Q3 2026 Zoom Video Communications Inc Earnings Call

November 24, 2025

Speaker #1: One of the world's leaders in AI and enterprise technology, Oracle adopted Zoom Custom AI Companion to create powerful AI-powered assistants across its global workforce.

Eric Yuan: One of the world's leaders in AI and enterprise technology, Oracle adopted Zoom Custom AI Companion to create powerful AI-powered assistants across its global workforce, helping employees turn everyday conversations into actionable insights. We were also delighted to see Salesforce deepen its partnership with Zoom by adding Custom AI Companion. Alongside horizontal momentum, we're extending AI into collaboration-adjacent verticals as well. In Q4, we agreed to acquire BrightHire, a leading AI-powered hiring intelligence platform that elevates every stage of the hiring process, enhancing one of the most critical business workflows, while also strengthening our collaboration platform. The same AI innovation powering how teams collaborate is also transforming how companies engage their customers, and Zoom is at the center. Customer experience is one of our fastest-growing businesses, and an important long-term growth vector for Zoom.

Speaker #1: Helping employees turn everyday conversations into actionable insights. We were also delighted to see Salesforce deepen its partnership with Zoom by adding Custom AI Companion.

Speaker #1: Alongside horizontal momentum, we're extending AI into collaboration and adjacent verticals as well. In Q4, we agreed to acquire BrightHire, a leading AI-powered hiring intelligence platform that elevates every stage of the hiring process, enhancing one of the most critical business workflows while also strengthening our collaboration platform.

Speaker #1: The same AI innovation powering how teams collaborate is also transforming how companies engage their customers, and Zoom is at the center. Customer experience is one of our fastest-growing businesses and an important long-term growth vector for Zoom.

Speaker #1: In Q3, customer experience delivered a phenomenal quarter, with ARR continuing to grow in the high double digits. Early in the quarter, we were honored to be included in the 2025 Gartner Magic Quadrant for Contact Center as a Service, only three years after launching Zoom Contact Center.

Eric Yuan: In Q3, customer experience delivered a phenomenal quarter, with ARR continuing to grow in the high double digits. Early in the quarter, we were honored to be included in the 2025 Gartner Magic Quadrant for Contact Center as a service only three years after launching Zoom Contact Center. Within customer experience, AI has become a clear differentiator, creating additional monetization opportunities. Nine of our top 10 CX deals involve paid AI, such as Zoom Virtual Agent or AI Expert Assist, as enterprises use Zoom to deliver faster, more personalized service. For example, SolarWinds, LegalShield, and Bromcom chose Zoom to replace fragmented legacy systems with one unified AI-first platform. They turned to Zoom for its integrated approach across workplace, phone, and contact center, and for the innovation of Virtual Agent 2.0, which helps simplify operations and enable faster, more intelligent customer engagement.

In Q3, customer experience delivered a phenomenal quarter, with ARR continuing to grow in the high double digits. Early in the quarter, we were honored to be included in the 2025 Gartner Magic Quadrant for Contact Center as a service only three years after launching Zoom Contact Center. Within customer experience, AI has become a clear differentiator, creating additional monetization opportunities. Nine of our top 10 CX deals involve paid AI, such as Zoom Virtual Agent or AI Expert Assist, as enterprises use Zoom to deliver faster, more personalized service. For example, SolarWinds, LegalShield, and Bromcom chose Zoom to replace fragmented legacy systems with one unified AI-first platform. They turned to Zoom for its integrated approach across workplace, phone, and contact center, and for the innovation of Virtual Agent 2.0, which helps simplify operations and enable faster, more intelligent customer engagement.

Speaker #1: Within customer experience, AI has become a clear differentiator, creating additional monetization opportunities. Nine of our top ten CX deals involve paid AI, such as Zoom Virtual Agent or AI Expert Assist, as enterprises use Zoom to deliver faster, more personalized service.

Speaker #1: For example, SolarWinds, LegalShield, and Bromcom chose Zoom to replace fragmented legacy systems with one unified, AI-first platform. They turned to Zoom for its integrated approach across workplace, phone, and contact center, and for the innovation of Virtual Agent 2.0, which helps simplify operations and enable faster, more intelligent customer engagement.

Speaker #1: We're encouraged by the rapid momentum of our CX portfolio, reflected in external recognition and customer wins, and driven by our AI differentiation and deep workplace integration.

Eric Yuan: We're encouraged by the rapid momentum of our CX portfolio, reflected in external recognition and customer wins, and driven by our AI differentiation and deep workplace integration. This progress advances our platform strategy to deliver a unified solution and expand long-term growth. In summary, we're executing a clear plan: AI-led innovation, platform expansion, and disciplined, durable growth. We're pairing innovation with financial rigor, delivering strong profitability and cash flow while investing for long-term growth. With accelerating adoption and marquee enterprise partnerships, we're turning our AI momentum into measurable value for customers and shareholders. Now, let me turn it over to Michelle to take us through the financials. Michelle?

We're encouraged by the rapid momentum of our CX portfolio, reflected in external recognition and customer wins, and driven by our AI differentiation and deep workplace integration. This progress advances our platform strategy to deliver a unified solution and expand long-term growth. In summary, we're executing a clear plan: AI-led innovation, platform expansion, and disciplined, durable growth. We're pairing innovation with financial rigor, delivering strong profitability and cash flow while investing for long-term growth. With accelerating adoption and marquee enterprise partnerships, we're turning our AI momentum into measurable value for customers and shareholders. Now, let me turn it over to Michelle to take us through the financials. Michelle?

Speaker #1: Progress advances our platform. This strategy aims to deliver a unified solution and expand long-term growth. In summary, we're executing a clear plan: AI-led innovation, platform expansion, and disciplined, durable growth.

Speaker #1: We're pairing innovation with financial rigor, delivering strong profitability, and cash flow while investing for long-term growth. With accelerating adoption and marquee enterprise partnerships, we're turning our AI momentum into measurable value for customers and shareholders.

Speaker #1: Now, let me turn it over to Michelle to take us through the financials.

Speaker #1: Michelle, Thank you,

Speaker #2: Eric, and hello everyone. I'm excited to share Zoom's Q3 FY26 financial performance today. In Q3, total revenue grew 4.4% year over year to $1.23 billion, or 4.2% in constant currency.

Michelle Chang: Thank you, Eric, and hello everyone. I'm excited to share Zoom's Q3 FY2026 financial performance today. In Q3, total revenue grew 4.4% year-over-year to $1.23 billion, or 4.2% in constant currency. This result was $15 million above the high end of our guidance. Our enterprise revenue grew 6.1% year-over-year, representing 60% of our total revenue, up 1 point year-over-year. Our online business continues to show signs of stabilizing. In Q3, average monthly churn was 2.7%, in line with Q3 of last year and at an all-time low. In our enterprise business, we saw 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers make up 32% of our total revenue, up 1 point year-over-year. Our trailing 12-month net dollar expansion rate for enterprise customers in Q3 continues to hold steady at 98%.

Speaker #2: This result was $15 million above the high end of our guidance. Our enterprise revenue grew 6.1% year over year, representing 60% of our total revenue, up 1 point year over year.

Speaker #2: Our online business continues to show signs of stabilizing, and Q3 average monthly turn was 2.7%. This is in line with Q3 of last year and represents an all-time low.

Speaker #2: In our enterprise business, we saw 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers make up 32% of our total revenue, up 1 point year-over-year.

Speaker #2: Our trailing 12 months net dollar expansion rate for enterprise customers in Q3 continues to hold steady at 98%. Pivoting to our growth internationally, our Americas revenue grew 5% year over year, EMEA grew 3%, and APAC grew 4%.

Michelle Chang: Pivoting to our growth internationally, our Americas revenue grew 5% year-over-year, EMEA grew 3%, and APAC grew 4%. Moving to our non-GAAP results, which excludes stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, net litigation settlements, and all associated tax effects. Non-GAAP gross margin in Q3 was 80%, up 117 basis points from Q3 of last year, primarily due to cost optimization efforts. We remain focused in the near term around balancing investments in AI with cost efficiencies. Non-GAAP income from operations grew 11% year-over-year to $507 million, exceeding the high end of our guidance by $37 million. Non-GAAP operating margin in Q3 was 41.2%, up 234 basis points from Q3 of last year. The operating margin improvement was driven by ongoing cost management and timing of spend.

Pivoting to our growth internationally, our Americas revenue grew 5% year-over-year, EMEA grew 3%, and APAC grew 4%. Moving to our non-GAAP results, which excludes stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, net litigation settlements, and all associated tax effects. Non-GAAP gross margin in Q3 was 80%, up 117 basis points from Q3 of last year, primarily due to cost optimization efforts. We remain focused in the near term around balancing investments in AI with cost efficiencies. Non-GAAP income from operations grew 11% year-over-year to $507 million, exceeding the high end of our guidance by $37 million. Non-GAAP operating margin in Q3 was 41.2%, up 234 basis points from Q3 of last year. The operating margin improvement was driven by ongoing cost management and timing of spend.

Speaker #2: Moving to our non-GAAP results, which exclude stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, net litigation settlements, and all associated tax effects.

Speaker #2: Non-GAAP gross margin in Q3 was 80%, up 117 basis points from Q3 of last year, primarily due to cost optimization efforts. We remain focused in the near term on balancing investments in AI with cost efficiencies.

Speaker #2: Non-GAAP income from operations grew 11% year over year to $507 million, exceeding the high end of our guidance by $37 million. Non-GAAP operating margin in Q3 was 41.2%, up 234 basis points from Q3 of last year.

Speaker #2: The operating margin improvement was driven by ongoing cost management and timing of spend. Non-GAAP diluted net income per share in Q3 increased to $1.52 on approximately 305 million non-GAAP diluted weighted average shares outstanding.

Michelle Chang: Non-GAAP diluted net income per share in Q3 increased to $1.52 on approximately 305 million non-GAAP diluted weighted average shares outstanding. This result was $0.08 above the high end of our guidance, and $0.14 higher than Q3 of last year. The EPS growth reflects strong business performance, effective cost management, as well as anti-dilution driven by our buyback program, and our disciplined stock compensation management. Turning to the balance sheet, deferred revenue at the end of Q3 grew 5% year-over-year to $1.44 billion, towards the high end of our previously provided range. In Q4, we expect deferred revenue to be up to 4% to 5% year-over-year. Looking at both our billed and unbilled contracts, our RPO increased 8% year-over-year to $4 billion. We expect to recognize 60% of the total RPO as revenue over the next 12 months, down 1 point year-over-year.

Non-GAAP diluted net income per share in Q3 increased to $1.52 on approximately 305 million non-GAAP diluted weighted average shares outstanding. This result was $0.08 above the high end of our guidance, and $0.14 higher than Q3 of last year. The EPS growth reflects strong business performance, effective cost management, as well as anti-dilution driven by our buyback program, and our disciplined stock compensation management. Turning to the balance sheet, deferred revenue at the end of Q3 grew 5% year-over-year to $1.44 billion, towards the high end of our previously provided range. In Q4, we expect deferred revenue to be up to 4% to 5% year-over-year. Looking at both our billed and unbilled contracts, our RPO increased 8% year-over-year to $4 billion. We expect to recognize 60% of the total RPO as revenue over the next 12 months, down 1 point year-over-year.

Speaker #2: This result was $0.08 above the high end of our guidance and $0.14 higher than Q3 of last year. The EPS growth reflects strong business performance, effective cost management, as well as anti-dilution driven by our buyback program and our disciplined stock compensation management.

Speaker #2: Turning to the balance sheet, deferred revenue at the end of Q3 grew 5% year over year to $1.44 billion, towards the high end of our previously provided range.

Speaker #2: In Q4, we expect deferred revenue to be up 4% to 5% year over year. Looking at both our build and unbuilt contracts, our Remaining Performance Obligations (RPO) increased 8% year over year to $4 billion.

Speaker #2: We expect to recognize 60% of the total RPO as revenue over the next 12 months, down 1 point year over year. Operating cash flow in Q3 grew 30% year over year to $629 million, representing an operating cash flow margin of 51.2%.

Michelle Chang: Operating cash flow in Q3 grew 30% year-over-year to $629 million, representing an operating cash flow margin of 51.2%. Pre-cash flow margin in the quarter grew 34% year-over-year to $614 million, representing a pre-cash flow margin of 50%, up 11 points year-over-year. The year-over-year increase in pre-cash flow margins was driven by improvements in the collection process, as well as stronger billing. We ended the quarter with $7.9 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. Under the pre-existing $2.7 billion share buyback plan, in Q3, we purchased 5.1 million shares for $414 million. As of the end of Q3, we repurchased 32.5 million shares for $2.4 billion. Turning to guidance, in Q4, we expect revenue to be in the range of $1.23 to 1.235 billion. This represents approximately 4.1% year-over-year growth at the midpoint.

Operating cash flow in Q3 grew 30% year-over-year to $629 million, representing an operating cash flow margin of 51.2%. Pre-cash flow margin in the quarter grew 34% year-over-year to $614 million, representing a pre-cash flow margin of 50%, up 11 points year-over-year. The year-over-year increase in pre-cash flow margins was driven by improvements in the collection process, as well as stronger billing. We ended the quarter with $7.9 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. Under the pre-existing $2.7 billion share buyback plan, in Q3, we purchased 5.1 million shares for $414 million. As of the end of Q3, we repurchased 32.5 million shares for $2.4 billion. Turning to guidance, in Q4, we expect revenue to be in the range of $1.23 to 1.235 billion. This represents approximately 4.1% year-over-year growth at the midpoint.

Speaker #2: Pre-cash flow margin in the quarter grew 34% year over year to $614 million, representing a pre-cash flow margin of 50%, up 11 points year over year.

Speaker #2: The year-over-year increase in pre-cash flow margins was driven by improvements in the collection process, as well as stronger billing. We ended the quarter with $7.9 billion in cash and cash equivalents, including marketable securities, excluding restricted cash.

Speaker #2: Under the pre-existing $2.7 billion share buyback plan in Q3, we purchased 5.1 million shares for $414 million. As of the end of Q3, we repurchased 32.5 million shares for $2.4 billion.

Speaker #2: Turning to guidance, in Q4, we expect revenue to be in the range of $1.23 to $1.235 billion. This represents approximately 4.1% year-over-year growth at the midpoint.

Speaker #2: We expect non-GAAP operating income to be in the range of $477 to $482 million, representing an operating margin of 38.9% at the midpoint. Our outlook for non-GAAP earnings per share is $1.48 to $1.49 based on approximately 305 million shares outstanding.

Michelle Chang: We expect non-GAAP operating income to be in the range of $477 to 482 million, representing an operating margin of 38.9% at the midpoint. Our outlook for non-GAAP earnings per share is $1.48 to 1.49, based on approximately 305 million shares outstanding. For the full year of FY26, we are excited to raise both our revenue and profitability guidance. We now expect revenue to be in the range of $4.852 to 4.857 billion, which at the midpoint represents approximately 4.1% year-over-year growth. We now expect our non-GAAP operating income to be in the range of $1.955 to 1.96 billion, representing an operating margin of 40.3% at the midpoint. In addition, our outlook for non-GAAP earnings per share in FY26 is increasing to $5.95 to 5.97, based on approximately 308 million shares outstanding. As a reminder, future share repurchases are not reflected in share count and EPS guidance.

We expect non-GAAP operating income to be in the range of $477 to 482 million, representing an operating margin of 38.9% at the midpoint. Our outlook for non-GAAP earnings per share is $1.48 to 1.49, based on approximately 305 million shares outstanding. For the full year of FY26, we are excited to raise both our revenue and profitability guidance. We now expect revenue to be in the range of $4.852 to 4.857 billion, which at the midpoint represents approximately 4.1% year-over-year growth. We now expect our non-GAAP operating income to be in the range of $1.955 to 1.96 billion, representing an operating margin of 40.3% at the midpoint. In addition, our outlook for non-GAAP earnings per share in FY26 is increasing to $5.95 to 5.97, based on approximately 308 million shares outstanding. As a reminder, future share repurchases are not reflected in share count and EPS guidance.

Speaker #2: For the full year of FY26, we are excited to raise both our revenue and profitability guidance. We now expect revenue to be in the range of $4.852 billion to $4.857 billion, which at the midpoint represents approximately 4.1% year-over-year growth.

Speaker #2: We now expect our non-GAAP operating income to be in the range of $1.955 to $1.96 billion, representing an operating margin of 40.3% at the midpoint.

Speaker #2: In addition, our outlook for non-GAAP earnings per share in FY26 is increasing to $5.95 to $5.97 based on approximately 308 million shares outstanding. As a reminder, future share repurchases are not reflected in share count and EPS guidance.

Speaker #2: With the strong free cash flow results in Q3 and an increased outlook for operating income in FY26, we now expect free cash flow to be in the range of $1.86 to $1.88 billion for the full year.

Michelle Chang: With the strong pre-cash flow results in Q3 and increased outlook for operating income in FY2026, we now expect pre-cash flow to be in the range of $1.86 to 1.88 billion for the full year, which at the midpoint represents approximately 3.4% year-over-year growth. As indicated in our press release today, we are also excited to announce our board has authorized an incremental $1 billion share repurchase. This reinforces our board and management team's confidence in Zoom as we continue to leverage our strong cash flow and balance sheet to drive shareholder returns. In closing, we've made progress in proving top-line growth, we've sustained best-in-class profitability, and we've reduced dilution. We're executing on our three priorities with discipline and momentum, and remain committed to building on this success to deliver lasting value for our shareholders.

With the strong pre-cash flow results in Q3 and increased outlook for operating income in FY2026, we now expect pre-cash flow to be in the range of $1.86 to 1.88 billion for the full year, which at the midpoint represents approximately 3.4% year-over-year growth. As indicated in our press release today, we are also excited to announce our board has authorized an incremental $1 billion share repurchase. This reinforces our board and management team's confidence in Zoom as we continue to leverage our strong cash flow and balance sheet to drive shareholder returns. In closing, we've made progress in proving top-line growth, we've sustained best-in-class profitability, and we've reduced dilution. We're executing on our three priorities with discipline and momentum, and remain committed to building on this success to deliver lasting value for our shareholders.

Speaker #2: Approximately 3.4%, which at the midpoint represents year-over-year growth. As indicated in our press release today, we are also excited to announce that our board has authorized an incremental $1 billion share repurchase.

Speaker #2: This reinforces our board and management team's confidence in Zoom as we continue to leverage our strong cash flow and balance sheet to drive shareholder returns.

Speaker #2: In closing, we've made progress improving top-line growth. We've sustained best-in-class profitability, and we've reduced dilution. We're executing on our three priorities with discipline and momentum, and we remain committed to building on this success to deliver lasting value for our shareholders.

Speaker #2: Thank you to our customers, investors, and of course, the entire Zoom team for your trust and support. With that, Megan, please queue up the first question.

Michelle Chang: Thank you to our customers, investors, and, of course, the entire Zoom team for your trust and support. With that, Megan, please queue up the first question.

Thank you to our customers, investors, and, of course, the entire Zoom team for your trust and support. With that, Megan, please queue up the first question.

Speaker #2: Thank you, Michelle. We will now begin the Q&A portion of the call. When I read your name, please turn on your video and unmute.

Operator: Thank you, Michelle. We will now begin the Q&A portion of the call. When I read your name, please turn on your video and unmute. As a reminder, in an effort to hear from everyone, please limit yourself to one question. Our first question will come from Tyler Radke with Citi.

Speaker #2: As a reminder, in an effort to hear from everyone, please limit yourself to one question. Our first question will come from Tyler Radke with Citi.

Speaker #3: All right. Hey, everyone. Thanks for taking the question. It's really nice to see the stabilization and acceleration in the business, as well as the margin expansion.

Tyler Radke: All right. Hey, everyone. Thanks for taking the question. Really nice to see the stabilization and acceleration in the business, as well as the margin expansion. Just a multi-parter here on growth. If we look at Q4, the outlook looks very strong. How should we be thinking about that as a jumping-off point into next year? I ask because I know there were some price increases that you took on the online business this year. How do you think about pricing heading into next year? Big picture, you're kind of near that 5% growth mark. Certainly, it should be by Q4. What do you need? What are sort of the stepping stones to get back to a 10% growth over the long run? Thank you.

Speaker #3: Just a multiparter here on growth. So can you—if we look at Q4, you know the outlook looks very strong. How should we be thinking about that as a jumping-off point into next year?

Speaker #3: And I ask because I know there were some price increases that you took on the online business this year. How do you think about pricing heading into next year?

How do you think about pricing heading into next year? Big picture, you're kind of near that 5% growth mark. Certainly, it should be by Q4. What do you need? What are sort of the stepping stones to get back to a 10% growth over the long run? Thank you.

Speaker #3: And then, big picture, you're kind of near that 5% growth mark—certainly should be by Q4. What do you need? What are sort of the stepping stones to get back to a 10% growth over the long run?

Speaker #3: Thank you.

Speaker #2: Yeah, I can jump in and take that one. First of all, we're not sort of at our planned planning process to the stage of getting FY27 guidance.

Michelle Chang: Yeah, I can jump in and take that one. First of all, we're not sort of at our planning process at this stage of getting FY27 guidance. We're going to go ahead and do that as per the normal kind of Zoom process in February. With that said, maybe to touch on a couple of your questions with more specifics, any pricing kind of elements we would always try and give real clarity to investors. If we choose to do that, you would also get that in the February time zone. Maybe let me just pause a little bit and share some thoughts about how we think about kind of long-term growth. First, with this latest forecast, enterprise will continue to be the predominant growth driver. With this latest round, you'll see that we do expect online to be a slight increase on the full year.

Speaker #2: We're going to go ahead and do that as per the normal kind of Zoom process in February. With that said, maybe to touch on a couple of your questions, and with more specifics, any pricing kind of elements, we would always try and give real clarity to investors.

Speaker #2: If we choose to do that, you would also get that in the February time zone. So maybe let me just pause a little bit and share some thoughts about how we think about long-term growth.

Maybe let me just pause a little bit and share some thoughts about how we think about kind of long-term growth. First, with this latest forecast, enterprise will continue to be the predominant growth driver. With this latest round, you'll see that we do expect online to be a slight increase on the full year.

Speaker #2: First, with this latest forecast, you know enterprise will continue to be the predominant growth driver. With this latest round, you'll see that we do expect online to be a slight increase.

Speaker #2: On the full year, and really the elements that investors should have top of mind as they think about the growth path for 2027 or even beyond that are the same elements that we've been talking about. First and foremost is stabilization, excuse me, of churn.

Michelle Chang: The elements that investors should have top of mind as they think about growth path for 2027 or even beyond that are the same elements that we've been talking about, first and foremost, stabilization, excuse me, yeah, churn. Then product diversification, moving up market. Those three priorities are going to be also the predominant drivers and focus of growth going forward.

The elements that investors should have top of mind as they think about growth path for 2027 or even beyond that are the same elements that we've been talking about, first and foremost, stabilization, excuse me, yeah, churn. Then product diversification, moving up market. Those three priorities are going to be also the predominant drivers and focus of growth going forward.

Speaker #2: And then product diversification, moving up-market, and really those three priorities are going to be also the predominant drivers and focus of growth going forward.

Speaker #2: forward. Thank

Speaker #3: you.

Tyler Radke: Thank you.

Speaker #2: Our next question is from Michael Funk with Bank of.

Operator: Our next question is from Michael Funk with Bank of America.

Speaker #2: America. Yeah, great, great.

Michael Funk: Yeah, great, great. Thank you for the question. Maybe a related question asked a slightly different way. Looking at the enterprise net dollar expansion you reported, still below 100%, clearly an opportunity to help drive top-line growth if that does improve. Several competitors, though, noted they're continuing to see post-COVID seat-based contraction. Can you peel apart the pressure on NDE, and if you're also seeing post-COVID seat-based contraction, and if you are, when you expect that to turn and maybe contribute to more positive top-line growth?

Speaker #4: Thank you for the question. Maybe a related question after slightly different way. So looking at the enterprise net dollar expansion you reported, still below 100%, clearly an opportunity to help drive top-line growth if that does improve.

Speaker #4: Competitors, though, noted they're continuing to see post-COVID seat-based contraction. So, can you peel apart the pressure on NDE and if you're also seeing post-COVID seat-based contraction?

Speaker #4: And if you are, when do you expect that to turn and maybe contribute to more positive top-line growth?

Speaker #2: Yeah. First, thanks for the question. Look, we're pleased after six quarters to see a net dollar expansion stabilizing. We're not going to sort of guide to inflection, but certainly, inflection is the goal.

Michelle Chang: Yeah. First, thanks for the question. Look, we're pleased after six quarters to see the net dollar expansion stabilizing. We're not going to sort of guide to inflection, but certainly, inflection is the goal. What I would say in terms of how to think about it, maybe just a continued reminder for investors, that when we have products like Zoom Contact Center and Workvivo that tend to bring in new customers to Zoom, those will obviously take a little while to play through the dynamic of the metrics. Overall, in terms of your maybe more specific question about seat count, that's not something that we've seen be a huge element to our quarter. Certainly, always customers here and there will have seat pressures, but we've seen overall a very strong macro demand.

Speaker #2: I would say, in terms of how to think about it, maybe just to continue to remind investors that when we have products like Contact Center and Workvivo, they tend to bring in new customers to Zoom.

Speaker #2: Those will obviously take a little while to play through the dynamic of the metric. But overall, in terms of your maybe more specific question about seat count, that's not something that we've seen be a huge element to our quarter. Certainly, there are always customers here and there who will have seat pressures.

Speaker #2: But we've seen overall a very strong macro demand.

Speaker #4: Great. Thank you, Michelle. Thank you, Eric.

Michael Funk: Great. Thank you, Michelle. Thank you, Eric.

Speaker #1: Thank

Speaker #1: you. Our next question is

Rishi Jaluria: Thank you.

Eric Yuan: Thank you.

Operator: Our next question is from Rishi Jaluria with RBC Capital Markets.

Speaker #2: from Rishi Jaluria with RBC Capital.

Speaker #2: Markets. Rishi, are you

Speaker #1: there? Oh, there we go.

Rishi Jaluria: Rishi, are you there?

Eric Yuan: Rishi, are you there?

Speaker #4: It's my apologies on that. Thanks so much for taking my questions. Maybe just one simple one from me. Coming out of Zoomtopia, there was conversation around M&A.

Michael Funk: Oh, there we go. My apologies on that. Thanks so much for taking my questions. Maybe just one simple one from me. Coming out of Zoomtopia, there was conversation around M&A, and I know you've done some too small tuck-ins right now. Is this just kind of how we should be thinking about M&A for you going forward in terms of it'll be more technological, a little tuck-in in nature, obviously accelerating your AI roadmap, or is there a potential for maybe more transformational M&A? Thanks.

Rishi Jaluria: Oh, there we go. My apologies on that. Thanks so much for taking my questions. Maybe just one simple one from me. Coming out of Zoomtopia, there was conversation around M&A, and I know you've done some too small tuck-ins right now. Is this just kind of how we should be thinking about M&A for you going forward in terms of it'll be more technological, a little tuck-in in nature, obviously accelerating your AI roadmap, or is there a potential for maybe more transformational M&A? Thanks.

Speaker #4: And I know you've done some smaller tuck-ins right now. Is this just kind of how we should be thinking about M&A for you going forward, in terms of it being more technological, a little tuck-in in nature, obviously accelerating your AI roadmap, or is there a potential for maybe more transformational?

Speaker #4: M&A? Thanks. Yeah.

Speaker #2: Thanks, Rishi, for the question. Really, I would say our thoughts on M&A are very consistent with what I've said previously. There’s really no change; just to update investors.

Michelle Chang: Yeah, thanks, Rishi, for the question. Really, I would say our thoughts on M&A are very consistent to kind of what I've said previously, really no change, just to update investors. Let me go ahead and recap them just for everybody's knowledge. First of all, we're going to be very thoughtful and disciplined in both acquisitions and integrations. We're going to make sure that they're strategically aligned with synergies, and obviously coming with sound financials. For Zoom, that typically will mean small to medium-sized investments. Think of the Bonsai and BrightHire M&A as small in nature. It's helpful. We'll be in.

Speaker #2: But let me go ahead and recap them just for everybody's knowledge. First of all, we're going to be very thoughtful and disciplined in both acquisitions and integrations.

Speaker #2: We're going to make sure that they're strategically aligned with synergies and, obviously, coming with sound financials. For Zoom, that typically will mean a small to medium-sized investment.

Speaker #2: Think of the bonsai and bride hire M&A as small in nature. It's helpful. So we'll be in all the way up to.

Speaker #1: OK, helpful. Thank you so much. Yeah. All right. Thank you.

Rishi Jaluria: Okay, helpful. Thank you so much.

Speaker #2: medium.

Michelle Chang: All the way up to medium.

Rishi Jaluria: Yeah. All right. Thank you.

Speaker #2: Our next question comes from Josh Baer with Morgan Stanley.

Operator: Our next question comes from Josh Baer with Morgan Stanley.

Speaker #1: Excellent. Thank you. Thank you very much for the question. Congrats on the beat and raise. I wanted to double-click on growth, enterprise growth from one more angle—just really double-clicking on Zoom Phone ARR, which is growing mid-teens, Customer Experience, high double-digit growth, Workvivo—you have rapid growth there.

Josh Baer: Excellent. Thank you. Thank you very much for the question. Congrats on the beat and raise. I wanted to double-click on growth, enterprise growth from one more angle. Just really double-clicking on Zoom Phone, ARR, which is growing mid-teens, customer experience, high double-digit growth, Workvivo, you have rapid growth there. Could you walk through each of those growth areas? Just wondering how you think about the sustainability of those growth factors.

Speaker #1: Could you walk through each of those growth areas? Just wondering how you think about the sustainability of those growth factors.

Speaker #2: Yeah. Maybe I can take that one. And maybe I'll use the opportunity as well. And Josh, just to call out to investors, we made a slight tweak to the three priorities that we've been highlighting to investors, really two themes of what we were trying to get across.

Michelle Chang: Yeah, maybe I can take that one. Maybe I'll use the opportunity as well, Josh, just to call out to investors. We made a slight tweak to the three priorities that we've been highlighting to investors. Really, two themes of what we were trying to get across. One, AI in all of our priorities. Two, really just sharpening kind of the language with which we talked about our priorities. Let me introduce them or reintroduce them to the same as what Eric talked about in his script and give an update to sort of get at your product-specific questions. The first one is really about elevating workplace with AI. Broadly, what that means is AI over the entire meeting lifecycle. The things that I would think about in terms of growth and progress that we saw in Q3 are continued progress against churn.

Speaker #2: One, AI in all of our priorities. And two, really just sharpening kind of the language with which we talk about our priorities. So let me introduce them, or reintroduce them, the same as what Eric talked about in his script, and give an update to sort of get at your product-specific question.

Let me introduce them or reintroduce them to the same as what Eric talked about in his script and give an update to sort of get at your product-specific questions. The first one is really about elevating workplace with AI. Broadly, what that means is AI over the entire meeting lifecycle. The things that I would think about in terms of growth and progress that we saw in Q3 are continued progress against churn.

Speaker #2: The first one is really about elevating the workplace with AI. Broadly, what that means is AI over the entire meeting lifecycle. The things that I would think about in terms of growth and progress that we saw in Q3 are continued progress against churn.

Speaker #2: This is the fifth consecutive quarter in enterprise for year-over-year declines in churn, and you obviously heard the callout in online for record low churn.

Michelle Chang: This is the fifth consecutive quarter on enterprise for year-over-year declines on churn. You obviously heard the call-out in online for record low churn. Not just that, it's the Zoom Phone. Increasingly, how much AI comes up in our win rates, you see it in the 10 million seats and the mid-teen growth. Second big priority for us is to drive new products with AI. Oh, I should mention on the previous one, also integral to that, that sort of sets up the second one, is getting that AI usage going. That's where we continue to see 4x year-over-year MAU increase in our AI. When it comes to new products in AI, we have sort of the horizontal that builds up that AI usage. You see the big names in Salesforce and Oracle.

This is the fifth consecutive quarter on enterprise for year-over-year declines on churn. You obviously heard the call-out in online for record low churn. Not just that, it's the Zoom Phone. Increasingly, how much AI comes up in our win rates, you see it in the 10 million seats and the mid-teen growth. Second big priority for us is to drive new products with AI. Oh, I should mention on the previous one, also integral to that, that sort of sets up the second one, is getting that AI usage going.

Speaker #2: But not just that. It's the Zoom Phone and increasingly how much AI comes up in our win rates. You see it in the 10 million seats in the mid-team growth.

Speaker #2: Our second big priority is to drive new products with AI. Oh, I should mention on the previous one, also integral to that, which sort of sets up the second one, is getting that AI usage going.

Speaker #2: And so that's where we continue to see a four times year-over-year MAL increase in our AI. When it comes to new products in AI, we have sort of the horizontal that builds up that AI usage.

That's where we continue to see 4x year-over-year MAU increase in our AI. When it comes to new products in AI, we have sort of the horizontal that builds up that AI usage. You see the big names in Salesforce and Oracle.

Speaker #2: And you see the big names in Salesforce and Oracle still early days, but pleased to see that in our second quarter-end, building off the names we shared last quarter.

Michelle Chang: Still early days, but pleased to see that in our second quarter and building off the names we shared last quarter. Certainly, then there's vertical, be it our ZRA product or our new BrightHire acquisition. Last, to kind of get at your Contact Center question or comment, is really to scale AI-first customer experience, whether that's agent-assisted or virtual agent. Really, what you're seeing called out by Eric in his script is strong, high double-digit revenue growth, customer growth in the 60+%. Also, just in the nature of the deals, a strong AI preference, nine of the top 10 deals pulling AI and many pulling both virtual and our agent-assisted. A lot that we're excited about as we pivot to growth going forward to update on our product side.

Still early days, but pleased to see that in our second quarter and building off the names we shared last quarter. Certainly, then there's vertical, be it our ZRA product or our new BrightHire acquisition. Last, to kind of get at your Contact Center question or comment, is really to scale AI-first customer experience, whether that's agent-assisted or virtual agent. Really, what you're seeing called out by Eric in his script is strong, high double-digit revenue growth, customer growth in the 60+%. Also, just in the nature of the deals, a strong AI preference, nine of the top 10 deals pulling AI and many pulling both virtual and our agent-assisted. A lot that we're excited about as we pivot to growth going forward to update on our product side.

Speaker #2: And certainly, then there's vertical, be it our ZRA product or our new BrideHire acquisition. And then last, to kind of get at your contact center question, or comment, is really to scale AI-first customer experience, whether that's agent-assisted or virtual agent. Really, what you're seeing called out by Eric in his script is strong, high double-digit revenue growth, customer growth in the 60-plus percent, and then also just in the nature of the deals, a strong AI preference, with nine of the top ten deals pulling AI.

Speaker #2: And many are pulling both virtual and our agent-assisted. So a lot that we're excited about is we pivot to growth going forward to update on our product.

Speaker #2: side. Great.

Speaker #1: Thank you.

Rishi Jaluria: Great. Thank you.

Josh Baer: Great. Thank you.

Speaker #2: Yeah. Next up, we'll hear from Ryan McWilliams with Wells Fargo.

Operator: Next up, we'll hear from Ryan McWilliams with Wells Fargo.

Speaker #1: Hey, guys. Good to see you again. Really cool to see the AI avatar in the prepared remarks. Maybe one day I’ll be asking AI Michelle about growth next year.

Josh Baer: Hey, guys. Good to see you again. Really cool to see the AI avatar in the prepared remarks. Maybe one day I'll be asking AI Michelle about growth next year. Just kidding.

Ryan MacWilliams: Hey, guys. Good to see you again. Really cool to see the AI avatar in the prepared remarks. Maybe one day I'll be asking AI Michelle about growth next year. Just kidding.

Speaker #1: Just

Speaker #1: Kidding. Under bots, Ryan, to talk to one.

Michelle Chang: We send our bots, Ryan, to talk to one another.

Speaker #1: Yeah. AI Mac, I don't know if you can recreate the Philly accent, but just one for Eric, actually. So, Zoom has had really strong product velocity historically.

Josh Baer: Yeah. AI Mac, I don't know if you can recreate the Philly accent, but just one for Eric, actually. Zoom has had really strong product velocity historically. As product development timelines shrink even further with agentic coding, do you think this offers Zoom the opportunity to build more product density into your existing products with new features or expand into new product categories?

Speaker #1: And as product development timelines shrink even further with agentic coding, do you think this offers Zoom the opportunity to build more product density into your existing products with new features, or expand into new products?

Speaker #1: categories? Well,

Speaker #3: Ryan, this is a great question. I think that in the AI era, every business is, right? And I’m facing similar challenges and also greater opportunities.

Eric Yuan: Well, Ryan, this is a great question. I think in the AI era, every business is right and are facing the similar challenge, and also the great opportunities. The innovation speed is unprecedented. Look at the way engineers write the code. Look at the marketing service team, how they leverage AI to automate the process. We got to leverage AI to reinvent everything. The good news, I have an engineer background, right? I think I have to, I know I also determined to spend way more time than any time in my career to double down, triple down on the product side. I think there's a huge opportunity, meaning we have to change the company culture and make sure every engineer, right, the way they write the code is totally different. The way they troubleshoot, the test also is very different.

Speaker #3: So, the innovation speed is unprecedented. Look at the way engineers write the code. Look at the marketing sales team and how they leverage AI to automate the process.

Speaker #3: We got to leverage AI to reinvent everything. The good news is I have an engineering background, right? I think I have to, and I also determine to spend way more time than any time in my career to double down, triple down on the product side.

The good news, I have an engineer background, right? I think I have to, I know I also determined to spend way more time than any time in my career to double down, triple down on the product side. I think there's a huge opportunity, meaning we have to change the company culture and make sure every engineer, right, the way they write the code is totally different. The way they troubleshoot, the test also is very different.

Speaker #3: I think there's a huge opportunity in meaning. We have to change the company culture and make sure every engineer, the way they write the code, is totally different.

Speaker #3: The way they troubleshoot the test is also very different. When you make sure every engineer, even if they write tens of thousands of lines of code, has to embrace AI now—back to your question—I truly believe the innovation speed will be much faster to build new features and new services, right?

Eric Yuan: When you make sure every engineer, even if they write the tens of thousand lines of code before, they have to embrace AI now. Back to your question, I truly believe the innovation speed will be much faster to build new features and new services, right? I think that's an opportunity. We are in a much better position. Again, I'm figuring out a way to really spend more time on that. That's the reason why I can tell you I couldn't be more excited now. Finally, I think we are going back to the early days of Zoom, double down on the product, leverage AI, build innovative services. You are so right, so.

When you make sure every engineer, even if they write the tens of thousand lines of code before, they have to embrace AI now. Back to your question, I truly believe the innovation speed will be much faster to build new features and new services, right? I think that's an opportunity. We are in a much better position. Again, I'm figuring out a way to really spend more time on that. That's the reason why I can tell you I couldn't be more excited now. Finally, I think we are going back to the early days of Zoom, double down on the product, leverage AI, build innovative services. You are so right, so.

Speaker #3: I think that's an opportunity, and we are much better positioned, right? And again, I'm figuring out a way to really spend more time on that.

Speaker #3: That's the reason why I can tell you I couldn't be more excited now. Finally, I think we are going back to the early days of Zoom, doubling down on the product, leveraging AI, and building innovative services.

Speaker #3: And you are so right.

Speaker #1: Appreciate the callback. Thanks, Eric.

Rishi Jaluria: Appreciate the color. Thanks, Eric.

Speaker #3: Thank you.

Eric Yuan: Thank you.

Speaker #2: Our next question comes from Patrick Walravens with the following inquiry.

Operator: Our next question comes from Patrick Walravens with Citizens.

Speaker #2: Citizens. Oh,

Speaker #4: Great. Thank you. Let me add my congratulations. I love the accent that you picked, Eric. I don't know what it was, but it was fantastic.

Seth Gilbert: Oh, great. Thank you. Let me add my congratulations.

Patrick Walravens: Oh, great. Thank you. Let me add my congratulations.

Michael Funk: Love the accent that you pick, Eric. I don't know what it was, but it was fantastic. Can you go into some detail and help us understand exactly how the Salesforce win works? Eric, if you're sitting there with any off, how do you pitch it, right? Then it just gives us some details on how it changes the experience for people at Salesforce.

Love the accent that you pick, Eric. I don't know what it was, but it was fantastic. Can you go into some detail and help us understand exactly how the Salesforce win works? Eric, if you're sitting there with any off, how do you pitch it, right? Then it just gives us some details on how it changes the experience for people at Salesforce.

Speaker #4: Can you go into some detail and help us understand exactly how the Salesforce win works? Like, Eric, if you're sitting there with any of... how do you pitch it, right?

Speaker #4: And then it just gives us some details on how it changes the experience for people at Salesforce.

Speaker #3: Yeah. So Salesforce is a great company, and the market is a great friend, also with our investor, right? Pretty sure he's thinking about AI every day as well.

Eric Yuan: Yeah, Salesforce is a great company. Marcus is a great friend, also was our investor. Pretty sure he's thinking about AI every day as well. Look at the Salesforce event, right? Dreamforce is very successful, the Agentforce event, very successful, right? They have an Agentforce framework. They also have a customer and how to integrate our AI company, I mean, sorry, the customer and AI company, right, to integrate with the Agentforce framework. Essentially, we drive the productivity, right? Because they have a genetic framework with our customer and company together, for sure. That's a no-brainer, right, to integrate it together. Given our customer, why not, right, to enable this feature? That's how this conversation started. That's the reason why they decided to move forward with a customer and a company.

Speaker #3: Look at it as a Salesforce event, right? Dreamforce is very successful. The Agent of Change event, very successful, right? So they have an Agent of Change framework.

Speaker #3: They also have a customer interested in how to integrate our AI company, I mean, sorry, the customer and the AI company, right? To integrate with the Agent of Force framework.

Speaker #3: Essentially, we drive the productivity, right? Because they have an agentic framework, right? With our customer company, together for sure, that's a no-brainer, right? To integrate it together.

Essentially, we drive the productivity, right? Because they have a genetic framework with our customer and company together, for sure. That's a no-brainer, right, to integrate it together. Given our customer, why not, right, to enable this feature? That's how this conversation started. That's the reason why they decided to move forward with a customer and a company.

Speaker #3: Given our customer, why not, right? To enable this feature. That's how this conversation started. That's the reason why they decided to move forward with the customer AI company.

Speaker #3: More and more customers realize the potential not only for Zoom AI company, but also for the Customer AI company. I think that's the reason why, in the next month, we are going to announce our Zoom AI company suite GA, right?

Eric Yuan: More and more customers realize the potential of not only for Zoom AI Companion, but also the customer and the AI company. I think that's the reason why in the next months, we are going to announce our Zoom AI Companion 3.0 GA, right? A lot of opportunity ahead of us. Salesforce, again, just one example.

More and more customers realize the potential of not only for Zoom AI Companion, but also the customer and the AI company. I think that's the reason why in the next months, we are going to announce our Zoom AI Companion 3.0 GA, right? A lot of opportunity ahead of us. Salesforce, again, just one example.

Speaker #3: So, a lot of opportunity ahead of us. Salesforce, again, just one.

Speaker #3: example. All right.

Speaker #4: Thank you.

Seth Gilbert: All right. Thank you.

Patrick Walravens: All right. Thank you.

Speaker #3: Yeah. I will invite you to test our AI company suite next month. We never will reach GA, so I'm pretty excited. Our employees really like that too.

Eric Yuan: Thank you. Yeah, I will invite you to test our AI Companion 3.0 next month. We never will reach GA. I'm pretty excited. Our employees really like that too.

Speaker #2: Hi, next question comes from Alex Zukin with Rosenblatt Securities.

Operator: Our next question comes from Alex Zukin with Wolf Research.

Speaker #2: Wolf Research. Hey, guys.

Speaker #1: Thanks, sir, for having me on. And Eric, I'd love to test out that virtual avatar when it's ready for GA. Maybe just a quick one for you and a quick one for Michelle.

Alex Zukin: Hey, guys. Thanks, Sir, for having me on. Eric, I'd love to test out that virtual avatar when it's ready for GA. Maybe just a quick one for you and a quick one for Michelle. For you, Eric, when you think about AI monetization that you're seeing in the business and in the quarter and in the coming quarters, maybe talk about that a little bit. Michelle, for deferred revenue, it was a little bit light of your high end of your guide this quarter, but it seems like it's actually a pretty strong guide for next quarter. Was there anything that shifted from one quarter to the next or pushed out or pulled in that maybe explains that?

Speaker #1: For you, Eric, when you think about AI monetization that you're seeing in the business and in the quarter, and in the coming quarters, maybe talk about that a little bit.

Speaker #1: And then, Michelle, for deferred revenue, it was a little bit light of your high end of your guidance this quarter, but it seems like it's actually a pretty strong guide for next quarter.

Speaker #1: Was there anything that shifted from one quarter to the next, or pushed out or pulled in, that maybe explains that?

Speaker #3: Yeah, so yeah, Alex. By the way, what you offered, a feature already there, right? This is the third time I'm using my AI avatar for our earnings call, right?

Eric Yuan: Yeah. Yeah, Alex, by the way, the virtual avatar feature already is there, right? This is the third time I'm using my AI avatar for our earning call, right? That frees up a lot of my time. I really love that. Back to your question for monetizing AI as a mission, right? Look at the few priorities, right? Elevate the Zoom Workplace with AI, and double down on the AI-centric product. You look at our horizontal collaboration suite, the AI Companion as a mission, right? Look at the usage year over year, already four times more, right? Customer AI Companion, we can monetize and form a sales team. Also, we are going to have introduced the new SKU to monetize AI Companion as well online. That is on one hand.

Speaker #3: I said, "Free up a lot of my time." I really love that. So, back to your question: monetize the AI, as Michelle mentioned, right?

Speaker #3: Look at the few priorities, right? Elevate the Zoom workplace with AI and double down on those AI-centric products. Look at our horizontal collaboration suite.

You look at our horizontal collaboration suite, the AI Companion as a mission, right? Look at the usage year over year, already four times more, right? Customer AI Companion, we can monetize and form a sales team. Also, we are going to have introduced the new SKU to monetize AI Companion as well online. That is on one hand.

Speaker #3: AI companion, as Michelle mentioned, right? Look at the usage year over year; it’s already four times more, right? Customer AI companion—we can monetize—and from a sales team, we are also going to introduce the new SKU to monetize AI company as well online.

Speaker #3: And this is on one hand. On the other hand, we also have vertical services like Zoom Contact Center, right? And your agent, right?

Eric Yuan: On the other hand, we also have vertical services like Zoom Contact Center, right, and Virtual Agent, right, Zoom AI Companion, right, and also the Zoom Revenue Accelerator for each of those departmental applications, including the vertical market solutions like Zoom Workplace for educators, clinicians, and also for the frontline workers. A lot of AI features already built in, we can monetize. Not to mention Zoom AI Companion 3.0 will be ready next month. I think almost everywhere, and we can leverage AI, improve productivity, improve the features. At the same time, we also can monetize as well. It's not a single thing, right, a single product we want to monetize. It's almost everywhere across the entire product portfolio. Back to the BrightHire, the acquisition. The reason why we acquired that company also is leverage AI to improve the hiring as well.

On the other hand, we also have vertical services like Zoom Contact Center, right, and Virtual Agent, right, Zoom AI Companion, right, and also the Zoom Revenue Accelerator for each of those departmental applications, including the vertical market solutions like Zoom Workplace for educators, clinicians, and also for the frontline workers. A lot of AI features already built in, we can monetize. Not to mention Zoom AI Companion 3.0 will be ready next month. I think almost everywhere, and we can leverage AI, improve productivity, improve the features. At the same time, we also can monetize as well.

Speaker #3: Zoom AI assistant, right? And also the Zoom revenue accelerator for each of those departmental applications, including the vertical market solutions like Zoom Workplace for educators, right?

Speaker #3: And clinicians, as well as the frontline workers. A lot of AI features are already built in. We can monetize this. Not to mention, the Zoom AI Companion Suite will be ready next month.

Speaker #3: I think almost everywhere we can leverage AI to improve productivity and enhance features. At the same time, we can also monetize as well. It's not a single thing, right?

It's not a single thing, right, a single product we want to monetize. It's almost everywhere across the entire product portfolio. Back to the BrightHire, the acquisition. The reason why we acquired that company also is leverage AI to improve the hiring as well.

Speaker #3: A single product we want to monetize. It's almost everywhere, across the entire product portfolio. Back to the brighter high, the acquisition. The reason why we acquired that company also leveraged AI to improve the hiring as well.

Speaker #3: So, essentially, AI is a foundation for us. We can monetize; we can innovate.

Eric Yuan: AI is a foundation for us. We can monetize, we can innovate, so.

AI is a foundation for us. We can monetize, we can innovate, so.

Speaker #2: Yeah. And it's helpful, Alex, maybe just to tag on to Eric, and then I'll hit your deferred revenue question. We produced said Zoomtopia as sort of a framework of AI monetization because it does kind of monetize indirectly and directly in different ways.

Michelle Chang: Yeah. If helpful, Alex, maybe just to tag on to Eric, then I'll hit your deferred revenue question. We produce Zentoopia as sort of a framework of AI monetization because it does kind of monetize indirectly and directly in different ways. Happy to share that with investors after. To Eric's point, as you go through that framework that we shared with investors, progress on every single trend in the third quarter. To your deferred revenue question, look, we ended upper end of the range, gave a very consistent guidance in Q4. Nothing really to call out. Results were sort of as expected on the deferred revenue.

Speaker #2: Happy to share that with investors and, to Eric's point, as you go through that framework that we shared with investors, there has been progress on every single front in the third quarter.

Speaker #2: To your deferred revenue question: look, we ended at the upper end of the range and gave very consistent guidance for Q4. So nothing really to call out.

Speaker #2: Results were sort of as expected on the deferred.

Speaker #2: revenue. Thank you, Thanks,

Speaker #1: Alex.

Eric Yuan: Thank you, Alex.

Speaker #2: Alex: Our next question comes from Timothy Horan with Oppenheimer.

Michelle Chang: Thanks, Alex.

Operator: Our next question comes from Timothy Horan with Oppenheimer.

Speaker #5: Question: What other apps are really important to improve your overall productivity strategy or software? Thank you.

Rishi Jaluria: What other apps that are really important to kind of improve on your overall productivity strategy or software? Thank you.

Tim Horan: What other apps that are really important to kind of improve on your overall productivity strategy or software? Thank you.

Speaker #2: The first part of the question—I'm so sorry—cut out. Would you mind repeating that just?

Michelle Chang: The first part of the question, I'm so sorry, cut out. Would you mind repeating that just so I?

Speaker #5: Yeah, sure. Sorry, Michelle. An important part of the strategy, I think, is to integrate with other productivity software apps. Can you talk about some of the most critical ones and where you are in that?

Rishi Jaluria: Yes, sure. Sorry, Michelle. An important part of the strategy, I think, is to integrate with other productivity software apps. Can you talk about some of the most critical ones, and where you are in the process?

Tim Horan: Yes, sure. Sorry, Michelle. An important part of the strategy, I think, is to integrate with other productivity software apps. Can you talk about some of the most critical ones, and where you are in the process?

Speaker #5: process? Yeah.

Michelle Chang: Yeah. Eric, do you want to take that?

Speaker #2: Eric, you want to take

Speaker #2: that? Sure.

Speaker #3: I think, first of all, we have way beyond really conversing, right? So we have so many other services we would like to integrate. At the same time, look at the ecosystem, right?

Eric Yuan: Sure. I think, first of all, we have way beyond video conferencing, right? We have so many other services we would like to integrate. At the same time, look at the ecosystem, right? We do integrate with Google ecosystem well and Microsoft ecosystem well as well, plus ServiceNow, Salesforce, and Atlassian, all those popular productivity tools, right? We all work on the integration. Again, this is an open ecosystem. We listen to our customer very carefully. Whenever they tell us, hey, you need more integration, we also work on that as well.

Speaker #3: We integrate well with the Google ecosystem, as well as the Microsoft ecosystem. Plus, we work seamlessly with ServiceNow, Salesforce, and Atlassian— all those popular productivity tools, right?

Speaker #3: We all work on the integration. Again, this is the open ecosystem. And we also listen to our customers very carefully. Whenever they tell us, "Hey, we need more integration," we also work on that as well.

Speaker #5: And is AI making that easier or harder at this?

Rishi Jaluria: Is AI making that easier or harder at this point?

Tim Horan: Is AI making that easier or harder at this point?

Eric Yuan: Easier and harder. Meaning the reason why easy, for sure, from an execution perspective, for sure easier. The harder part is because of AI, every customer, they want to tell us, hey, given the AI error, can you integrate more, right? Can you release it in a timely manner, right? The requirement also is different, right? From that perspective, a little bit harder, but really boils down to execution. I have confidence our team can deliver.

Speaker #3: And hard. Meaning the reason why it's easy, for sure, from an execution perspective. And easy, sure, easier. The hard part is because of AI; every customer, they want to tell us, "Hey, given the AI error, can you integrate more?" Right?

Speaker #3: Can you release in a timely manner? Right? So the requirement also is different, right? From that perspective, it’s a little bit harder, but it really boils down to execution.

Speaker #3: So, I have confidence our team can deliver.

Speaker #5: Thank you.

Rishi Jaluria: Thank you.

Tim Horan: Thank you.

Speaker #3: Thank you.

Eric Yuan: Thank you.

Speaker #2: Our next question is from Seth Gilbert with UBS.

Operator: Our next question is from Seth Gilbert with UBS.

Speaker #6: Hey, thanks for the question. Free cash flow is a bit above what we in the street remodeling, and free cash flow margin hit 50%.

Seth Gilbert: Hey, thanks for the question. Free cash flow is a bit above what we in the street were modeling, and free cash flow margin hit 50%. I'm curious if you call out anything additional here. Were there any one-time benefits to free cash flow? Thank you.

Speaker #6: I'm curious if you could call out anything additional here. Were there any one-time benefits to free cash flow?

Speaker #6: Thank you. Yeah.

Michelle Chang: Yeah. Thanks, Sir. Obviously, we're pleased with the Q3 results. As such, it made sense to update the full year guidance as well. I'm pleased with the overall progress, frankly, that we made since the beginning of the year kind of guidance. With that said, to your question specifically on the one-time, look, there are very durable results as part of that. You see that obviously in our core financials. The one thing that we did put in the script that I would make sure I emphasize with investors is we made some changes as part of our selections process, really looking at that more end-to-end as a new CFO coming in. As a result, we were able to make real notable progress on DSO.

Speaker #2: Thanks. Thanks for it. Obviously, we're pleased with the Q3 results, and as such, it made sense to update the full-year guidance as well.

Speaker #2: So pleased with the overall progress, frankly, that we made since the beginning of the year, kind of guidance. With that said, to your question specifically on the one-time, look, there are very durable results as part of that.

Speaker #2: You see that obviously in our core financials. The one thing that we did put into script, that I would make sure I emphasize with investors, is we made some changes as part of our selection process, really looking at that more end-to-end. As a new CFO coming in, and as a result, we were able to make real notable progress on DSO.

The one thing that we did put in the script that I would make sure I emphasize with investors is we made some changes as part of our selections process, really looking at that more end-to-end as a new CFO coming in. As a result, we were able to make real notable progress on DSO.

Speaker #2: Those are sustainable changes to our DSO. But obviously, you won't continue to see that marked progress as we go forward, meaning it won't continue to accelerate off that.

Michelle Chang: Those are sustainable changes to our DSO, but obviously, you won't continue to see that marked progress as we go forward, meaning it won't continue to accelerate off that. You can kind of think about that as durable, but one-time a bit in nature.

Those are sustainable changes to our DSO, but obviously, you won't continue to see that marked progress as we go forward, meaning it won't continue to accelerate off that. You can kind of think about that as durable, but one-time a bit in nature.

Speaker #2: So you can kind of think about that as durable, but one time a bit in.

Speaker #2: So you can kind of think about that as durable, but one time a bit in nature. Got it.

Speaker #6: Yeah. Thank you.

Seth Gilbert: Yeah, yeah. Thank you.

Speaker #3: Yes. By the way, obviously, I will be sure she did a great job. Really, try her team, right? Dramatically improve our collection process. This is very sustainable.

Eric Yuan: Yes. Yes. That's, by the way, our CFO Michelle. She did a great job, really drive the team, right? Dramatically improve our collection process. It is very sustainable.

Speaker #6: We agree.

Seth Gilbert: We agree.

Speaker #3: Thank Yeah.

Speaker #3: you. Next, we'll hear from

Michelle Chang: Yep.

Eric Yuan: Thank you.

Michelle Chang: Yep.

Eric Yuan: Thank you.

Operator: Next, we'll hear from James Fish with Piper Sandler.

Speaker #2: James Fish with Piper Sandler.

Speaker #7: Hey, guys. Thanks for the question. Maybe Eric, this is for you on BrightHire. Is this the start of expanding into other mission-critical business workflows, or how should we think about it? I'm not asking about the M&A strategy, but more about that sort of broader platform expansion.

Alex Zukin: Hey, guys. Thanks for the question. Maybe, Eric, for you on BrightHire. Is this the start of expanding into other mission-critical business workflows, or how should we think about, I'm not asking about the M&A strategy, more about that sort of broader platform expansion? Michelle, how should we think at this point about the duration of the overall install base? Thanks.

James Fish: Hey, guys. Thanks for the question. Maybe, Eric, for you on BrightHire. Is this the start of expanding into other mission-critical business workflows, or how should we think about, I'm not asking about the M&A strategy, more about that sort of broader platform expansion? Michelle, how should we think at this point about the duration of the overall install base? Thanks.

Speaker #7: And Michelle, how should we think at this point about the duration of the overall install base? Thanks.

Speaker #1: Well, this is a greater question. So my great friend Jim Cramer made a comment recently, right? And he wishes Zoom would become more than just a Zoom, right?

Eric Yuan: Well, this is a great question. My great friend, Jim Cramer, made a comment recently, right? He wishes Zoom would become more than just Zoom, right? That's our strategy over the past few years. Double down on Zoom Phone, launch the Zoom Contact Center, leverage our technology, right, to focus on those business mission-critical use cases. We are already doing that over the past few years. The BrightHire acquisition is just another way for us to double down on business mission-critical applications. We cannot build everything by ourselves, right? Why not? We do not have a greater remote hiring solution to target the HR remote hiring use case, right? BrightHire fits very well to our strategy. You will see that more and more we are going to leverage AI, because data, AI, and focus on those business mission-critical use cases.

Speaker #1: And that's our strategy over the past few years: double down on Zoom Phone, launch the Zoom Connect Center, and leverage our technology to focus on those business mission-critical use cases.

Speaker #1: We have already been doing that over the past few years. The Bright Hire acquisition is just another way for us to double down on business mission-critical applications.

Speaker #1: We cannot build everything by ourselves, right? Why not? We do not have a greater remote hiring solution to target HR's remote hiring use case, right?

We cannot build everything by ourselves, right? Why not? We do not have a greater remote hiring solution to target the HR remote hiring use case, right? BrightHire fits very well to our strategy. You will see that more and more we are going to leverage AI, because data, AI, and focus on those business mission-critical use cases.

Speaker #1: BrightHire fits very well with our strategy. You will see that more and more we are going to leverage AI because data, AI, and focus on those business mission-critical use cases.

Speaker #1: Way more than just video conferencing, and this is all our strategy over the past few years. We are going to continue that strategy.

Eric Yuan: Way more than just video conferencing. This is all our strategy over the past few years, and we are going to continue that strategy. Your comment is right, huh?

Way more than just video conferencing. This is all our strategy over the past few years, and we are going to continue that strategy. Your comment is right, huh?

Speaker #1: So your comment is right

Speaker #1: on. And just so I get to.

Michelle Chang: Just so I get to your right question, your question on install base was in regards to BrightHire, or?

Speaker #2: Your right question, your question on install base was in regards to BrightHire, or?

Speaker #3: No, it was a separate question around the duration that you're seeing because it seems as though you guys are doing pretty well on sort of cross-sell of existing products, and you're seeing that show up also on the long-term RPO really driving some growth here on the overall RPO.

Alex Zukin: No, it was a separate question around the duration that you're seeing because it seems as though you guys are doing pretty well on sort of cross-sell of existing products, and you're seeing that show up also on the long-term RPO, really driving some growth here on the overall RPO. Just trying to understand where the duration of the enterprise contracts has gone.

James Fish: No, it was a separate question around the duration that you're seeing because it seems as though you guys are doing pretty well on sort of cross-sell of existing products, and you're seeing that show up also on the long-term RPO, really driving some growth here on the overall RPO. Just trying to understand where the duration of the enterprise contracts has gone.

Speaker #3: So, just trying to understand where the duration of the enterprise contracts has gone.

Speaker #2: Yeah. Look, I think many quarter to quarter, you're going to see fluctuations. We've had a very consistent RPO trend in the current quarter. I'm very pleased with the current quarter RPO that went up.

Michelle Chang: Yeah. Look, I think, look, many quarter to quarter, you're going to see fluctuations. We've had a very consistent RPO trend in the current. Very pleased with the current quarter RPO that went up, which really reflects a couple of large contact center and AI deals in particular. I would say it varies from quarter to quarter, but we're very pleased with the upsell progress that we have relative to our upsell base, as well as kind of what I was referencing earlier, which is bringing in new customers to the Zoom ecosystem. In particular, to the duration of deals, I would say sort of a stabilized. There's obviously AI and contact center that brings in sort of longer-term nature of contracts, but a relatively stable trend with it.

Speaker #2: Which really reflects a couple of large contact center and AI deals in particular. And so, look, I would say it varies from quarter to quarter, but we're very pleased with the upsell progress that we have relative to our upsell base, as well as kind of what I was referencing earlier, which is bringing in new customers.

Speaker #2: To the Zoom ecosystem, and in particular to the duration of deals, I would say it has sort of stabilized. There's obviously AI and the contact center that bring in a longer-term nature of contracts.

Speaker #2: But a relatively stable trend with it. All right. Our next question is from Mark Murphy with JP Morgan.

Operator: All right. Our next question is from Mark Murphy with JPMorgan.

Speaker #8: Hey, this is Ernie Vuon from Mark Murphy. Thanks for taking my question, and congrats on the strong quarter. We recently spoke with a Zoom partner who was very positive on Zoom's products, pricing, and overall value prop.

Ardy Vuon: Hey, this is Ardy Vuon from Mark Murphy. Thanks for taking my question, and congrats on the strong quarter. We recently spoke with a Zoom partner who is very positive on Zoom's products, pricing, just overall value prop. They kind of called out particular momentum within the mid-market, legacy migrations, adoption of contact center AI products. Marie, you said, are you seeing this relative strength in the mid-market segment as well? Thanks.

[Analyst] (JPMorgan): Hey, this is Ardy Vuon from Mark Murphy. Thanks for taking my question, and congrats on the strong quarter. We recently spoke with a Zoom partner who is very positive on Zoom's products, pricing, just overall value prop. They kind of called out particular momentum within the mid-market, legacy migrations, adoption of contact center AI products. Marie, you said, are you seeing this relative strength in the mid-market segment as well? Thanks.

Speaker #8: And they kind of called out particular momentum within the mid-market, legacy migrations, and adoption of contact center AI products. From where you sit, are you seeing this relative strength in the mid-market segment as well?

Speaker #2: Yeah, I would say to Donna, and I think we are seeing a strong uptick in AI usage as well as a strong uptick in our three-plus products.

Michelle Chang: Yeah, I would say to Donna, I think we are. We're seeing strong uptick of AI usage, as well as strong uptick of usage in our three-plus products. Certainly, this is, I would say, a sweet spot for Zoom from small business down to low-end enterprise, and something that we're pleased with the results that we're seeing. I think you can see play out in many of our financial metrics.

Speaker #2: And certainly this is, I would say, a sweet spot for Zoom, from small business down to low-end enterprise, and something that we're pleased with the results that we're seeing.

Speaker #2: And I think you can see play out in many of our financial metrics.

Speaker #1: Yeah. By the way, to add on to what Michelle said, the reason why that mid-market sweet spot is important is that those mid-market customers really embrace technology faster than any other segment, right?

Eric Yuan: Yeah. By the way, to add on to what Michelle said, the reason why that mid-market of a sweet spot is, number one, those mid-market customers, they really embrace technology faster than any other segment, right? Two, mid-market customers truly care about employee experience, right? They really want to deploy the best solution. It's a much better total cost of ownership. That's the reason why that's our sweet spot. That's the reason why we're winning over there.

Speaker #1: Two mid-market customers truly care about employee experience, right? And they really want to deploy the best solution with a much better total cost of ownership.

Speaker #1: That's the reason why that's our sweet spot. That's the reason why we're winning over there.

Speaker #8: Thank you, Eric, Michelle.

Ardy Vuon: Great. Thank you, Eric, Michelle.

[Analyst] (JPMorgan): Great. Thank you, Eric, Michelle.

Speaker #1: Thank you, Great.

Speaker #1: Mark, our next question is from.

Eric Yuan: Thank you, Mark.

Operator: Our next question is from Siti Panigrahi with Mizuho.

Speaker #2: CT Panigrahi with Mizuho.

Speaker #4: Hi, thanks, guys. This is Chad, TV Ball on here for City. Just wondering if you could touch on sort of the broader demand environment.

Chad T. Bibbawon: Hi, thanks, guys. This is Chad T. Bibbawon here for Citi. Just wondering if you could touch on sort of the broader demand environment. I know there were some moving pieces earlier in the year, sort of how that shaped out during the quarter, and expectations for the rest of the year.

Chad Tevebaugh: Hi, thanks, guys. This is Chad T. Bibbawon here for Citi. Just wondering if you could touch on sort of the broader demand environment. I know there were some moving pieces earlier in the year, sort of how that shaped out during the quarter, and expectations for the rest of the year.

Speaker #4: I know there were some moving pieces earlier in the year, sort of how that shaped out during the quarter and expectations for the rest of the year.

Speaker #2: Yeah, so look, I think in the quarter we saw further improvement. I think you see it in metrics like our customers over 100,000 growing at 9%.

Michelle Chang: Yeah. I think in the quarter, we saw further improvement. I think you see it in metrics like our customers over $100,000 growing at 9%. That doesn't mean that we're not going to see some seat pressure like we talked about earlier. That's certainly our business model, and we won't be immune. We saw broad, consistent demand across both enterprise and online, and full abatement, if that was your specific question, to what we referenced in our Q1 earnings. With respect to our forecast, it assumes similar conditions to what we saw in the third quarter.

Speaker #2: Look, that doesn’t mean that we’re not going to see some seed pressure, like we talked about earlier, where that’s certainly our business model, and we won’t be immune.

Speaker #2: But we saw broad, consistent demand across both enterprise and online, and full abatement, if that was your specific question to what we referenced in our Q1 earnings.

Speaker #2: So, with respect to our forecast, it assumes similar conditions to what we saw in the third quarter. And maybe to end with sort of where Eric left us in the last question, Zoom, what we're going to focus on is not any conditions from one day to the next, given that we are in a dynamic environment.

Michelle Chang: Maybe to end with sort of where Eric left us in the last question, at Zoom, what we're going to focus on is not any conditions from one day to the next, given we are in a dynamic environment, but on providing sustainable TCO and business value to our customers. Sort of in the line of in uncertain conditions, you control what you can control. To Eric's point earlier, we have a fantastic TCO story that we're leaning in on with our customers.

Maybe to end with sort of where Eric left us in the last question, at Zoom, what we're going to focus on is not any conditions from one day to the next, given we are in a dynamic environment, but on providing sustainable TCO and business value to our customers. Sort of in the line of in uncertain conditions, you control what you can control. To Eric's point earlier, we have a fantastic TCO story that we're leaning in on with our customers.

Speaker #2: But on providing sustainable TCO and business value to our customers. So, sort of in the line of uncertain conditions, you control what you can control.

Speaker #2: And to Eric's point earlier, we have a fantastic TCO story that we're leaning in on with our...

Speaker #2: customers. Awesome.

Speaker #4: Thank you.

Chad T. Bibbawon: Awesome. Thank you.

Chad Tevebaugh: Awesome. Thank you.

Speaker #2: Yeah. Next, we'll hear from Jackson Adair with KeyBank.

Michelle Chang: Yep.

Operator: Next, we'll hear from Jackson Adair with KeyBank.

Speaker #9: Great. Hey, guys. Good to see you. Thanks for taking our question. Michelle, on the kind of call, the non-revenue top line metrics, you've talked about billings, you've talked about RPO.

Jackson Adair: Great. Hey, guys. Good to see you. Thanks for taking our question. Michelle, on the call, the non-revenue top-line metrics, you've talked about billings, you've talked about RPO. I'm just curious, as you shift more of your business toward the enterprise, when should we expect those non-revenue metrics to start to outgrow maybe your overall revenue metrics on the top line?

Jackson Ader: Great. Hey, guys. Good to see you. Thanks for taking our question. Michelle, on the call, the non-revenue top-line metrics, you've talked about billings, you've talked about RPO. I'm just curious, as you shift more of your business toward the enterprise, when should we expect those non-revenue metrics to start to outgrow maybe your overall revenue metrics on the top line?

Speaker #9: I'm just curious, as you shift more of your business toward the enterprise, when should we expect those non-revenue metrics to start to outgrow maybe your overall revenue metrics on the top line?

Speaker #2: I mean, in terms of the non-revenue metrics, I would point to things like our AI usage. I would point to product momentum-type stats, to which they already are outpacing our revenue growth.

Michelle Chang: I mean, in terms of the non-revenue metrics, I would point to things like our AI usage. I would point to product momentum-type stats, to which they already are outpacing our revenue growth. I don't know, Jackson, correct me if I'm sort of missing your question, but I think those are the sorts of non-specific, explicit revenue drivers that I look at, and I would say they're already outpacing.

Speaker #2: So, I don't know. Jackson, correct me if I'm sort of missing your question, but I think those are the sorts of non-specific explicit revenue drivers that I look at.

Speaker #2: And I would say they're already outpacing.

Speaker #9: Got it. No, no, no. That's helpful. Yeah. Just curious about the dynamics there. Thanks, Michelle.

Jackson Adair: Got it. No, no, no, no. That's helpful. Yeah. Just curious about the dynamics there. Thanks, Michelle.

Jackson Ader: Got it. No, no, no, no. That's helpful. Yeah. Just curious about the dynamics there. Thanks, Michelle.

Speaker #4: Yeah. Just quickly, Jackson, you're right. And you're right. AI usage is really number one. The metrics we're looking at are looking at that every day.

Eric Yuan: Yeah. Just to quickly add, Jackson, you're right. You're right, right? AI usage is really number one. The metrics, we're looking at that every day. At the same time, CSAT, that's another metric. Also look at that, right? The customers are pretty happy, not only for online customers, online bars, SMD, and all the way to enterprise customers. We also measure CSAT as well.

Speaker #4: At the same time, I see that it's not a metric to look at, right? The customers are pretty happy—not only for online customers, online buyers, SMBs, and all the way to enterprise customers.

Speaker #4: We also measure

Speaker #4: CSAT as well. Got it. Thank you, Jackson.

Speaker #9: Thanks, Eric. See you

Jackson Adair: Got it. Thanks, Eric.

Jackson Ader: Got it. Thanks, Eric.

Eric Yuan: Thank you, Jackson. Appreciate it.

Speaker #4: Appreciate it.

Speaker #9: Guys, our next question is from...

Jackson Adair: See you guys.

Jackson Ader: See you guys.

Operator: Our next question is from Peter Levine with Evercore.

Speaker #2: Peter Levine with Evercore.

Speaker #9: Great. Thank you for taking my question. Maybe just to follow up, I think on Jim Fisher's question. Eric, you mentioned a lot about employee experience on this call.

Peter Levine: Great. Thank you for taking my question. Maybe just to follow up, I think, on Jim Fish's question. If you think about Eric, you've mentioned a lot about employee experience on this call. I look at BrightHire. I mean, is this the on-ramp into Zoom getting into the HR stack, if it's interviewing, onboarding, engagement? Just curious if you can maybe just talk about how you view is this the on-ramp into HR? If you think about other segments that you can get into, can you maybe just help us understand where else Zoom can go with the platform expansion?

Speaker #9: I look at BrightHire. I mean, is this like the on-ramp into Zoom getting into the HR stack? If it's interviewing, onboarding, engagement—just curious if you can maybe just talk about how you view this as the on-ramp into HR?

Speaker #9: And then, if you think about other segments that you can get into, can you maybe just help us understand where else Zoom can go with the platform expansion?

Speaker #1: Well, Peter, this is a great question. You look at our core competency. Look at our technology, right? In the collaboration and productivity suite, and there's the AI.

Eric Yuan: Well, Peter, this is a great question. Look at our core competency. Look at our technology, right? Collaboration, the productivity suite, and also AI. This is our core technology. How to apply those technologies, right, into the use case? That's kind of every quarter, every year we are looking into, right? That's the reason why a few years ago we introduced the contact center, essentially to target the support, IT help desk, those kind of use cases department. We also have Zoom Revenue Accelerator, right, to target the sales department, right? We also have Zoom Webinar, Webinar Plus, also target the marketing department. You look at HR. HR is, I would say, a huge use case. We are not going to focus on every use case at all. We just focus on the remote hiring, right, because we can leverage our technology.

Speaker #1: This is our core technology and how to apply those technologies, right, into the use case. That's kind of every quarter, every year we are looking into, right?

Speaker #1: That's the reason why, a few years ago, we introduced the contact center. Essentially, to target the support, IT help desk, and those kinds of use cases in the department.

Speaker #1: We also Zoom revenue accelerator, right? To target the sales department, right? We also have Zoom webinar, webinar plus, also target marketing department. You look at HR, HR is, I would say, a huge use case.

We also have Zoom Revenue Accelerator, right, to target the sales department, right? We also have Zoom Webinar, Webinar Plus, also target the marketing department. You look at HR. HR is, I would say, a huge use case. We are not going to focus on every use case at all. We just focus on the remote hiring, right, because we can leverage our technology.

Speaker #1: We are not going to focus on every use case at all, but we just focus on the remote hiring, right? Because we can leverage our technology.

Speaker #1: That's a very different use case, right? For those in each department, how to leverage our product, AI and data, right, to improve the use case. That's our focus.

Eric Yuan: That's a very different use case, right? For those issue department, how to leverage our product, AI, and data, right, to improve the use case. That's our focus, including the vertical segment as well, like educators, clinicians as well. If you understand our strategy, expanding strategy, you look at which department, which vertical market might benefit from our technology, AI, and data. That's the kind of thing we are going to focus on. Remote hiring, BrightHire, for sure, fits very well to our strategy for expansion.

That's a very different use case, right? For those issue department, how to leverage our product, AI, and data, right, to improve the use case. That's our focus, including the vertical segment as well, like educators, clinicians as well. If you understand our strategy, expanding strategy, you look at which department, which vertical market might benefit from our technology, AI, and data. That's the kind of thing we are going to focus on. Remote hiring, BrightHire, for sure, fits very well to our strategy for expansion.

Speaker #1: Including the vertical segment as well, like educators and clinicians. So if you understand our strategy and expanding strategy, you look at which department or vertical market might benefit from our technology, AI, and data.

Speaker #1: That's the kind of thing we are going to focus on. So remote hiring, BrightHire, for sure, fits very well with our strategy for expansion.

Speaker #9: Thank you very much.

Jackson Adair: Thank you very much.

Peter Levine: Thank you very much.

Speaker #1: Yeah. Thank you, Peter.

Eric Yuan: Yeah, thank you, Peter.

Speaker #2: Our next question is from Tom Blakey with Canter Fitzgerald.

Operator: Our next question is from Tom Blakey with Cantor Fitzgerald.

Speaker #10: Hey, Eric. I'm Michelle. Thank you for taking the questions. I have a couple of quick ones. We really just want clarification for you, Eric, and for you, Michelle.

Tom Blakey: Hey, Eric. I'm Michelle. Thank you for taking the questions. I have a couple of quick ones. Really just one for you, Eric, and a clarification for you, Michelle. Eric, you were key in leading the charge in terms of the higher pricing tiers in CX, and it's great to see the success you're having there. Another Zoom heritage is just disrupting markets in terms of technology, pricing, and products. You have some peers in CX talking about maybe possibly disrupting the CX market with regard to consumption-based pricing. I would love to hear your comments in terms of some forward-looking possible kind of statements there in terms of how Zoom could compete in the consumption-led CX market.

Speaker #10: Eric, you were key in leading the charge in terms of the higher pricing tiers in CX, and it's great to see the success you're having there.

Speaker #10: Another Zoom heritage is just disrupting markets in terms of technology, pricing, and products. You have some peers in CX talking about possibly disrupting the CX market with regard to consumption-based pricing.

You have some peers in CX talking about maybe possibly disrupting the CX market with regard to consumption-based pricing. I would love to hear your comments in terms of some forward-looking possible kind of statements there in terms of how Zoom could compete in the consumption-led CX market.

Speaker #10: I would love to hear your comments in terms of some forward-looking possible kind of statements there in terms of how Zoom could compete in the consumption-led CX market.

Speaker #10: And just, Michelle, from a clarification perspective, I think you made some comment about online growth kind of upticking off of fiscal Q3, maybe possibly in fiscal Q4.

Tom Blakey: Michelle, from a clarification perspective, I think you made some comment about online growth kind of upticking off of fiscal Q3, maybe possibly in fiscal Q4 when there was a desale in enterprise. Could you just maybe clarify what we possibly could expect in terms of that mix would be helpful in fiscal Q4? Thank you.

Michelle, from a clarification perspective, I think you made some comment about online growth kind of upticking off of fiscal Q3, maybe possibly in fiscal Q4 when there was a desale in enterprise. Could you just maybe clarify what we possibly could expect in terms of that mix would be helpful in fiscal Q4? Thank you.

Speaker #10: And there was a deceleration in enterprise. Could you maybe clarify what we possibly could expect in terms of that mix? That would be helpful in fiscal Q4.

Speaker #10: Thank you.

Speaker #1: Yeah, yeah. Tom, thank you for a good question. But just curious, what's your background? I'm so jealous. It's so beautiful.

Eric Yuan: Yeah, yeah. Tom, thank you for a good question. Just curious, your background is what's your background? A real one? I'm so jealous. It's so beautiful.

Speaker #10: That is as fake as it can be.

Tom Blakey: That is as fake as it can be.

Speaker #1: Oh my God. I even do not know how technology works so well. I did not realize that's really how fake it was. So anyway, thank you.

Eric Yuan: Oh my God. I even do not know how technology works so well. I did not realize that's a real one, how fake of it. Anyway, back to your.

Speaker #1: Yeah, thank you. So, back to your question. You are so right, huh? Remember, I was a Zoom Accounting Center General Manager for a while.

Tom Blakey: Really?

Eric Yuan: Yeah. Thank you. Back to your question. You are so right, huh? Remember, I was Zoom Contact Center general manager for a while, right? Very excited about our contact center workforce management, product management, right? Zoom's product over the past few years. Guess what? Because of AI, we have leveraged AI to introduce a new product, which is a virtual agent, either chat-based agent or the voice agent. I feel like that's becoming more and more important, right? We have both. We have the traditional contact center solution, and we also have virtual agent solution. In terms of consumption of the business model, I think it will fit very well to our virtual agent, right? Because customers deploy technology, right? How often do you use a virtual agent? How many times do you use a virtual agent, right?

Tom Blakey: Really?

Speaker #1: It's very exciting about our accounting center workforce management and product management, right? Those products over the past few years. But guess what? Because of AI, we have leveraged AI and introduced a new product, which is a virtual agent.

Speaker #1: It's a chat-based agent or the voice agent. I feel like that's becoming more and more important, right? And because we have both, we have the traditional accounting center solution versus a virtual agent solution.

I feel like that's becoming more and more important, right? We have both. We have the traditional contact center solution, and we also have virtual agent solution. In terms of consumption of the business model, I think it will fit very well to our virtual agent, right? Because customers deploy technology, right? How often do you use a virtual agent? How many times do you use a virtual agent, right?

Speaker #1: In terms of consumption of the business model, I think it will fit very well with our virtual agent, right? And because customers deploy technology, right, how often is the virtual agent used? How many times is the virtual agent used, right?

Speaker #1: So we got to do this based on how happy the customer is for every call, right? If a virtual agent can truly help address the customer issues, the customer should pay for us.

Eric Yuan: We got to do based on how happy customers they are, right, for every call, right? If a virtual agent can truly help address the customer issues, customers should pay for us. Otherwise, they should not because you fall back to the traditional agent solution, right? I think from that perspective, we are indeed thinking about the consumption-based model for the virtual agent or AI-based agent technology. Yeah, we are working on that. This is a great question, so.

We got to do based on how happy customers they are, right, for every call, right? If a virtual agent can truly help address the customer issues, customers should pay for us. Otherwise, they should not because you fall back to the traditional agent solution, right? I think from that perspective, we are indeed thinking about the consumption-based model for the virtual agent or AI-based agent technology. Yeah, we are working on that. This is a great question, so.

Speaker #1: Otherwise, they should not, because you fall back to the traditional agent solution, right? I think from that perspective, we are indeed thinking about the consumption-based model for the virtual agent or AI-based agent technology.

Speaker #1: And yeah, we are working on that. It's a great question.

Speaker #2: Just to clarify, the virtual agent, while our agent-assisted product, is a per-user model. Our ZVA product that Eric is referencing is already a consumptive business model.

Michelle Chang: Thank you. Just to clarify, the virtual agent, while our agent-assisted product is a per-user model, our ZVA product that Eric is referencing is already a consumptive business model. Certainly, I think many in the industry talk about tying it more to outcome-based. We obviously are looking into that. I just want to make sure it was clear that we are already consumptive-based on our ZVA product. To my comments to clarify on the online, it was just with one more quarter clarity and the full-year guidance out there. Full-year guidance at 4.1% at the midpoint. All I was trying to do in my comments is say that we've used a consistent forecast methodology. Previously, to the investors, we've been paying sort of slattish online revenue.

Speaker #2: And certainly then, I think many in the industry talk about tying it more to outcome-based, and then we obviously are looking into that. But I just want to make sure it was clear that we are already consumptive-based on our ZVA product.

Speaker #2: To my comments, to clarify on the online was just with one more quarter clarity and the full-year guidance out there. So full-year guidance at 4.1% at the midpoint.

Speaker #2: All I was trying to do in my comments is say that we've used a consistent forecast methodology. Previously, to the investors, we've been saying sort of flattish online revenue, and obviously, with now most of the year playing out and the results realized in the online, we're just adjusting that to a tweak of slightly increasing.

Michelle Chang: Obviously, with now most of the year playing out and the results realized in the online, we're just adjusting that to a tweak of slightly increasing. That's all.

Obviously, with now most of the year playing out and the results realized in the online, we're just adjusting that to a tweak of slightly increasing. That's all.

Speaker #2: That's all.

Speaker #10: Super helpful. Thank

Tom Blakey: Super helpful. Thank you, Michelle. Thank you, Eric.

Speaker #10: You, Michelle. Thank you, Eric. Thank you.

Speaker #1: Tom. Our next

Eric Yuan: Thank you, Tom.

Speaker #2: question is from William Power with

Operator: Our next question is from William Power with Baird.

Speaker #2: Baird. Great.

Speaker #10: Thanks for taking the question. Eric, maybe let's stick with your contact center GM hat for a moment. Can you maybe remind us and perhaps update us on where we are with the contact center go-to-market?

William Power: Great. Thanks for taking the question. Hey, Eric, maybe let's stick with your contact center GM hat for a moment. Can you maybe remind us and maybe update us where we are on contact center, go-to-market? Where are you in terms of the opportunity, in terms of channel partner reach? I guess if you extend that, the opportunity outside the US, US versus international, as I assume international is still on the earlier front.

Speaker #10: Where are you in terms of the opportunity in terms of channel partner reach? And I guess if you extend that, the opportunity outside the U.S., U.S. versus international, and I assume international is still on the earlier side?

Speaker #10: front. Yeah.

Speaker #1: So, William, by the way, I was the contact center GM. I'm not there anymore, luckily. So if I do that, maybe focus on the virtual agent. But anyway, so back to your question, I think we should look at our customers, right, suited to our platform.

Eric Yuan: Yeah. William, by the way, I was the contact center GM. I'm not there anymore, luckily. If I do that, maybe focus on the virtual agent. Anyway, back to your question, I think look at the customers, right, suited to our platform last quarter. Many of them are switching from other cloud vendors to Zoom Contact Center, right? That's the reason why channel partners are becoming a most important go-to-market strategy for our contact center solution. We are doubling down not only for US market, for international market as well. Because the contact center is very different buyers, and the channel is becoming increasingly important. We already invested there now, and also we're going to invest more, right? In terms of the virtual agent, not only do we leverage our sales team channel partners, we're also thinking about the product-led growth.

Speaker #1: Last quarter, many of them are switching from other cloud vendors to the Zoom Contact Center. That's the reason why channel partners are becoming the most important go-to-market strategy for our Contact Center solution.

Speaker #1: We are doubling down, not only for the U.S. market but for the international market as well, because the contact center has very different buyers, and the channel is becoming increasingly important.

We are doubling down not only for US market, for international market as well. Because the contact center is very different buyers, and the channel is becoming increasingly important. We already invested there now, and also we're going to invest more, right? In terms of the virtual agent, not only do we leverage our sales team channel partners, we're also thinking about the product-led growth.

Speaker #1: We already invested there now, and also we're going to invest more, right? And in terms of the virtual agent, not only do we leverage our sales team and channel partners, we're also thinking about product-led growth.

Speaker #1: Because guess what? Some developers, for let's say, taking the SMB customers, they can leverage our API and deploy that virtual agent technology by themselves, right?

Eric Yuan: Because guess what? Some developers, for let's say, take the SMB customers, they can leverage our API, deploy those virtual agent technology by themselves, right? That's why I think about how to monetize contact center to leverage our product-led growth to targeted developers as well. That's another area we are looking into as well.

Because guess what? Some developers, for let's say, take the SMB customers, they can leverage our API, deploy those virtual agent technology by themselves, right? That's why I think about how to monetize contact center to leverage our product-led growth to targeted developers as well. That's another area we are looking into as well.

Speaker #1: That's why I think about how to monetize the contact center to leverage our product-led growth to target developers as well. That's another area we are looking into as well.

Speaker #2: And it's helpful, maybe just to punctuate Eric's comments to your GTM question in particular. We look at the top 10 deals in contact centers, sort of reflective of the demand and the customer signal that we see.

Michelle Chang: It's helpful maybe just to punctuate Eric's comments to your GTM question in particular. We look at top 10 deals in contact centers, sort of reflective of the demand and the customer signal that we see. If helpful, 9 out of 10 of our largest deals were channel-driven. It's a very important investment to us, and one that we're very pleased with the results.

Speaker #2: It's helpful; 9 out of 10 of our largest deals were channel-driven. So it's a very important investment to us, and one that we're very pleased with.

Speaker #2: results.

Speaker #10: Thank you.

William Power: Great. Thank you.

Speaker #1: Thank Great.

Speaker #1: you.

Eric Yuan: Thank you.

Speaker #2: Next, we'll hear from Arjun Bhatia with William.

Operator: Next, we'll hear from Arjun Bhatia with William Blair.

Speaker #2: Blair. Thank you.

Speaker #11: This is Alinda on for Arjun. The question here is just what type of customers are adopting custom AI companions? In particular, what incremental value are they seeing from the custom AI companions versus customers using the free AI companions?

[Analyst] (William Blair): Thank you. This is Alinda on for Arjun. The question here on just what type of customers are adopting custom AI companions in particular, and what increment of value are they seeing from the custom AI companions versus customers using the free AI companions?

Speaker #10: I think for sure we want SMB, medium-sized, all the way to enterprise customers to adopt custom AI companions as quickly as possible.

Eric Yuan: I think for sure, we wanted SMB, medium-sized, all the way to enterprise customers to adopt a custom AI companion as quickly as possible. To start with, we focus on the relatively large enterprise customers for custom AI companies. The reason why the demand, another reason is because look at the value of a custom AI company. We can integrate with customer third-party applications. We can have a generic framework, and for the data search as well. A lot of functionality and features are built for those a little bit complicated enterprise use cases, right? That's the reason why we start from there. For sure, we do have, we want to introduce SKU for online buyers as well to empower the small and medium-sized business as well.

Speaker #10: But to start with, we focus on the relatively large enterprise customers for our customer AI company. The reason for this demand is clear. Another reason is because, looking at the value of our customer AI company, we can integrate with third-party applications. We also have a generic framework and capabilities for data search as well.

Speaker #10: And a lot of functionality features are built for those a little bit complicated enterprise use cases, right? And that's the reason why we start from there.

A lot of functionality and features are built for those a little bit complicated enterprise use cases, right? That's the reason why we start from there. For sure, we do have, we want to introduce SKU for online buyers as well to empower the small and medium-sized business as well.

Speaker #10: So for sure, we do have what we want to introduce: SKU or online buyers as well, to empower the small and medium-sized businesses.

Speaker #10: well. Thank Thank you. you.

[Analyst] (William Blair): Thank you.

Eric Yuan: Thank you.

Speaker #2: Our next question is from Katherine Trebnick with Rosenblatt.

Operator: Our next question is from Katherine Trebnick with Rosenblatt Securities.

Speaker #2: Securities. Hey

Speaker #12: There. This is Andrew King on for Katherine Trebnick. Thanks for taking the question. Since Nick Ted has come in and started revamping your channel partners program, can you just give us any more color on how that channel partner platform is performing?

Andrew King: Hey there. This is Andrew King on for Katherine Trebnick. Thanks for taking the question. Since Nick Ted's come in and started revamping your channel partners program, can you just give us any more color to how that channel partner platform is performing? Obviously, that 9 out of 10 is a great metric to hear. Any further color there? Also, within that, you were one of the earliest to pivot to a partner-led professional services organization. Can you just give us a little bit of color as to how that may be helping you win certain deals?

Speaker #12: Obviously, that 9 out of 10 is a great metric to hear. Any further color there? And then also, you were one of the earliest to pivot to a partner-led professional services organization.

Speaker #12: Can you just give us a little bit of color as to how that may be helping you win certain deals?

Speaker #2: Yeah. Maybe I can lay it out on that one. So first, for a company that's going to focus on phone and customer experience, having a healthy, vibrant channel ecosystem is just par for the game. This means it's how customers often want to buy, and they're certainly part of the deployment and services after.

Michelle Chang: Yeah. Maybe I can lay down on that one. First, for a company that's going to focus on phone and customer experience, having a healthy, vibrant channel ecosystem is just part of the game, meaning it's how customers often want to buy. They're certainly part of the deployment and services after. Zoom offers both a deep direct as well as a through channel. It's also to Eric's comments earlier. I think one of the questions earlier is integral to sort of our international expansion where Zoom has opportunity to go.

Speaker #2: And so, Zoom offers both a deep direct as well as a through channel. It's also, to Eric's comments earlier, I think one of the questions earlier, integral to our international expansion, where Zoom has the opportunity to go.

Speaker #2: In terms of how to think about success, I shared there earlier contact center, but also we're just very pleased with a lot of the forward-looking metrics that we see with our channel ecosystem.

Michelle Chang: In terms of how to think about success, I shared the earlier contact center, but also we're just very pleased with a lot of the forward-looking metrics that we see with our channel ecosystem: pipe of 30%, the majority of contact center deals I talked about earlier coming from partner, over 50% of our large phone deals coming from partner. The types of partners that are transacting with us is also growing. All in all, it's been a very big investment into my earlier comments, something that we're very pleased with the results.

In terms of how to think about success, I shared the earlier contact center, but also we're just very pleased with a lot of the forward-looking metrics that we see with our channel ecosystem: pipe of 30%, the majority of contact center deals I talked about earlier coming from partner, over 50% of our large phone deals coming from partner. The types of partners that are transacting with us is also growing. All in all, it's been a very big investment into my earlier comments, something that we're very pleased with the results.

Speaker #2: Pipe up 30%. The majority of contact center deals I talked about earlier are coming from partners, with over 50% of our large phone deals coming from partners.

Speaker #2: And the types of partners that are transacting with us are also growing. So all in all, it's been a very big investment. In my earlier comments, something that we're very pleased with the results.

Speaker #12: Great. Thank you.

Andrew King: Great. Thank you.

Speaker #2: Our final question comes from Peter Weed with

Operator: Our final question comes from Peter Weed with Bernstein.

Speaker #2: Bernstein.

Speaker #12: Hey, thank you very

William Power: Hey, thank you very much. I guess the Peters on this call are similar mind. I was really interested in BrightHire, and I appreciated your response around kind of the vertical-specific focus that you have, which makes a lot of sense, and I can understand why you're excited about that. How should we think about that opportunity? When you think of it relative to your existing customer base, how much of this is more of an upsell opportunity to them versus expanding the TAM to new customers? When you kind of think about the monetization, how does this add to your stack and really could expand the TAM or generate revenue upside for the business?

Peter Weed: Hey, thank you very much. I guess the Peters on this call are similar mind. I was really interested in BrightHire, and I appreciated your response around kind of the vertical-specific focus that you have, which makes a lot of sense, and I can understand why you're excited about that. How should we think about that opportunity? When you think of it relative to your existing customer base, how much of this is more of an upsell opportunity to them versus expanding the TAM to new customers? When you kind of think about the monetization, how does this add to your stack and really could expand the TAM or generate revenue upside for the business?

Speaker #12: Much. I guess the Peters on this call are of similar mind. I was really interested in BrightHire, and I appreciated your response around kind of the vertical specific.

Speaker #12: Focus that you have, which makes a lot of sense, and I can understand why you're excited about that. How should we think about that opportunity?

Speaker #12: When you think of it, relative to your existing customer base, how much of this is it more of an upsell opportunity to them versus expanding the TAM to new customers?

Speaker #12: And when you kind of think about the monetization, how does this add to your stack and really could expand the TAM or generate revenue upside for the?

Speaker #12: Business? Yeah, maybe I can take that.

Michelle Chang: Yeah. Maybe I can take that one and give you sort of the finance version because Eric talked about BrightHire earlier. First of all, it starts a lot at those critical conversations. One thing Zoom is fantastic at is really just nailing those critical conversations with our customers. There couldn't be a more critical conversation for our customers than who and how they hire. It also offers Zoom the ability, as AI monetization plays out across different markets, to have a very tangible scenario for customers where the value point is very clear, and certainly represents one of those vertical AI monetization scenarios. It's a large and unpenetrated market at roughly $3 billion, certainly allows us to help them scale, and also then gives us sort of an upsell piece beyond it. They're a category leader in sort of a large TAM that is growing.

Speaker #2: One. And give you sort of the finance version because Eric talked about BrightHire earlier. First of all, it starts a lot at those critical conversations.

Speaker #2: One thing Zoom is fantastic at is really just nailing those critical conversations with our customers. And what could be a more critical conversation for our customers than who and how they hire?

Speaker #2: It also offers Zoom the ability, as AI monetization plays out across different markets, to have a very tangible scenario for customers where the value point is very clear.

Speaker #2: And so certainly represents one of those vertical AI monetization scenarios. It's a large and unpenetrated market at roughly $3 billion. And so certainly allows us to help them scale, and also then gives us sort of an upsell piece beyond it.

It's a large and unpenetrated market at roughly $3 billion, certainly allows us to help them scale, and also then gives us sort of an upsell piece beyond it. They're a category leader in sort of a large TAM that is growing.

Speaker #2: And they're a category leader in a large TAM that is growing. So, something we're very excited about.

Michelle Chang: Something we're very excited about.

Speaker #12: Thank

Speaker #12: you. All right.

William Power: Thank you.

Speaker #2: This concludes the Q&A portion of today's call. I'll turn it back over to Eric for closing.

Speaker #2: This concludes the Q&A portion of today's call. I'll turn it back over to Eric for closing remarks. So, yeah, thank you.

Operator: All right. This concludes the Q&A portion of today's call. I'll turn it back over to Eric for closing remarks.

Eric Yuan: Yeah, thank you. Thank you, Megan. Thank you for every investor, customer, and partner's greatest support and trust. We truly appreciate it. Thank you for every Zoom employee's hard work and dedication. Wishing you all have a wonderful holiday season. Thank you.

Speaker #10: Thank you, Megan. Thank you for every investor, customer, and partner's greatest support and trust. We truly appreciate it. Thank you for every Zoom employee's hard work and dedication.

Speaker #10: Wishing you all a wonderful holiday season. Thank you.

Michelle Chang: Thanks, everyone.

Operator: This concludes today's earnings call. Thank you all for attending, and have a happy holiday season.

Q3 2026 Zoom Video Communications Inc Earnings Call

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