Zoom Communications, Inc. (ZM) Earnings Call Transcript

All right. Hello everyone, and welcome to our investor session at Zoomtopia 2026. We're so happy to have everyone here. in the room and also on the virtual audience. I hope you guys got to experience the keynote and all the exciting things happening there. And for those of you here today, I hope you enjoyed the nice lunch with a view. We have a packed agenda for you all today. First, Michelle, our CFO, will touch on Zoom's strategy, vision, priorities and progress and connect that to what you all care about, our growth, our ability to generate cash and return capital for shareholders; then Graeme, our Chief Sales Officer, will take us through the first priority of elevating our core business with AI; Chris Morrissey, our GM of Customer Experience, will take us through all the exciting things in his world; and then Russell Dicker, our Chief Product Officer, will come on to take us through the new AI revenue streams. At the end, we'll host an executive panel, where we'll bring on Eric, our CEO; Kim, our CMO; and then bring back Michelle, Graeme and Russell. A few notes on the Q&A we will be doing most of the Q&A during the Q&A session. We may have some time after each of the speakers to take 1 to 2 questions, but that will just depend on how the timing progresses. And during the Q&A session, if you're in the virtual audience, please submit questions on the Q&A function over Zoom, and we'll try our best to get to those. The market just closed, and this presentation will soon be available on the Investor Relations website, investors zoom.com. The presentation does include non-GAAP metrics. And please see an appendix for a reconciliation to GAAP. These metrics should not be considered as a substitute for GAAP. During this webinar in this deck, we will be making forward-looking statements. Please be familiar with this slide. Forward-looking statements are only predictions that are based on what we believe today, and actual results may differ materially. Please see our filings for a detailed list of risk factors, assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, I'll turn the discussion over to Michelle.

All right. See hopefully, I'll get the right direction. Welcome, everybody. Hopefully, everybody had a great time out of the keynotes. Really our intention in the keynote was simple, breathe life into the system of action. We actually debuted our system of action vision with our investors in February earnings. And it takes a little bit to sort of get the message out. And really our intention with the entire Zoomtopia presentation was to breathe life into it, help you understand where we're going as a company. And I'm excited to be here with all of you. We have some new stats that we're going to give you more evidence and proof of where we're going and our progress, and then we're going to update our long-term guidance. So with that, let's dive in. And I have 3 sections that I'm going to talk about. The first is just get us all grounded on Zoom, where is it going? What are its priorities? How are those changing as we pivot into the next fiscal year? What, in my opinion, were the big things that were announced this morning for investors to think about. The bulk of what I'm going to talk about is progress, progress we've made against revenue growth, progress that we've made towards durable vectors as part of that and then the financials, and then I'm going to wrap up with that long-term guidance. So this is a bit of a refresh visual, but it really paints the picture of where the company is going, the system of action that I think Eric has this great way that like humans connecting and communicating that will never change. That is durable, that is what will give us that sort of conversation that's where work begins. And look, it's no matter whether it's a sales call or a customer support call or just a team interaction. But look, clearly, you heard the centerpiece of today's dialogue with that unified context layer. That, that's what's underlying on this, getting smarter, learning more about you and connecting dots on your behalf. But look, as the CFO, and I said this in a customer panel afterwards, conversation and context are great, but what really matters is the ability to get it to completion because that's what drives business value for your customers, whether it's improving revenue rates or driving better CSAT or getting cost downs, are people more productive, right? And so I love this idea it plays out, as you can see on the bottom across all of our products. And with that thing, I think maybe to take away here for investors too. And I think you see this in our ability to announce today what we did with unified contacts there is that it's built on one platform of AI, meaning we build the AI once, and it replicates across all of our products, and it enables things like the context layer. All right. So that's where we're going. Let's get down into, okay, in a world where you guys see a lot of different companies, right? Why does Zoom have a structural advantage in the world. Look, first and foremost, it starts with the rich context and the conversations. We own so much of the world's dialogue. And in those dialogues is meaning in tone and decisions and follow-ups and discussion and the richness of that. And so that's to us where it starts. But we're not stopping there. It's about taking them into a system of action, improving business value. That's really #2. And hopefully, you can begin to see in Russell's presentation where you sort of stitch so many different products in that scenario together, that being in adjacent markets in an AI world that have natural synergies it's proven to be a really good place for us to be in being able to deliver that value. Jim has always had an open ecosystem kind of approach to it. It started with you can come to Zoom even if you're not on our meetings, we're sort of embracing the customers and whatever technology they own. And that is just as important, if not more important, in an AI world. So you saw us talk a lot about headless and MCPs and announcements in regards to APIs, that's all part of this. That gets down to that deployment flexibility and being able to say we're going to meet customers whether they are -- where they are, whether they're in the Zoom product, or whether they want to take Zoom AI and their Zoom data and be able to move that in a headless scenario. And of course, you'd be remiss if you didn't talk about trust, I love the fact that we talked about new announcements in the Zoomtopia around trust. We hear that we win with customers around trust because we give sort of the finance person's definition of it, but we give more knobs and dials in order to allow our customers to use AI as they see fit. And it's the reason that we win in industries like banking, and it's the reason that we win in industries like cyber. All right. Every single time I get in front of you guys, I want to talk about our business priorities. These are the structural durable drivers of what will drive our revenue growth acceleration. And let me talk about how they've changed a little bit. You're getting the preview to FY '28. And let me start at sort of this goes most accelerated our biggest revenue drivers and to sort of emerging, just so you sort of follow the frame. Elevating the core with AI. You heard today, we're not just sitting still on meetings. We're continuing to innovate and reinvent how meetings happen. We didn't talk a lot about events, but there's some very cool stuff happening in events of being able to take a live event where we have a lot of market share and debut it and share it out in different ways. So first priority is really elevate the core with AI to make sure we're not stopping there, okay? Then you get into the second business priority, which is really around accelerating those line of business solutions, the vertical solutions. In many ways, no different. We've been talking about customer experience with our investors, and it continues to be a huge priority for this company. And what we wanted to do in this '28 version is begin to sharpen the other lines of business that we're going to go after. Hopefully, not a surprise that we're going out to that sales piece with our acquisition of common room. Many of you asked when we acquired common room, we already had ZRA. You did common room, what's your level of ambition. We did a fast follow of announcing engage and forecast right after in September. So hopefully, it gives you a picture of where we're going. On the HR audience, think of this as things like Workvivo and BrightHire. And really the central theme is conversations where we think we have a unique opportunity to provide additional value. And the third priority is sort of our most urgent area which is drive new AI work streams that are sort of outside of this vertical targeted line of business that's things like My Notes and ZoomMate that we've been talking to investors about, and we've added things like Zoom as a service, a lot of what we talked about today in the keynote. All right. I wanted to give investors a takeaway side. A lot of the chemo had a sort of conversational flow about it. I wanted to give you just a tearaway side of everything meant. We announced to me the big headliner was sort of a contact layer. Another big headline moving into -- it's not just in the Zoom service, but meeting and that deployment flexibility that I talked about. Lots of innovation in lines of business and events and of course, in the core meetings. All right. So if that's a we're going, and that's the durable reason that sort of zoom exists and succeeds in an AI world, those are our business priorities. Let's get into talking about the progress that we've made in the last years. All right. This is sort of my report card to all of you. And I have to say I'm proud when I look at this, I just passed my 2-year mark at Zoom. This revenue growth acceleration. Let me start there. I think when we started, we were talking about numbers in the 2%. In our last half, we passed 5%. So some really good progress, and we'll have a milestone moment as a company of crossing $5 billion. So clearly, revenue growth acceleration. And I'm going to go deep here, so I'll leave it just at that. But look, it's not just about revenue or growth acceleration. We got to do it while also holding profitability. And I'm proud to say Zoom has best-in-class profitability, and we've even been growing off of that well. We drove that revenue growth acceleration. And look, I think that I see several faces that I met with when I first started. You kind of gave me a healthy push on capital return to shareholders, shareholder return. And I'm pleased to say that I think we've made a lot of progress in that. We've made our buyback programs much more predictable and structural in nature. And as a result of that and sort of our top off grants that we did in the pandemic coming down our share counts are coming down. So I look at this and I say, great progress so far. I'm going to go deep on the sort of revenue driver. And obviously, the thesis for our revenue growth acceleration is our enterprise business. So you can read the stats over there. My favorite was last quarter, we crossed -- we grew 7.5%. That's our highest enterprise growth in the last 3 years. So real another good evidence point of our acceleration. And look, even in the last 4 years, we've gone from our enterprise business being 58% to now over 62%. So great to see. What are the elements that all of you should be thinking about in terms of growth acceleration. I've listed them there and what I'm going to go through is each one of them individually and give you additional context and color behind them. But said simply, we're going to make progress in continuing to grow enterprise by moving up market by continuing to diversify our product set by focusing on those 3 business priorities I talked about, which represent kind of our path to growth. All right. Driver number one, moving upmarket. To me, this is all about the evidence points that you're playing a more strategic role with our customers. And when you play that more strategic wealth your customers, it means they're in it for the longer haul, they sign longer deals with you. and you're getting larger customers. So we're making progress here and customers over 1 million, growing and over 100,000. So meeting both -- we frequently refer to them as singles and doubles. But making progress in both tranches in our enterprise growth acceleration. Driver #2 is the question that investors ask a lot, and I wanted to give you sort of a representation, like how do we think about the size of your various products. But clearly, we have a more established large dollars, in many cases, still growing, events, phone meetings, rooms. Then we have our kind of high growth getting to materialities. This is frequently for us crossing that 100 million or more line and then our more emerging bets for the future. What I really hope headline for investors on this slide is Zoom is no longer just a meetings company. Hopefully, you saw that expressed in the keynote. But look, I think this clearly says that there are multiple paths to continue to grow revenue going forward. This isn't just about our meetings. And we've got products that we're excited about at all sort of stages along the journey. All right. Now we're moving into those business priorities. Let's go to the first one, which is all about elevating our core products, meaning foam, webinar, rooms with AI. And look, our conversations with investors frequently get down to one thing. Zoom took a very differentiated position early on in the journey of AI and said we're going to put AI and our paid SKUs at no additional cost. You can imagine as a CFO, I struck a little here. But I'm pleased to share with you today this is a question you guys have been asking us. How is it going? Are you seeing evidence of that panning out? And the great news is that when our customers are adopting AI, we see 70% lower churn rate among them. Second sort of bet for sort of the core was this land-and-expand motion. And we're pleased to give investors updated stats of sort of where we are on our attached journey. You can read there, but phone at 29%, webinars at 27%, rooms at 17%. To me, what this says is there is both progress. We haven't given all 3 of these previously. I think we've given phone previously, but there's both progress and headroom and opportunity still to grow. And look, we know when we have those products and customers are buying 3 or more products, it isn't just a monetization of the land and the expand. It also drives lower churn, sort of intuitively makes sense, but the stat we want to share with investors is we see 43% lower dollar churn when customers buy 3 or more even versus 1 or 2. There's a stat I didn't put on this slide, but I think it is a great transition to the next slide, which is all about our phone business. Our phone business is having a resurgence of sorts. So here, we think about it, and we're talking about it as penetration to our meetings based to our enterprise kind of account core. But I'm excited to share that our phone in 1/3 of our phone deals, they are net new customers to Zoom, okay? That's going to make sense when I go to the next slide, which is talking about our contact center and customer support. But I think it's also reflective of the fact that we've been taking and really pushing things like our team's integration, right, where we know the team's phone product isn't strong, and it's another vector to gaining share. All right. Probably my favorite or one of my favorite slides in the deck talking about our customer experience, our contact center. Lots of new data on this slide. So let me talk through it with all of you. First, we've taken a little different pivot on sort of our AI. Obviously, the headline you all know here is AI is driving sort of our growth story. What we did is we take revenue. So this is in that darker blue down here, any SKU that has AI value in it. Think of this as EDA, Elite, Contact Center intelligence, right, represents over 60% of our Contact Center business and it has growth in the mid-100s, right? So really just another way of saying what we've been saying to investors that AI is clearly driving that growth. And look, we're seeing a lot of different paths to capturing that. Sometimes, we're seeing customers start in ZCC and move to Elite. And the realized, meaning inclusive of churn uplift that we see from that is 122%. Sometimes they're starting in ZCC, announcing a virtual agent, and that's about 40% realized uplift. That one, you got to factor in a new product and it's a consumptive business model. But look, there's also a path where they start in ZVA and go over. We just wanted to paint the picture of the opportunity in the 2 more comments. What I love probably most on this slide, however, is this. The contact center is winning on its own. In our top 100 deals, 90% were net new customers to Zoom, 70% brought phone with them. I think it's a really great signal for a lot of what we've been talking about with investors, but now you sort of have the data, and we wanted to share it with you. But look, that doesn't mean that attaching to our meeting base is not also opportunity. It's a huge base, so the penetration is still low. But look, I look at this slide and I say in a moment where a market is transforming, this is a great durable element of revenue growth for us. All right. Now we're going to move more into the stuff that's a little bit further out, but important to talk to investors about in talking about our lines of business related to sales and HR. I want to kind of give you a sense of how do we see the opportunity what are early signs of success. And ultimately, what is that business value that we hold in our head that we're trying to drive for our customers. starting in sales. This is a combination of ZRA and common room. Look, you can read the addressable market, which is big. But the thing I really want to make sure investors understand is so many of those sales conversations are taking place on Zoom. It gives us that natural conversation that natural context to go and sort of add on to that with customers. One of the last places and I'm kind of smiling because Graeme is sitting back there, and he is a great evidence point in this. But sales doesn't want to have calls that aren't on some because of the external quality issues. And so this represents a great base for Zoom. We have customers already in ZRA growing strong. I'm not going to read this, if they just came out with an IDC ranking for this area, and Zoom was named a leader. So already, early in our journey, some great progress. And then I mentioned earlier, but in case you all missed the press release, we announced common room, which is about the intelligence signal, right? We added Engage and forecast to ZRA. So what it does is gives us that entire platform of revenue orchestration and being able to really help our customers with something that is so critical to all of them driving revenue, get some better intelligence about who they target, improve things like win rates, forecast accuracy and end-to-end orchestration, but there's a very important word in their lives because Zoom owns the conversation, they can infuse intelligence live into the moment that others can't, okay? If we go down to the HI with Workvivo and BrightHire to focus more on BrightHire. You can read the addressable market is really the reinvention of the recruiting motion in general. But look very similar to the sales. This is an area where Zoom holds a lot of those conversations and a lot of those interviews. Pleased to share early success, bright-hire customers, up over 75%, and it's really in service to driving more efficient hiring. Hiring is one of the most important things that a customer does and fraud detection. You heard us talk about it, but this is a huge issue for people and interviews. All right. I'm going to finish this off at the last driver of revenue growth for the enterprise, which is sort of our new AI revenue streams. Look, there's a lot more than I'm not going to talk about that goes into this. But as it's more our sort of future state, I wanted to just paint the picture for Zooming. So zooming is our horizontal value SKU that attaches to sort of our core workplace or meeting SKU. And look, the opportunity is clear and simple. It's the entirety of our mean space. This is not a realized uplift. It's just a price uplift given where the product is in this path, but you can see the uplift potential that will come with that pleased to be announced already on the Gartner, Magic Quadrant, big name customers adopting and refining our approach. We're getting a good signal from both enterprise and SMB and just try to capture the customer value. But I think you saw a lot of it today in the keynote. It's about enterprise search, genetic orchestration and then being able to take that into AI creation like creating a PowerPoint deck that you saw are creating a slide deck. All right. With that, I want to continue our revenue with a slide on online, and really the headline here is just stabilization continues. We've cut churn down low, and that's despite 2 rounds of price increase. We have a much different customer base in online with over 75%, and this stuff has been growing with us through over 16 months. That's really helped to stabilize our revenue in online. And similar to the staff that I shared on AI adoption and what is it doing for the core, I wanted to share that we see a 50% churned action when these customers are using things like minus, okay? And our path of land and expand in online is earlier stage than enterprise, but something that we're still excited. All right. Moving us from revenue into our P&L so proud of what the Zoom teams have done in our gross margins. You can see there the progress we've held best-in-class gross margins at 79% to 80%. And look, that's because we've had many different levers to work. Clearly, as AI usage goes up and we move to an enterprise business, that puts pressure on our margins. And yet, we've been able to offset that with AI monetization, infrastructure optimization sort of in our core. And then this federated model that we talked about. And all of that is a long way to say. We have a fluid way of taking in AI scenarios and determining whether they should go to SLM, the Zoom model or a large language provider. We have various third parties to choose from, and we embrace open AI -- or sorry, open models as well, okay? What we wanted to do -- we also embrace OpenAI. What I wanted to do here with investors was show you just a visual of that AI inflection going up. and the progress that we've made in being able to put it on Zoomm's model, right, really key for cost and for quality balance and also building that context layer. All right. Moving beyond gross margin. What I hope you take from this slide is really, look, we've been investing in innovation. We've been building out a channel, and we have been able to keep our margins best-in-class because we've been harvesting efficiencies in AI, in general, productivity and economies of scale, and I'm so proud of what the teams have done. And in a GAAP world, we've also done the same thing with stock-based -- stock-based compensation expenses going down, in part because Zoom gave that top-off grant post-pandemic and that naturally tapers off. But we've also been really working to move to more market norms in terms of stock-based comp, and that's part of our progress as well. All right. Not only are we growing revenue and holding profitability, now we're going to move to the cash flow, right? And we are, of course, strong generators of cash flow and conversion, you can read it for yourself. Generally, what I would say is to investors is you should think about it as generally growing cash in line with operating margins. But something unique to zoom. Certainly, we have large cash balances to the extent that there are changes in interest rates that can come in and influence and that's why you see really a play with the conversion as well as some of the stock-based comp. We moved from stock-based comp to more cash based. So -- but generally, as the principle, think about that as a rule, it will grow in line with op income, and we feel great about our progress there. All right. Last slide of progress, and I'm going to hit the long term slide to wrap us up. We've made strong progress as well in returning capital to our shareholders. This was something, again, I got a lot of feedback when I first came in. And we'd had sort of spotty use of buybacks. I'm super pleased to say that I think we've announced $4.7 billion of buybacks. We've executed $3.4 billion against that. And given investors, the frame that we bid to reduce share count in FY '27 and beyond with our buybacks. When I came in, there was also just confusion around M&A and what that path looks like. And so what we've done with investors is really tighten our frame to say, if we acquire, it will be in 1 of the 3 business priorities that I talked about, and it will be more small-to-medium size in nature, right? So that you all have clarity of what that looks like. And I'm proud to say that we've executed 3 acquisitions in the last year, and they've each fallen straight into that guidance. And then lastly, our strategic investments. This represents not the value of entropic for those that are orienting to the slide, but it represents sort of our buy-ins for the year or what we've invested in, in the year. And that's anthropic, but it's also many others, right? This is a great vehicle for us, not only in financial return but one that gives us access to early partnerships in technology. So with that progress, let me head the long-term guidance slide. What I hope everyone takes away from this is that we are all about continued revenue acceleration and we're going to do it while driving strong profitability. There's a lot new to this slide, so let me orient everyone for the first time ever, Zoom is putting the time bound on its long-term guidance. And for the first time ever, we're giving top line guidance. So I'm pleased to say that our revenue guidance in FY '30 is 6% to 8%, with enterprise getting to double-digit growth. Let me give you a little bit of color and context around that number. One, it represents organic business momentum. It is really reflective of those established products and the scaling products that I mentioned. In other words, the vast majority of the bridge of this FY '30 comes from things and products that are already hunting and proven in market. It presumes sort of flattish online, where we think we can hold to stability there and then reflects that sort of earlier-stage land and expand motion, so that's sort of how to think about the top line guidance. Let's go to gross margins. We continue to reiterate with so many of those things that I talked about on the previous slide that we can hold to gross margin. And I'm going to skip down to the bottom, we're saying we're going to be in the 40% range for non-GAAP operating margins. All of this a way of saying we're going to continue to invest in innovation. We're going to continue to invest in those 3 priorities: continue to invest in channel, but we feel great about our ability to offset that with efficiencies, AI or otherwise in COGS and still have efficiencies in our infrastructure optimization and our ability to find them within our OpEx as well. Roughly, our allocations. Let me say one more thing here. This is supersedes the previous guidance, I think it was day 2 when I got called into Zoomtopia, and we debuted long-term guidance to you. This is the previous number that had been in the 33% to 36%. This guidance supersedes that. So this is the new guidance. And really is no different than what I've been saying if you've been following what I've been talking about in the earnings release so you should expect that when the revenue growth is similar as ZIP codes to where we are, that we're going to continue to hold profitability and won't be going into the 33% to 36%. So it just makes that official. From a non-GAAP perspective, great to see the expansion in '28 to '30. This obviously excludes any sort of one-off items and you can see sort of the stock-based comp range as part of that. All right. Let me then go to sort of a wrap-up slide before I hand it to Graeme with really what I hope investors walk away with. From an AI perspective, we have an AI advantage. It starts in the conversation. It builds in the context that we talked about. But look, nobody should be mistaken that the true line for customers is your ability to drive that into action and business results for them. Zoom has a tremendous focus on our customers. And I can tell you day in and day out, that's the bar of success. And we have an ambitious system of action vision. We're accelerating top line, and we're doing it while holding strong best-in-class margins. We have durable elements of enterprise growth with broad platform momentum. And we continue to be a robust cash flow generator and return that value to shareholders. So with that, let me set that. Yes. Are we taking on? Okay. Sorry, I ran long. But we will have the exact Q&A. This is the frame you guys. These are durable elements for growth. What we want to do is just breathe even more depth into hearing not just for me, but all of our leaders. So Graeme is going to take us through Elevate with the Core. Chris is going to come on and we want to go deep with investors on CX. And then, Russell is going to take us through the more future stuff, and then we'll wrap with the panel at the end. All right. Graeme, great to have you here. Thanks for joining.

I wanted to take the opportunity today, as Michelle said, we're walking through these different pillars and categories, elevate the Core, CX and AI. And while I'd love to talk about all 3. What I want to do is maybe start with a contextual frame. One of the benefits I have in my job is I get to meet and speak with customers every single day, multiple customers, large and small. And I want to share some insights into just some of the dynamics that are happening with the conversations we're having. And I'll start specific to elevate the Core with AI. So this is specific to our mediums, our phone, our webinar and events business. but some of this carries throughout. And I think the most important frame here is to think about the way that our customers are using Zoom is changing. And so if you think about in years past, right, Zoom was about how do I bring in a remote participant, right? So it's video conferencing, you think about kind of during the PMIC area and post, it was about hybrid work, how to I bring people together when they're in kind of different work environments. But we are entering an age where our customers are asking for Zoom to participate in every single conversation across their enterprise. And this is -- I think this is really, really important for us to all kind of consider because it's a big shift in what's driving the buying behaviors of our customers. And so every conversation counts and it counts at scale. So this isn't about conversations just within a contact center, right, resolving kind of things of how long did it take my ticket resolved? This isn't just about a sales conversation, right, of, okay, what are my win rates, right? This goes horizontal across an enterprise. And what's important is that this is driving that universal context player that Michelle touched on earlier, but was a big part of the announcements that we had this morning. And it's a driver across our medians phone and webinar business. And I do want to call out right the note here, which is super important that AI, right, intelligence is only as good as the contextual understanding that you can give to it. But guess what, garbage in, garbage out. And so that contextual understanding and the ability to give quality context is paramount. And so that's where you see like what we're doing, we're actually investing in the AI primitives with the deep tech to allow us to have a structural advantage here. So it all starts with making sure that we're capturing what was said accurately. So XD on the exec panel mentioned, right, our Zoom ASR with that we're doing with Zoom Scribe right, leading the industry, right, in our automated speech recognition technologies, doing audio isolation, right? This is making sure that the quality of the input that can feed that contextual understanding. Another important one is who said what. So if you think about in the future, right, this idea that our customers are wanting Zoom to participate in every conversation. Like the thing that makes that real is when a customer says, "Hey, I'm fully in the office." I have 5 people in the conference room, and I want Zoom. I want my notes to participate in that conversation because I want right? The recording, I want the transcription, I want the diarization, so I know who said what, so I can automatically assign action items afterwards. So this is a new use case, where it's no longer about bringing in a remote participant. It's about adding value to every single conversation, but guess what, right? Understanding in a shared media space with a single microphone who said what that's not easy, right? So there are a lot of underlying technologies, as I mentioned, things like smart name tags, speaker recognition that are actually allowing us to truly understand what's being said. And this carries across the platform. And then by everyone, right? So this is really, really critical. It's driving a lot of our international opportunity with things like voice translator. And as announced this morning, things like touch up my voice. But then the bottom layer is also critically important. It's about the trust layer. So you saw some of our announcements this is very much customer-driven around how do I make sure that the people who are speaking right should be there that I have that layer of trust -- and so this is augmenting the platform with deepfake detection sensitivity labels so that a high sensitivity conversation, that summary is making sure that it's flagged and categorized as high. So this is allowing us to have conversations in highly regulated markets, other areas across the globe. We're leveraging our node architecture for delivering AI on-prem. So you saw a couple of months ago, some announcements from us there, which allow us to expand where and how we can do this. But as Michelle mentioned, right, with regards to these areas of meetings and phone and the opportunity to expand in phone and webinar, there's still a tremendous amount of opportunity. But the reason why customers are buying is changing. And that's what I want to talk through. So the drivers of the past for phone, it used to be, okay, I'm replacing dial-tone. It used to be, right, that, okay, maybe I'm moving from prem to cloud. And I'm going to -- the business driver was that, "Hey, I have less complexity." I don't have to manage a phone system anymore. So I'm going to offload that to a vendor like zooming. So we've seen great success, right? The business has grown. But these new contextual this universal contact layer is providing a new conversation that is driving these customers to Zoom. And so when we think about things like phone, right? It's no longer about dial tone, right? It is this understanding of when I can have a contextual understanding of what's being said, right, I can help an organization get real work done. So you see here, whether it be the before, during and after, is driving meaningful impacts with customers. So you see an example here, customers that previously had. Voice is one of the things that's pretty fragmented, especially within enterprise customers, they might have multiple different systems right? But now this universal context player is consolidating onto a single platform. So a national wealth net manner that we work with 16,000 locations consolidating all of that on to the Zoom platform on to Zoom Phone so that we can build this universal context layer and then augment the organization with AI, and AI receptionist being a meaningful part of that strategy. We talk about it as the digital front door of an enterprise. And so this is where this resonates across customers of all shapes and sizes where I think there's a meaningful opportunity in kind of mid-market, lower end of the market. So think organizations that might have historically not even had potential use cases for Zoom. And I think it's evidenced in Michelle's stats around 1/3 of our Zoom Phone customers being net new to the platform. This is -- think of businesses that I have a plumbing or a landscaping company, right? Like I might not be out in the field. I have 25, I have 50 of 100 employees, right? How can I have an automated system, AI system that's intelligent, they can offload things like scheduling, appointments, reminders, calendaring. And so it's a huge upsell opportunity. It's a huge driver of why phone and telephony matters versus just dial tone replacement. That makes sense? Shifting into our webinar business. I think webinars -- I think Michelle sometimes says, right, it's the -- part of our business that's sometimes less looked at, but is meaningful, huge opportunity to deliver value in what I would say, a persona that typically people don't really think that Zoom is working with. So within that sales and marketing arm, but more towards the marketing of how do I help a customer get their brand and message out. But the market is under tremendous consolidation. So we've seen a lot of disruption over the past year, and that's because the buying criteria, right, augmented with AI is changing how people are thinking about this. So it's no longer about just running an event or running webinar. There's a true TCO conversation where you can replace multiple different parts of the technology stack within a customer. And so you see here, we've added capabilities, production studio, content studio, video management, right, turning this into a true kind of Martech life cycle stack and delivering a tremendous amount of value. And then it's personal portamine mine. You see the comment at the bottom. This is a great land-and-expand opportunity. This is a technology where we can go to a customer -- a competitively held customer have this conversation, the absolute best-of-breed win and get a wedge from the door. And actually, some of our top competitors that you would think of are actually leveraging our webinar and advance platform. So I think that seeks to, right, our ability to kind of use that as a wedge into account. I do want to give an example. So one of, I think, a very, very large technology supplier, one of the world's largest. This is kind of a journey that they had with webinar and events. So in the last 8 months, we've had 6 expansion opportunities. So you want to talk about defining land and expand. This is the gift that keeps on giving. 47 different events licenses ranged in different size and capacities up to 10,000 attendees. And then they're actually doing a pilot right now for our video management product. Video management is an area that I'm really excited about. Because if you think about it, some webinar or events usage can be episodic, right? It's either seasonal or I use it. And then maybe after I do my event, I don't need it anymore. And with video management, we're turning that into, right? It's building in terms of the stickiness of the solution, so where it's no longer about producing a single event. It's now about a full life cycle around that. So whether it be the ability to create, manage, repurpose, use AI to actually learn from that, how do I make that session better? How do I actually drive more engagement from my end customers that I'm trying to target to get that message out from a scale perspective. So very, very excited with what we're doing with video management as well. I think that's it for median stone and webinar. I think we might have.

We have time for a few questions for you. .

Perfect. Before we move, yes. Yes, please. Yes. So before we hop in to customer experience.

All right.

I'll repeat your question.

Alex Zukin from Wolfe Research. Thank you for the wonderful presentation. It's really great. Just on the guide for the long term, can you maybe just clarify, is that a CAGR? Is that a point in time? What is assumed? Because I think there is a -- you alluded to double-digit enterprise growth. Is that we saying that's in fiscal '30? Is that before then? Kind of what is the implication for online? Just any more kind of substance. And then the other point is like you haven't given a guide for a long time. Why are you doing it now? What is the confidence or the visibility that you have that gives you that enough data points to put it out there?

First, to answer the question specifically, it's a target in FY '30. Generally, in terms of the path to that, we'll give '28 guidance in February. But generally, think of it as sort of like a gradual path to that. I think I gave a lot of color on sort of what the drivers will be. With respect to why now look, I think it's because we do have more confidence, and we've built sort of that path, and we want investors to be able to know where we're headed on both the top line and bottom line.

And maybe just on the topic of M&A, is there any thought of how much with all organic?

Organic only, yes.

All right. Going to move around room a little bit. All right.

Yanni Samoilis from Baird. Just within the visibility that you have to accelerate the enterprise business, how are you planning on incentivizing the sales force to be able to achieve that? Is there anything -- are you increasing quotas? Are you focused on incentivizing the AI attached more? Or is it really just the cross-sell motion that's going to drive the story? Just anything there? And then what's assumed for the channel as well?

Yes. So I'd say the one -- I'll let Michelle comment on quotas. But when it comes to compensation drives behavior, right? We continue to evolve our compensation philosophy both for our direct business as well as our channel programs and how we drive outcomes with them for our direct sellers. We're in the middle of our FY '28 planning now, talking about specific mechanisms that we can use to drive the upsell cross-sell and also the expansion in areas like consumptive. So those are all conversations we're having. And then we've made pretty big changes to our channel partner programs as well where we've tied the channel partner economics both to not just to a specific deal, but to a book of business and outcomes, but then also delivering on things like net retention, churn targets as well. So really bringing a level of sophistication the way that we do our channel motions as well.

I'll just subtract. Go ahead and add sessions here you go. Sorry.

Arjun Bhatia from William Blair. Michelle, I noticed there was not a free cash flow target that you did walk through some of the that you're seeing in free cash flow, how do you think about what the long term of that metric might look like? Is there room to get that back to 40%? Or are the working capital headwinds?

The 40%?

Free cash flow margin.

Look, what I'd say with free cash flow. I mean, you have our margins guidance. What I would say was free cash flow is what I tried to say earlier. We didn't give explicit guidance, but you should generally think about that growing in line with operating income. The wildcard is sort of interest rates given Jim's large cash balance and what you believe about that, and taxes would obviously be the other piece. But we've given sort of tax rates in the 22% to 23%. So hopefully that gives investors enough kind of pieces to be able to back into it.

I think we're going to go to actually do Chris Morrissey last and will do Russell's presentation.

All right. And then we'll be back again you guys with the panel at the end. All right. I will introduce you Russell, our newest entrant to the staff, I believe, is just -- I think you guys saw them up there, but just such a great addition to our team and is going to talk more about those kind of outer year things in terms of our priorities. All right?

All right. We're good.

All right. Awesome. Well, see, Graeme talked to you a little bit about the Elevate the core with AI. I think you'll hear from Chris in a little bit -- Chris. Okay. But what I'm going to talk a bit about is how we are working to drive revenue in this third bucket here. And like it's all kind of part of the same story and how we think about it. It's all part of this idea of the system of action. And so what we're looking at, the framework, how we think about all these pieces fitting together. Before kind of getting into the products a little bit, we had a version of this slide that I talked about earlier. And we really do think that this idea of a unified contact layer is a lot of what powers everything that we can go do. . And I think what we're increasingly seeing is that there's a lot of companies with a lot of AI models, the leaderboards change over every 45 seconds, there's a new one that is leading at this particular benchmark and another one leading at the particular benchmark. And so the question is like when everyone has a good AI model or has access to a good AI model, what do you start to see as being like interesting and meaningful distinction. And we really think a lot of that is context because AI models are never going to have the specifics of any individual business and the knowledge about like who works on what and what's going on there. And increasingly, like what you're seeing even with the magic of things like Claude Code and others, is the idea that the more agents are able to have access to the specific context of a business of a workflow of an organization, and they're able to understand and use and reason over that context. The more they're going to be able to take on, the more they're able to go do. And so that becomes like which company, which organization has the right context to access becomes like an incredibly important thing. And we look like our opportunity with Zoom is like where conversations, like we have access to so much of the raw information often undefined, often unstructured that is the context of how businesses work and how they operate. And so by owning the conversation, Zoom is actually in an incredibly unique position to capture that, not just the transcripts, but how it all fits together, what's going on in the meeting across like what's presented and everything else. And that makes this like richer version of context that we think that we can go do. And so as we can connect that all together across different surfaces from meetings, phone, webinar, chat, with our genetic search, we can like reach into kind of other document repositories. It's not just a transcript, it's a picture of how everything relates that can be fed into the model to go start to do interesting pieces of work. For us, a lot of it starts with My Notes as the core engine to help capture a lot of this stuff. It's not just kind of a folder of transcripts, but it's already kind of one of the clearest proof points of how this starts to get sticky and what we are seeing in terms of how the use of My Notes affects how people are like using Zoom more broadly. And so when you look at, for example, our online business, people who are using my dose, they churn at less than half the rate of the people that are not using it because it moves us from a position where, hey, you have this meeting and then you go have this discussion and then you're done, you don't think about Zoom anymore to something that is kind of very durable and sticks with you. And we have lots of examples of how win people not only start to capture what's happening in media with My Notes, but then they start to use either via ZoomMate or some other tool, they use that information again they start to see the power of like what's being built for them in like their memory and their personal context within the Zoom platform. And we already have, I think, 1.5 million monthly active users in My Notes. And we have a lot of more work that we're going to do to keep driving the growth of that. ZoomMate is obviously how we are building this idea of taking a lot of this context and helping drive it to completion so that people can actually get work done. They're seeing the productivity gains with it. And so ZoomMate is our completion engine. It has a wide degree of functionality with like a sandbox. So it can go right code to go figure stuff out. It's connected deeply to our Agentic search system. There's an easy example of hey, like prep me for the sales call, it can reach into a connected CRM, look at meetings that you had preparing for conversations you had last time chat threads and then start to draft a briefing specifically for you, like a very true story that I tell sometimes, I'm still reasonably new to Zoom, like 6 months in by 1 month in, I had to present on our AI strategy to the Board. So that was great for me because I was still only a month in. But I knew I talked about a bunch of stuff and a bunch of ideas and using my notes, I was able to like actually get that going incredibly quickly, and it became this really powerful proof point where you start to say, "Oh, how do we start to then turn this in a thing that comers can connect the dots on and use that and then you really drive a lot of the sticky behavior that we've seen and ZoomMate with what helped kind of get all that done." And so we're seeing like ZoomMate being powering across a variety of different systems. We have the AI productivity suite, which is able to reach into both riding to and pulling information out of and it's able to connect to other systems, Salesforce, Jira, we're using that for a lot of our own internal automation of our product building process, ServiceNow. And we're starting to see the story land with customers. We had our first APAC deal that we closed in Q2, which is University of Newcastle. They're already a full Zoom platform customer and now they're getting into the AI story. It's not just something that we're seeing in the U.S. We're seeing it overseas as well. It's starting to like show real traction globally. And so with ZoomMate driving this for a lot of our information workers, we're also starting to see versions of this gaining traction on the front line. I think of the global workforce is not information workers, they're frontline. There's a huge opportunity there that we're very connected with, with our Workvivo product that we have. And they have HQ agent, which is their version built on Zoom that kind of brings this into the frontline workflows. And so Workvivo passed 100 million ARR in Q2. Frontline workers can use HQ agent to ask questions in plain language about what's going on and what's -- and how they can act right in that moment. And so it saves a bunch of productivity for them in a bunch of ways. And so I think there's a lot of -- it's another example of how we can have a new AI-driven business that's built into what we're working on today. One example of this for Workvivo, in particular, we just had a top U.S. insurer 100,000 users on top of Workvivo. What they found was that for. There was a huge fragmented set of tools that people are working with, a lot of shadow IT stuff of things written down here, things written down there. And it really like hit their team in a bunch of ways. And like the field teams were some of the hardest for them to go reach. And so this was, I think, a little over 210,000 net MRR just from a single customer, getting them into this platform. And so I think it changes the discussion that they're having from hey, is this a thing that they saw, did this information diffuse itself throughout the organization to something that like they have kind of track acknowledgement. They know who saw it and how it's connected and everything else. The next opportunity for all these kinds of deals that are often new logos to Zoom in a bunch of ways is to attach HQ agent to what they're doing. So get that going for the 100,000 frontline workers. So we have -- Woodie's is a company that started to use the Workvivo platform. It went from 57% to I think, 88% engagement. Bus RM was up 55%. And we use this for our own internal work for our large workforce within Zoom. And we get like 89% participation in a lot of our cultural surveys and stuff like that, that really shows the reach that these tools can start to have. And I think what we see over and over again in a core thesis for how we design a lot of our products is that when you reach people where they already are, where their workflows already exist, you just get a much better engagement than what you're saying, hey, please go member to go check another inbox or learn a new tool in order to go get something done. We see this playbook extending to a lot of other important kind of functions as well. So we look at this in the context of like HR and recruiting with our Bright hire product, and we see it for revenue organization, sales teams with the new unified common room ZRA product. So BrightHire, it goes down this pattern of you have interviews, you have structured contacts that you need to bring into these centers. you can get the idea of the hiring brain, what your organizational policies are, what you're trying to go higher for in a particular role, sometimes that's happening dozens or hundreds of times, particularly for organizations that have scaled hiring operations if you're like running a lot of retail organizations or something like that. You compound what's going on in that brain and you can feed that back into what you're seeing in the hiring process. And then you can use that to refine your job descriptions or find the questions that you're asking in the interview and everything else. Very similar pattern that we're seeing success on with the revenue side of the house. What are the buying signals? What are the actions around outreach, coaching, deal acceleration, dealing with objections, forecasting, stuff like that and accelerating it through to trying to get the deal closed as best you can. And so you start to look at these things, you say, okay, these are the patterns, the specifics and the details might be different between the 2, but you start to like match the pattern and you can scale up and build a number of these. If you own the conversation, you figure out how to then go structure the context and then you drive all that through to completion. When you kind of double-click on each of these things, BrightHire, in particular, this is one where it's embedded in Zoom, and we know that so many our interviews now are taking place virtually very commonly Zoom because it's a product that works so well for kind of lightweight, low setup meetings that people really like. There's organizations that use Zoom almost exclusively for other kind of external calls and stuff like that. It's not a new tool. It's not a set app, that they need to deploy. We've got BrightHire in around 1,000 hiring orgs right now. It's also really one that is very thoughtful about the workflow that we've built. It's not just a transcript tool. It's this whole idea of the hiring brain that I mentioned a moment ago. So every interview becomes structured content that compounds in a really compelling way. And I think a lot of this is capabilities that it's difficult for competitors to be able to match because we can have a lot of our real-time guidance that's built directly into the platform. We have a lot of the seamless consent. It uses Zoom's Deepfake detection system, which is a huge topic of a conversation in the world of hiring right now. I think we've caught hundreds of fraudulent candidates dialing in from who knows where. And what our customers are starting to see is 27% fewer interviews per Hire across a variety of clients. We have a couple of case studies we looked at. included health recruiter screening hours went from 274 down to 110. Surge hiring recruiters went from down to 1. They reported about $1 million plus in net savings by using the octane versus kind of having some sort of outsourced model and they maintain their surveys around candidate experience, and they maintained a very high 4.7 out of 5 on their candidate experience there. I think the quote they have, speaks themselves, really talks to the idea that like we really want to embed things directly into the workflow in order to create the transformation and not send people off to a separate tool. And I think that's a lot of the difference that you're seeing between something that's just a transcript or something that's a complete separate tool versus embedding it directly into the workflows that people are already using inside the Zoom meeting in this case. When we go down to the revenue side of things, we have the common room ZRA, what we're really starting to see there? Again, you look at this where this is a scenario that has lots of conversations, lots of outbound conversations Zoom owns a lot of telephony stuff. We have the dialer, we have SMS. A lot of competitors in this space only lie on something like a third-party API like a Twilio or something like that, but we can integrate that entire thing into the existing stack that users have. We build a lot of real-time interventions, the sales assist coach. We don't just analyze things after the call is over because we can like look at like what's happening in real time, not just the words spoken, but we can think about what's on screen and what's kind of happening in the back channel. We have a good set of kind of clean buyer identity stuff that common room is able to bring us biggest have is continuous buyer view across every channel again, you get this pattern where the context is compounding, right? It's not just a matter of like what happens specifically in this call, but how we build all that up over time. And when we go through and when we're winning deals, we do our surveys of, hey, why did you choose us? And more than half the time, it's because of the product functionality. It's not purely a pricing play. They're saying this is a better product that's going to help me serve my needs substantially better. And then I think we're also seeing there's been a huge explosion in people trying new tools as a lot of the technology has evolved. We're also hearing from customers and seeing that they see the benefit in some of this consolidation and not having to leave or not have their users need to leave 45 different things together in terms of like how to go make that happen, like having this clean solution. So ZRA customers are up 41% year-on-year. Okta customers expanded their common contract because they can get more of the value from the AI intelligence. And then we were just named a leader in the IDC MarketScape for the unified revenue orchestration platforms. And so we're seeing a lot of the traction benefit from that part. So I can just kind of back to where we started showing how all the pieces fit together in huge ways. And so like I would say that like our bet that we feel very good on is the value of having all the context that comes in from the conversation, having the richest real-time access to that not just to sort of after the fact transcript, but what you can do in real time and understanding all the nuance of that. How we can then also use that particular moment, both during the conversation and directly afterwards. And like the shoulders of when it happens, help drive the completion in that moment and be very tightly connected to the workflows that people are already a part of. Again, they don't have to go somewhere else. They don't have to remember something else. And I don't think there's any point solutions that can go solve all these problems in the way that we're capable of doing that. They can look at one side of the equation or the other, but we can kind of see the whole thing wall to wall, I think, in a really powerful way. And so I think that just becomes a structural advantage for us that no point tool, no contact center vendor by themselves can go manage. And so yes, I think the context layer and our bet on that and how we're able to go build that and how we're able to flesh that out is what's going to allow us to like be really successful and go in here. It's not just one market, but you see that how across functions the same patterns emerge over and over again. So as we continue to improve our ability to execute on that, there's, I think, more domains that we be able to go into. And it's just we're going to go to Q&A, but I think we're going to go to Chris. Come on up, Chris.

I know we went out of order, but the -- sorry, the good news is I'm late because we had our first ever CX Connect as Zoomtopia, which I was extremely excited about -- the plan was I was going to leave the stage and say, now Eric is going to come up on stage and talk and then Eric said, Chris, why don't you stay with me. And I'm not the smartest person in the world, but I know how to read in work chart say but it was good. The CX session is going very well. So for those of you -- I'm the GM of our CX practice here at Zoom, been here for 3 years, and it's been just a phenomenal journey and a lot of things we're doing. It ties directly to the pivot. We're very disciplined in strategy. We spent a lot of time, and you've seen this slide a couple of times, so I probably don't need to go through it. But we're talking about the middle of the customer experience, specifically under accelerating line of business, which is the business that I run. And this includes like the virtual agent, the traditional CX platforms. So I wanted to start just kind of framing before getting to kind of some of the successes and why. But when I started here 3 years ago, and I've been in the CCaaS space for 174 years, I think, it's been a while. But I said like our goal is not to chase the CCaaS market, like that is not exciting. And the reason I said that is a couple of things. One is there is so much changing in the CX space right now, that if you're chasing a market that's existed for 12 years, you're just chasing a dinosaur. So we have a very strong opinion of what's happening in the market and why you need to look at things differently and go over them quickly is like there's a massive convergence happening in the market. an example like CRMs are now becoming ITSM platforms, ITSM platforms are becoming CRMs, UC and CC platform coming closer together. Some CRMs think they're becoming CCaaS vendors. I think that's more marketing than truth. But these are the types of things that are happening in the space right now. And then AI is changing everything. I feel like I get paid a nickel every time I say AI, so I'll say it a couple of times. But AI is pervasive across the entire platform. So a lot of people think of AI about virtual agent, which definitely is. But AI is around giving more insights. It's around helping the jobs better. We don't subscribe to the belief that AI means there will be no humans in a CX world anymore. That is not our fundamental belief. We think the belief is when AI and humans work together, your outcomes will be better. Now there's definitely cost reduction you can use an AI. Like I'm not saying there isn't, but the question to the brands that save them money is, are you going to take that money and save it and just apply it as cost savings? Or are you going to redirect that money into other areas of the business. The perfect example is IKEA, where they had a -- some with AI, they saved the equivalent of 1,000 or is it 1,000 employees that they save by using AE, but they didn't fire them they repurpose them into a new role. And they end up generating $1 billion in new revenue by creating them as design experts. So yes, there are savings, but brands can decide how to use the savings. It's moving from personalization to individualization and this ties very directly to the concept that Russell is talking about where that unified contact layer. And for years, people talk about personalization or -- and if you're super special, they said hyper personalization, right, they use other buzz phrases. But all that like example of that would be, if you called an airlines thanks, Chris, thanks for being a diamond member, are you calling about your flight to Los Angeles, right? But when you start taking the context, every conversation a customer has with the brand, they're telling something about themselves. And that's never captured in the CRM. So what we're doing is we're capturing all those insights, putting them into our unified contact layer. So now when we talk to it, it's not like Chris, your dimers like, Chris, I know you like aisle seats direct flights only. You don't like to sit next to trees, not usually do anyway, but -- and it will give you a more personalized experience for me. And then CX is becoming a revenue driver. So if you talk about a look at all these things, you can't talk about just CCaaS because the way I say this is CCaaS vendors historically love to say we are a CX vendor. So long as you call my contact center. But if you think about customer experience through the lens of a brand, and they're like, well, what if they call the phone, right? Wait out of the gate, the CCaaS vendors are in trouble because, well, I don't have a phone, he's have a codec center. What if they want to use a kiosk in a store or at a clinic, well, I can't do that either, right? Well, if I wanted to use video and meetings well, I can't do that either. So what you're saying is you're a great CX platform in a very narrow view of CX and Zoom is saying, what brands are saying is CX is much broader than that. So we just fundamentally change the narrative, right? And it's landing very well. Now here's the good news is I was saying this 3 years ago. I said I think CCaaS will die, new markets will be formed. And when new markets are formed, new leaders rise. I think I was like one of my first quotes when I started at Zoom 3 years ago. I'm not always right, but this time I was. So now you look -- these are reports that just came out this year. This is a new report that says is the -- they call it the Agentic CCaaS, which is way more powerful CCaaS because it's Agentic. But it is a report that came out. And if you look at it, it's pretty far, but -- this is Zoom. This is a NICE, this is Genesis. This is Five9s. So you know why that is, is because I wasn't chasing NICE in Genesis and Five9 to be a CCS. We were changing the market. And when markets change, new leaders rise. When new leader rise, it's Zoom. The other version of convergence, we said we think UC and CC will come together. I believe that 3 years ago. Well, now this is a report that says, how are the integrated platforms and this measures the platforms that have both UC and CC, clear market leader. So like we've been building for years where the market is going, not where it's coming from. And these are the areas, like these are how we start every conversation to customer, like we don't go in there like my CCaaS is better than their CCaaS, right? It's not the conversation. We started much broader than that. So you get into all the tools we have in our CX platform. It's the trigonal CCaaS products. And when I say we're not a CCaaS vendor -- we do all the capabilities, quality management, workforce management, conversational intelligence. We have all those capabilities as a narrow part of the scope, but we go much, much wider. Virtual agent right now is one of our fastest growing products within the CX suite. The beautiful thing about arbitral agent is it doesn't have to be tied to our platform. In fact, right now, our largest virtual agent customer is it attached to our CX platform. This particular case, they have 1,100 storefronts, and they are -- they rolled it out in 8 months have virtual agent with a pretty high deflection rate. I was just on a call with them last week, and I was teasing the kiosks that we're having, that we're going to be having virtual agent on kiosks within storefronts, where you can go to a -- think if you go to a Best Buy. These are the types of conversations we have with customers, right? You go into a Best Buy and buy an LG TV. And there's one LG TV expert and he's got 3 people in mind we can talk to them. Where do most consumers do them? You turn, leave the room. Like I can't wait for -- I got to go do something else. But if there's a kiosk there, multimodal, you can go there and like, here's the TV I'm looking at. Can you tell me about it? Do I need tables with it? So the virtual agent will be helping people in store. And if it can't help them in store, you can elevate and talk to a contact center expert somewhere else. So this is where all like CX starts blending together and you start having very different narratives. So this is a huge success in, and they're going to innovate more with kiosks and some pilots with us pretty soon. Any chart up into the right is usually pretty like this one. But this is showing our volume of virtual engagements, both chat and voice. We're growing in both, but we're having the most inflection point in our voice virtual agent. Now if you believe pundents like 5 years ago, they were all saying voice is dead. Voice is dead. Voice is dead. Voice is the fastest-growing virtual agent tool in the market right now. And then we're following suit. And again, like we see a huge adoption within our own customer base. We see customers buying as a part of the full suite upfront. We're going back, we're selling to our current customers, and we're selling ZVA to customers that have no other zoom products. So the potential just for that product on its own is massive. The other thing we talk about is the unified customer and -- like these are components of what we call our Elite products. So Elite, we start bringing some AI capabilities into one of our bundles. Like we try to make certain parts of AI accessible to everybody and then other parts you can buy an upsell and get more consumption-based model. So virtual agent is not bundled in a suite, it's a separate offering, but we do have some AI bundled that try to democratize it in some areas. But when we do that, we have a 122% uplift. So some people would think like, is AI going to make contact center sales go down? No. It's making it go up, right? It's adding value. And like sometimes, I've been asked, like, well, what have you got a contact center they had 100 ages. All 100 left. I might go, why did they leave? Well, because they're using a virtual agent, I'm like, that would be amazing. Because if I'm doing the virtual agent, my revenue goes up by 30% just by handing the virtual agents. So it's huge there. Here's another example, which, again, we talk about convergence and things coming together. Here's a customer that had to have separate products. They had a separate virtual agent, separate UCaaS, SepCCAS, separate quality management, right? Convergence. We do that all together. So we sold all of that and replaced 4 or 5 vendors in 1 sale. NICE CX1, that's where I came from. I save is truth in advertising. They call themselves CX 9 because there's 9 products in the background. It's not 1 product. But 8x8, cognitive, which is the phone, cognitive, which is the virtual agent and observe, which was the QM, right? We replaced all of those in one sale. So when we win, we are winning a lot against the incumbent. It's not just ironically, I had some theories when I came on board and one of them was like we'll continue selling everyone moving from prime to cloud, but most of our sales are replacing like I call it, first-generation legacy cloud vendors. That's where a lot of our growth is coming from right now. And I think Russell is up next, just. No. But I went rather fast because I did want to make sure that we save some time for questions. Yes.

Siti Panigrahi from Mizu. Just on the CX part, I think you're saying you're not changing the CCaaS market. I can see that more than CX. Are you seeing customer layering in like AI product or agents into the existing CCaaS? Or are you seeing customers like the example you have given like all the 5 products, replacing one, which one will be like?

So we're seeing both. So that one example was layering just our virtual agent on top of another person's product, right? So we are seeing people just buy components of our -- we are seeing a lot of our customers start and they like we have some customers that buy like everything we have on the truck day 1, right? They're going to buy a Elite, which is expert assist, QM, WFM and virtual agent on top of it all, right? . And then, we have a massive land-and-expand approach too, where they might start with the basic Essentials bundle and then later, they come back, how you want to add Expert Assist. So they go to Elite, they'll come back and they want to add virtual agent. So when we land the account, it's very, very, very rare. That's the end of our sale to that account. There is much more upsell on every account we sell into, which is exciting because it's not like it's 1 product and the only way you can grow is if you have more people, where you can grow even if you have less people, we can grow by bringing more AI tools to that same customer. So it's all 3 of them.

And one more follow-up on the recently with miles and all these personal agents coming in and they soon start calling all the customer support do you think this contact center or customer experience business is going to evolve? And how prepared are you for that?

Yes. It's a great question. It actually came up upstairs. So just one observation on that is that shows you how fast the market is changing, right? Like 3 months ago, nobody talked about didn't exist, right? And now all of a sudden, everybody is talking about it. So when you talk to -- this is just -- this actually might be a sales pitch. But when you talk to customers and they know how fast the market is moving. So then you ask them like, you need to partner with someone that's innovating as fast if not faster than the market. And frankly, Zoom isn't innovating faster than any -- like you think of what we're doing today in 3 years, it's more than some vendors that have been around for 20 years. So they believe we're moving fast to take care of that, right? So it validates how fast the market is moving. So I'll answer your question after I gave you a pitch, but I think is going to have a significant change in the volume of calls in the conic centers. Russell and I have talked about this a couple of times, right, where there's many calls that I don't make to any brand because of time, like I think my Verizon Bill, I could probably say $15 a month, right? It's not worthy isn't worth the squeeze for me to call and try to get $15. But if muses calling, then all day long, do it, right, and then do the same here. So there will be a massive influx of engagements to brands. And some of them don't know what to do with it. Some of them are just shutting it down if it's an agent calling don't handle it. So they're trying to debate. As a vendor, it's very exciting because it will get sorted out. You never put genies back in the bottle, right? Once they come out, it's just a matter how fast it's going to come out. So we'll continue down this path. But there's a lot of things that you get sorted out like if a personal agent is calling a brand, how do you know they're actually authenticated and they're actually representing the customer, and it's not like a malicious call. And so we are working with me right now and Meta on what these protocols look like. But once that's sorted out, the inflow will come in. Now that contact center has got 1 of 2 ways to handle it. put a human on it, highly recommend against it or put a virtual agent on it. I love that. And if they put a virtual agent on it like and more calls go into a contact center, they're going to need more virtual agents handling those calls. So I think it's a good thing for vendors. It's probably a little bit scarier for brands because they will see a massive influx of calls because it's easier for us to use it like a personal agent to go do things that I don't have time to do. So yes, I think that we're still trying to figure out all the sense. It will be good for us. I was late to this one, I'll be late to the next one too.

Jackson Ader at KeyBanc. Why wouldn't you put a human on that? Just like on the Muse interaction, what was the rationale for not putting a human on that?

It's the most expensive resource in the contact center right? I mean, you could. But I think what you do the same reason you wouldn't put a human as your first channel of choice on someone calling about an account inquiry, right? That can be handled by a virtual agent. Why would you put a human on that call? So it's not that it's like an agent coming in, you don't want to like a human being interacting with an agent coming in. It's just like, hey, any anything, your first priority now is just priorities there. And then, but if it's a virtual like -- if you think about humans calling in and Zoom virtual agent, you get into things like how natural does that agent sound? How latency is it? How human, how well does it communicate with me. But if you're talking to another bot, like those things matter less, right, like because the bot's not going to get upset that you didn't sound perfect English or what I write is going to talk to you. So I think bots are going to be best suited to solve that. And I also don't think it should be a voice agent. It'll probably say, let's take this conversation into more of a chat conversation because voice is the most expense like humans first and voice virtual agents and then chat virtual agents. And what brands are going to want to do is like if it's a bot calling in, I want to go to the lowest channel to serve. So it'll probably go to a chat virtual agent, right? All the same things there, the reasoning the guardrails, all that will still be in place. But let's not burn tokens to talk Bob. I mean -- but it does -- you can. I think what's going to happen, like another observation is you know when humans all of us call into a call center and then we get annoyed, and we're like agent, agent, agent, right? Because we're like, we don't talk to the bot anymore. That's going to get flipped or 1 day like brands are going to go start phone calls from bots, like the Chris bot. I'm a bot, right? Chris bot will call into contact center. And that brand is going to be like human, human, human, like, it's going to get flipped. So yes.

I think we got to get you to your next meeting and we're going to move on to the Q&A session.

All right. Thank you so much. Sorry, I was late.

Wait a second. We got to get everybody up here first. All right. This might have to go to the speakers. All right. Do you need to -- should I give us a speaker to somebody? All right. Okay. Maybe put that one on the first chair Michelle, you should sit here, so it kind of goes underneath. Once we know all the micro we'll start. You guys all good? Okay. All right. Catharine, why don't you start.

All right. One of the things I've noticed today is that you have a very broad product portfolio, and you also have a really broad reach to customers. So what are you doing that won't dilute the brand? And what specifically are you going to do for like some of the products to really push them for upsell and land and expand?

Perfect. So I'll start on the brand side, and then I'll have Graham kind of cover off the second piece of the question. So ultimately, yes, we do. We have a very broad portfolio. And what's interesting about it is that it's not like we've taken one persona and added more products just to that persona, right? We've really acquired and built products and solutions that talk to the pain points of a variety of personas. And so ultimately, the balance that we're doing from a marketing standpoint is, yes, we want to increase general awareness of like, "Oh, wow, I didn't know that Zoom did that", right? Because we do need to be cost efficient with our media buys and how we're reaching the broadest mental availability, right? That's kind of marketing science 101. But when it comes to brand to demand and really connecting the dots between that top of the funnel, although the funnel doesn't really exist anymore, all the way down through the lead generation, we have to be talking specifically to those personas. And so we're working really hard to ensure that the storyline and the narrative to the CX persona that we're finding the right creators, the right influencers, we're finding the right communities. We're finding the right industry third-party events where that persona is showing up and engaging and making sure that Zoom is present in those conversations, whether we're in the conversations or not. And so that brand demand strategy is ultimately what's allowing us to increase our pipeline. We've increased our pipeline over 50% year-over-year. And it's because we've connected the dots from that top of the funnel all the way down through the needs of each persona. But it is a balance. We do have to make prioritizations and trade-offs and figure out what are the right personas for us to be talking to at this moment in time and how do we leverage the things that are happening in the industries for each of those personas so that we're not having to create the moments ourselves necessarily because that could obviously get pretty costly. But by leveraging the things that already exist, we're able to be cost effective to reach them in the channels through the creators, through the influencers, through the media, through the events that matter to them. So it's really connecting the dots between that broad awareness all the way down to the persona needs of each individual persona.

And then to the question on land and expand. And really, I'll expand that to just more broadly in terms of how we're thinking about from a go-to-market perspective, -- these are areas that we feel very compelled that we can win on a persona and kind of per product basis. So we have a right to win. We have depth of capability and feature set to win head-to-head, right, with the best of the best within that specific persona. That's where we can land, and I think we've shown evidence of our ability to do that with where we're winning even net new customers to the platform and then pulling through the rest. But also then leveraging the story arc and the platform vision, things like unified context layer and everything else that gives us the opportunity to have a differentiated viewpoint to those buyers versus any point solution across those personas. So you think about things like Bright Hire, right, great recruiting capabilities, awesome, delivers a ton of value to that recruiting HR persona, but also solves pain points for the IT teams, right, leveraging Zoom defect technologies, everything else that we're doing, right? And so that actually pulls the value of the entire platform together. Oh, by the way, guess what, if I can hire better people, right, that context feeds back into how I'm actually then where is my #1 turnover spot, right? It's in support where my contact center agents turn over all the time, right? So how do I turn that into a flywheel, right? So leveraging these personas as a landing moment, winning on their own, but then also adding value in terms of the whole platform narrative. And then I'll just comment in terms of from a direct perspective, we have sales specialists that operate within each one of these. These are people that understand this persona backwards and forwards. This is what they do all day long. So that gives us the ability to go head-to-head and win but then also serve as kind of the expertise to help our generalists where they're kind of covering the broader portfolio. And then we're doing the same thing within our channel programs and channel motions. Not all channel partners are the same. So we have CX specialized partners. We actually have partners that are specialized in Workvivo and the HR persona. So leveraging our partner ecosystem to onboard a new type of partner that are focused on all of these different personas, and they have specific boutique practices around each specific one.

Can I ask one more thing around online because we didn't touch on that. Like obviously, like we have to like start bringing people in. But then also, we do have like a very large online business where a lot of people use either meetings or webinars or phones and everything else. And we're doing a lot of work to think about what are the magic moments where we can start to introduce people to other parts of the Zoom portfolio, whether it's MyNotes or things around like whiteboard or some of the other things that we know start to drive stickiness to that and also start to provide more opportunities for us to do other kinds of upsell to the value we create there. We have more permission to do that in the online SMB side than we do in some of the direct enterprise side. So we have a different set of motions that we're working on there.

Samik from JPMorgan. In addition to your system of action sort of move towards that approach more and more, you were traditionally a conversation-led company as you move towards more workflow management. How do you envision some of the incumbents or some of the software vendors that have been sort of managing workflow react to that? Particularly you've talked about openness today on your front, headless and MCPs, but how do you think about sort of openness from the vendors or the partners on the other side to enable you to more deeper go into workflow management?

Yes. I mean it's a little hard to predict what other people will go do. We certainly see a lot of demand from customers that they want a clean integrated story, and they're starting to look at saying things like, okay, how do we make sure that the people that we're working with are setting up this kind of openness in any new RFP they're going and doing because they see the value of being able to string all these things together. And then from our perspective, we're doing a lot of work like getting very close to the customers to start to understand their specific workflows and how we can build the different components that we need, the different context we need in order to go make sure that we have the kind of like subject matter expertise to go do a lot of that automation to help them with that.

And then I would say this is where some of that persona specificity actually rings true. So you look at the example within CX, and the deep understanding of the actual workflow of a user, right, of the full life cycle, the ability for us to do that at a level that's differentiated than others that are purely horizontal, I think is really showing up in the results with the attach rates that we see with CC Elite moving into ZVA, ZVA workflows as well. And so within these personas, now within sales, right, how do I have a contextual understanding of with leveraging common room and intent data of who is it that a seller should talk to and why and when. And how do I feed that into an engagement product and then automatically feed that into a conversational intelligence feedback loop that then goes into forecasting in the virtuous cycle. So those workflows within a specific persona, I think we're seeing really good signal that we can land differentiated value there. And then from a horizontal perspective for others, we can fit in -- we have a great solution for customers. But if they choose to go a different route, we have the headless go-to-market as well.