Zoom Communications Q1 Earnings Call Highlights
Key Points
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- Zoom beat first-quarter expectations with revenue of $1.24 billion, up 5.5% year over year, and raised its full-year fiscal 2027 outlook. The company also approved an additional $1 billion share repurchase program.
- Enterprise demand and AI adoption were major growth drivers, with enterprise revenue up 7.2% and large customers contributing more to total revenue. Usage of AI Companion surged 184% year over year, while products like My Notes and Custom AI Companion gained traction with major customers.
- Zoom Phone and customer experience products continued to perform well, with Zoom Phone annual recurring revenue growing in the mid-teens and ZCX posting high double-digit growth. The company also delivered strong margins and cash flow, ending the quarter with $7.7 billion in cash and marketable securities.
Zoom Communications (NASDAQ:ZM) reported a stronger-than-expected start to fiscal 2027, with executives pointing to enterprise demand, artificial intelligence adoption and customer experience products as key contributors to the quarter’s performance.
On the company’s first-quarter fiscal 2027 earnings webinar, founder and CEO Eric Yuan said revenue grew 5.5% year over year, exceeding the high end of Zoom’s guidance and marking “among our best growth rates in recent years.” CFO Michelle Chang said total revenue reached $1.24 billion, or 4.6% growth in constant currency, coming in $14 million above the high end of the company’s prior outlook.
Zoom also raised its full-year revenue and profitability guidance and announced that its board authorized an additional $1 billion share repurchase program.
Enterprise Revenue and Large Customers Drive Growth
Chang said Zoom’s enterprise business remained a source of strength, with enterprise revenue growing 7.2% year over year and representing 61% of total revenue, up one percentage point from the prior year. Customers contributing more than $100,000 in trailing 12-month revenue increased 8% year over year and now account for 33% of total revenue.
The company’s trailing 12-month net dollar expansion rate for enterprise customers improved to 99% in the quarter. Chang said the improvement reflected the same drivers management has been discussing with investors, including product diversification, AI monetization and churn reduction.
By geography, Chang said revenue in the Americas and EMEA each grew 5% year over year, while APAC grew 6%. She noted that EMEA’s growth rate was predominantly driven by changes in foreign exchange rates.
In Zoom’s online business, average monthly churn was 3%, compared with 2.8% in the same quarter a year earlier. Chang characterized the increase as a “nominal uptick” and said she did not “read too much into it,” adding that the online business has become more stable.
AI Companion Usage Expands
Yuan said Zoom’s strategy is centered on building an “AI-first system of action” for modern work. He highlighted the appointment of Russell Dicker as chief product officer, citing Dicker’s more than 25 years of product leadership experience across Microsoft, Google and Amazon, including work leading Microsoft Teams product and data science teams.
Zoom said usage of AI Companion continued to scale in the quarter, with paid monthly active users growing 184% year over year. Yuan said My Notes, an AI note-taking product, surpassed 1.5 million monthly active users excluding trial users four months after launch.
Yuan said AI Companion 3.0 extends the product beyond meeting summaries into broader workflows through agentic retrieval across Zoom and connected work sources. In response to analyst questions, he said Custom AI Companion includes features such as enterprise agent retrieval, workflow builder and agentic builder capabilities.
Yuan cited several customer examples tied to AI adoption, including Raymond James expanding to Custom AI Companion across about 10,000 seats after initially adopting AI Companion for meeting summaries. He also said MongoDB selected Custom AI Companion as part of an upgrade that included Zoom Workplace Enterprise Plus, Zoom Contact Center and Zoom Virtual Agent, with the goal of translating live conversations into completed actions across IT ticketing, customer relationship management and other third-party systems.
Zoom Phone and Customer Experience Products Gain Traction
Yuan said 15 of Zoom’s top 20 wins in the quarter included Zoom Workplace or Zoom Phone. He said Zoom Phone annual recurring revenue continued to grow in the mid-teens, supported by customers modernizing voice systems.
Customer examples included a major government contractor that returned to Zoom for Zoom Workplace, Phone, Events and Webinars in a seven-figure annual recurring revenue deal, displacing Teams and Cisco calling. Yuan also cited Baptist Health in Jacksonville, Florida, which chose Zoom Phone to support 16,000 workers across more than 200 points of care in another seven-figure ARR deal.
Zoom Customer Experience, or ZCX, also remained a focus. Yuan said the business posted high double-digit growth in the quarter, with paid AI included in nine of the top 10 ZCX deals. He said Zoom is seeing customers consolidate contact center and unified communications systems onto a unified AI workflow and analytics platform.
Among customer wins, Yuan said Chelsea FC selected Zoom Phone, ZCC Elite and ZVA Chat to modernize fan engagement. Caliber Collision chose Zoom Phone with ZCC Elite for use across more than 1,800 repair centers and its central contact center. In Japan, Rensa selected Zoom Virtual Agent, Agentless Dialer and ZCC Elite for high-volume customer interactions, including outbound engagement tied to electricity and gas connection pre-confirmation calls.
In the Q portion of the call, Yuan said Zoom is entering the customer experience market from a different angle than Salesforce, emphasizing Zoom’s strength in communications infrastructure and its combination of unified communications, contact center and AI. He said eight of Zoom’s top 10 ZCX deals replaced other contact center-as-a-service vendors, while all 10 of those deals were channel-driven.
Margins, Cash Flow and Buybacks
Zoom reported non-GAAP gross margin of 79.9%, up 70 basis points from the prior year, which Chang attributed primarily to continued cost optimization. Non-GAAP income from operations grew 9% year over year to $509 million, exceeding the high end of guidance by $17 million. Non-GAAP operating margin was 41.1%, up 130 basis points year over year.
Non-GAAP diluted earnings per share were $1.55 on approximately 300 million diluted weighted average shares outstanding, $0.13 above the high end of guidance and $0.12 higher than the year-ago quarter.
Operating cash flow grew 7% year over year to $522 million, while free cash flow grew 8% to $500 million. Zoom ended the quarter with $7.7 billion in cash, cash equivalents and marketable securities, excluding restricted cash.
During the quarter, Zoom repurchased 4.2 million shares for $362 million under its existing $3.7 billion repurchase plan. Chang said the company has repurchased a total of 40.4 million shares for $3.1 billion. The new $1 billion authorization brings total authorized buybacks to $4.7 billion, with approximately $1.6 billion remaining.
Guidance Raised for Fiscal 2027
For the second quarter, Zoom guided for revenue of $1.265 billion to $1.27 billion, representing 4.1% year-over-year growth at the midpoint. The company expects non-GAAP operating income of $508 million to $513 million and non-GAAP earnings per share of $1.45 to $1.47, based on approximately 304 million shares outstanding.
For the full fiscal year 2027, Zoom raised its outlook and now expects revenue of $5.08 billion to $5.09 billion, representing 4.4% growth at the midpoint. The company expects non-GAAP operating income of $2.065 billion to $2.075 billion and non-GAAP earnings per share of $5.96 to $6.00. Zoom reiterated its free cash flow outlook of $1.7 billion to $1.74 billion.
Chang said the company remains “on track to surpass $5 billion in revenue this year,” while maintaining its focus on profitability, cash flow generation and shareholder returns.
About Zoom Communications (NASDAQ:ZM)
Zoom Video Communications, Inc (commonly referred to as Zoom) is a provider of cloud-based communications and collaboration solutions. The company's platform supports video conferencing, voice calling, instant messaging, webinars and large-scale virtual events, and meeting room systems, marketed to businesses, educational institutions, government organizations and individual users. Zoom's product lineup includes Zoom Meetings, Zoom Phone, Zoom Rooms, Zoom Video Webinars and Zoom Chat, and the company offers integrations and extensions through a developer marketplace and third-party apps.
Founded in 2011 by Eric S.
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