Zoom Earnings Call Highlights AI, Cash and Buybacks

Zoom Video Communications, Inc. Class A ((ZM)) has held its Q1 earnings call. Read on for the main highlights of the call.

Zoom Video Communications struck an upbeat tone on its latest earnings call, emphasizing solid revenue growth, expanding margins and robust cash generation despite a few modest headwinds. Management leaned into early traction in artificial intelligence and customer experience products, arguing that these growth engines, combined with disciplined capital returns, outweigh near‑term churn and currency pressures.

Revenue Beat and Upgraded Outlook

Zoom delivered Q1 revenue of $1.24 billion, up 5.5% year over year and about $14 million above the high end of guidance, or 4.6% growth in constant currency. The company responded to the beat by lifting its full‑year fiscal 2027 revenue outlook to a range of $5.08 billion to $5.09 billion, implying roughly 4.4% growth at the midpoint.

Enterprise Growth and Move Upmarket

Enterprise revenue rose 7.2% year over year and now represents 61% of total sales, up one point from a year ago, underscoring Zoom’s shift away from smaller online customers. Large customers spending more than $100,000 over the trailing 12 months grew 8%, and this cohort now accounts for 33% of revenue, also up one point.

AI Adoption and Monetization Gains

AI was a central theme as paid monthly active users for Zoom’s AI Companion surged 184% year over year, and the new My Notes feature surpassed 1.5 million monthly active users within four months. Early demand for AI Companion 3.0 and paid AI capabilities is already driving upsells, with several large clients expanding into customized AI offerings.

Strategic Wins and Platform Expansion

Zoom highlighted a series of high‑profile enterprise wins and vendor displacements across industries, featuring names from healthcare, financial services and professional sports. These deals increasingly bundle multiple products, including Workplace, Phone, Contact Center and Zoom Virtual Agent, which helps deepen customer relationships and reduce reliance on single‑product contracts.

Customer Experience and Contact Center Momentum

The Zoom Customer Experience business posted high double‑digit growth in the quarter, signaling strong demand for its newer CX offerings. Management called out that nine of the top ten CX deals included paid AI, supported by new SKUs such as CX Insights, AI Expert Assist 3.0 and enhanced workforce management tools.

Profitability Expansion and EPS Upside

Profitability remained a standout, with non‑GAAP gross margin improving to 79.9%, up 70 basis points from last year, reflecting operating leverage. Non‑GAAP operating income climbed 9% to $509 million, driving a 41.1% operating margin and non‑GAAP diluted EPS of $1.55, which exceeded guidance by $0.13.

Balance Sheet Resilience and Cash Flow

Zoom’s financial position remains strong, with deferred revenue rising 5% to $1.49 billion and total remaining performance obligations reaching about $4.3 billion, up 11%, driven by longer‑term deals. Operating cash flow increased 7% to $522 million and free cash flow rose 8% to $500 million, leaving the company with $7.7 billion in cash and marketable securities.

Capital Returns via Share Buybacks

The company continued to return cash to shareholders, repurchasing 4.2 million shares for $362 million in Q1 and bringing total buybacks to 40.4 million shares, or $3.1 billion, to date. The board also approved an additional $1 billion repurchase authorization, signaling confidence in long‑term prospects even as future buybacks are excluded from EPS guidance.

Developer Platform and AI Services Push

Zoom advanced its developer strategy with the March debut of Zoom AI Services, including a Scribe API that taps its speech recognition capabilities, and it is already signing early adopters. This effort aims to expose core AI technology to both customers and developers, broadening use cases and potentially embedding Zoom deeper into third‑party applications.

Online Business Growth Moderation

While the enterprise side strengthened, the online segment showed only modest improvement, with Q1 online revenue up 2.8% year over year. Average monthly online churn edged up to 3.0% from 2.8% a year earlier, and management cautioned that online revenue growth is likely to slow further over the next three quarters.

Net Dollar Retention Slips Below Target

Zoom’s trailing 12‑month net dollar expansion rate for enterprise customers landed at 99%, slightly below its goal of staying above 100%, indicating mild net contraction. This metric reflects a balance between expansions driven by AI and multiproduct deals and offsets from optimizations, seat rightsizing and competitive pressures.

Volatile Timing in Deferred Revenue and RPO

Management noted that deferred revenue grew faster than expected in Q1, up 5% versus guidance of 1% to 2%, largely because fewer contracts included grace‑period billing structures. Even so, executives warned investors that the timing and structure of larger, longer‑term agreements can create quarter‑to‑quarter swings in deferred revenue and remaining performance obligations.

Currency and Cost Structure Considerations

Reported top‑line growth benefited from foreign exchange tailwinds, lifting the headline rate to 5.5% versus 4.6% in constant currency, and the company urged analysts to factor FX into their models. Zoom also highlighted expense pressure from shifting compensation away from stock‑based awards toward cash bonuses for a second year, partly offsetting margin gains.

AI Brand Perception and Competitive Landscape

Despite strong AI adoption in its products, management conceded that many customers still do not instinctively view Zoom as an AI‑driven platform, underscoring a marketing and positioning challenge. Competition is intensifying, particularly in customer experience where rivals are rolling out native voice and AI features, which could weigh on pricing and require Zoom to keep innovating.

Longer‑Term Deal Mix and Concentration

The 19% growth in noncurrent remaining performance obligations highlights Zoom’s success in landing more large, multi‑year, multiproduct contracts that enhance revenue visibility. At the same time, this mix shift increases the concentration of longer‑duration commitments, which can make the pattern of billed and unbilled revenue more volatile and complicate short‑term forecasting.

Guidance and Forward Outlook

For the second quarter, Zoom expects revenue between $1.265 billion and $1.27 billion, implying around 4.1% growth at the midpoint, with non‑GAAP operating income of $508 million to $513 million and EPS of $1.45 to $1.47 on about 304 million shares. For fiscal 2027, the company raised guidance to revenue of $5.08 billion to $5.09 billion, non‑GAAP operating income of roughly $2.07 billion, EPS near $6 and free cash flow up to $1.74 billion, while projecting continued strength in RPO and a solid cash balance.

Zoom’s latest earnings call painted a picture of a company transitioning from pandemic‑era video staple to a broader enterprise and AI platform, with financial metrics largely supporting that narrative. Investors will be watching whether AI‑driven products, CX momentum and long‑term enterprise deals can offset slowing online growth, modest retention pressure and rising competition while sustaining Zoom’s impressive profitability profile.