• Total Revenue: $1.184 billion, a 3% year-over-year increase.
• Enterprise Revenue: Grew 6% year over year, comprising 60% of total revenue.
• Average Monthly Churn: 2.8%, a 20-basis-point improvement year over year.
• Non-GAAP Gross Margin: 78.8%, slightly lower due to strategic investments in AI.
• Non-GAAP Income from Operations: $468 million, a 5% year-over-year increase.
• Non-GAAP Operating Margin: 39.5%, an improvement of 81 basis points from last year.
• Non-GAAP Diluted Net Income per Share: $1.41, $0.11 above guidance.
• Deferred Revenue: $1.35 billion, a 7% year-over-year increase.
• Operating Cash Flow: $425 million, a 21% year-over-year increase.
• Free Cash Flow: $416 million, a 25% year-over-year increase.
• Cash and Marketable Securities: Approximately $7.8 billion.
• Share Buyback: 4.3 million shares purchased for $355 million in Q4.

• Warning! GuruFocus has detected 6 Warning Signs with ZM.

Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Zoom Communications Inc (NASDAQ:ZM) reported a 3% year-over-year revenue growth in Q4, surpassing their top-line guidance.
• The company saw a significant increase in the adoption of its AI capabilities, with Zoom AI Companion's monthly active users growing by 68% quarter over quarter.
• Zoom's enterprise revenue grew by 6% year over year, now constituting 60% of total revenue, indicating strong enterprise traction.
• The Contact Center achieved its largest ARR deal in history with a Fortune 100 US tech company, showcasing its ability to win large enterprise customers.
• Zoom's strategic partnerships, such as with Mitel and Amazon, are expanding its market reach and enhancing its platform's appeal.

Negative Points

• Despite revenue growth, the overall growth rate remains modest at 3%, with guidance for FY26 indicating only a slight increase.
• The company faces ongoing macroeconomic challenges and uncertainties, which could impact future growth.
• Zoom's online business continues to experience churn, although it has improved to a record low of 2.8% in Q4.
• The transition to AI-first initiatives involves significant investment, which may impact margins in the short term.
• There is a potential risk of increased competition in the AI space, as many vendors are pitching their AI capabilities to customers.

Q & A Highlights

Q: Eric, as you look ahead, do you think AI capabilities could become a tailwind for your business and drive revenue growth? A: Eric Yuan, CEO: AI investment is a priority for us. AI Companion is part of our service at no additional cost, making it very sticky for low-end customers. For high-end customers, we plan to monetize customized AI Companion starting in April. Our business services, like Contact Center, are already benefiting from AI features, which is a great way for us to monetize AI.

Q: How is AI impacting the decision by larger customers to adopt existing components of the platform? A: Eric Yuan, CEO: Customers are smart and want to see the value AI adds to their business. Our AI Companion features are offered at no additional cost, which customers appreciate. This builds trust and long-term relationships, as opposed to competitors who charge high prices for AI features.

Q: Michelle, what are the top three drivers for Zoom's net new revenue in fiscal 2026? A: Michelle Chang, CFO: Enterprise will be the dominant growth driver, with online expected to be slightly down. Our core business, including Phone, is seeing record low churn. Contact Center and Workvivo are also important, with Contact Center revenue driven by our elite SKU, which includes AI.

Q: What kind of go-to-market investments are you making as you broaden the portfolio, particularly for Contact Center? A: Michelle Chang, CFO: Our priorities include moving upmarket, accelerating the channel, and returning our online business to growth. For Contact Center, 6 out of 10 top deals were driven by channel partners, and we plan to invest more in this area.

Q: Eric, can you talk about the demand environment post-election and the difference between online and enterprise segments? A: Eric Yuan, CEO: The macro environment is mixed but stable. We see upmarket momentum in enterprise and record low churn in online. However, headlines about layoffs and volatility contribute to a mixed sentiment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.