range of $4.825 billion to $4.835 billion, representing approximately 3.5% year-over-year growth at the midpoint.
Full Year FY '26 Non-GAAP Operating Income: Expected to be in the range of $1.905 billion to $1.915 billion, representing an operating margin of 39.5% at the midpoint.
Full Year FY '26 Non-GAAP Earnings Per Share: Expected to increase to $5.81 to $5.84, based on approximately 308 million shares outstanding.
Full Year FY '26 Free Cash Flow: Expected to be in the range of $1.74 billion to $1.78 billion.
Share Buyback Program: In Q2, Zoom accelerated execution of its existing $2.7 billion share buyback plan, purchasing 6 million shares for $463 million. This represents an increase of approximately 389,000 shares quarter-over-quarter. The buyback program underscores Zoom's commitment to delivering value to its shareholders.
The earnings call presents a mixed outlook. Financial performance is stable, with modest growth and improved cash flow. Product development is promising, particularly with AI, but lacks immediate impact. Market strategy is unclear, with vague responses on growth timelines and AI monetization. Expenses are managed well, but there's no FY '27 guidance. Shareholder returns aren't mentioned. The Q&A reveals stable demand but no immediate inflection. Overall, the sentiment is neutral, reflecting stable yet unspectacular performance.
Zoom's earnings call highlights strong AI-driven growth, strategic partnerships, and a robust share buyback program, with positive guidance for revenue and operating income. The Q&A session reveals positive sentiment towards AI innovations and stable customer churn despite price increases. While some uncertainty remains about AI's future financial impact, the overall sentiment is positive, with raised guidance and strong customer engagement in AI and Contact Center products. These factors suggest a likely positive stock price movement in the short term.
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