Zoom Communications (NASDAQ:ZM) reported second-quarter fiscal 2027 revenue growth of 4.9% year over year to $1.28 billion, exceeding the high end of its guidance by $7 million, as enterprise revenue rose 7.8% in its strongest growth rate in three years.
Founder and CEO Eric Yuan said the company’s enterprise momentum reflected execution against three priorities: enhancing Zoom Workplace with artificial intelligence, expanding AI-first customer-experience offerings, and developing new AI products. Licensed monthly active users of Workplace AI features increased 125% from a year earlier, he said.
Enterprise platform expansion
Enterprise revenue represented 62% of total revenue during the quarter, up two percentage points from a year earlier. The number of enterprise customers generating more than $100,000 in trailing-12-month revenue rose 8% year over year, and those customers accounted for 33% of company revenue. Enterprise trailing-12-month net dollar expansion was 99%, up one point from the prior-year period and unchanged from the prior quarter.
Yuan cited several customer wins across Zoom Workplace, Phone and Contact Center. One of the largest U.S. technology companies renewed Zoom Workplace and expanded annual recurring revenue by $1.9 million, while a U.S. wealth manager upgraded to Zoom Workplace Enterprise Premier and rolled out Zoom Phone across its workforce, replacing multiple vendors.
Zoom Phone continued to grow in the teens on an ARR basis. CFO Michelle Chang said all of the company’s top 10 Phone deals in the quarter involved competitive replacements. About half of the top 10 Phone deals also included Contact Center, highlighting what Chang described as growing integration between unified communications and customer-experience deployments.
Zoom’s remaining performance obligations increased 14% year over year to approximately $4.5 billion, driven by a 25% increase in non-current RPO. Chang said the growth reflected larger, longer-term and multi-product platform agreements. Deferred revenue grew 6% to $1.56 billion.
AI customer-experience products gain traction
Zoom CX ARR grew at a high double-digit year-over-year rate, according to Yuan, and the business posted a record number of seven-figure ARR deals. Paid AI was included in nine of the top 10 Zoom CX deals, he said.
Zoom Virtual Agent, or ZVA, saw customer count rise more than 250% year over year. The offering can be deployed alongside Zoom Contact Center or as a standalone product, with voice and chat agents designed to complete workflows, resolve issues and transfer interactions to human agents with context when needed.
Chang said six of Zoom’s top 10 ZVA deals included Contact Center, while some customers began with the virtual-agent product independently. Seven of the top 10 Contact Center deals used the company’s Elite offering for AI-assisted agents, and four included ZVA.
Yuan said Zoom believes its combined UCaaS, CCaaS and virtual-agent portfolio differentiates the company amid rising competition in customer experience. He also pointed to Zoom’s AI technology, including speech-recognition capabilities, its federated AI approach and existing enterprise customer relationships. Earlier in the month, Zoom was named a leader in IDC MarketScape for agentic CCaaS, Yuan said.
New AI offerings and Common Room acquisition
During the quarter, Zoom launched ZoomMate, an AI-focused productivity offering for Zoom Workplace users that includes agentic search and workflow capabilities. The University of Newcastle in Australia, an existing Zoom platform customer, added ZoomMate during the period, Yuan said.
Zoom Revenue Accelerator, the company’s revenue orchestration product, increased paid customers by 41% year over year. Zoom also completed its acquisition of Common Room in mid-July for $250 million, adding buyer-intelligence capabilities intended to identify in-market accounts, buyers and engagement opportunities.
Yuan said Common Room, combined with Zoom Revenue Accelerator and planned engagement and forecasting capabilities, could expand Zoom’s AI offerings for sales organizations. Chang said Common Room was incorporated into updated guidance but would have a de minimis impact relative to Zoom’s approximately $5 billion revenue base. She added that acquired early-stage companies do not initially carry Zoom’s existing margin profile.
Workvivo surpassed $100 million in ARR, according to Yuan. Zoom also introduced Workvivo HQ, an AI-native digital headquarters that combines employee communications, knowledge and actions. Yuan said Workvivo has won customers that were not previously Zoom customers, creating an opportunity to cross-sell into both the Workvivo and broader Zoom installed bases.
Profitability, cash flow and outlook
On a non-GAAP basis, Zoom reported gross margin of 79.1%, compared with 79.8% a year earlier. Non-GAAP operating income increased 1% to $510 million, while operating margin was 40%, down from 41.3%. Chang said AI usage rose with newly introduced products, increasing expenses during the quarter, though the company intends to optimize costs in the second half and continues to target long-term gross margins around 80%.
Non-GAAP diluted earnings per share rose to $1.55, eight cents above the high end of guidance and two cents above the prior-year quarter. Operating cash flow totaled $495 million, while free cash flow was $472 million. Zoom ended the quarter with $7.2 billion in cash equivalents and marketable securities.
The company repurchased 3.7 million shares for approximately $352 million during the quarter. Since launching its $4.7 billion repurchase plan, Zoom has bought back 44.2 million shares for $3.4 billion.
- Third-quarter outlook: Revenue of $1.275 billion to $1.28 billion; non-GAAP operating income of $510 million to $515 million; non-GAAP EPS of $1.46 to $1.48.
- Fiscal 2027 outlook: Revenue of $5.085 billion to $5.095 billion, representing 4.5% growth at the midpoint; non-GAAP EPS of $6.08 to $6.12.
- Free cash flow outlook: $1.78 billion to $1.82 billion, raised due to first-half cash-flow performance and lower expected capital expenditures.
Chang said the higher annual revenue outlook assumes enterprise revenue grows faster than previously expected, partly offset by flat online-business growth. The company lowered its online-growth expectation from slight growth to flat, citing changes in how potential customers discover products at the top of the funnel, while noting that online churn remained low at 2.9%.
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.
