Zoom CFO Michelle Chang highlighted a distinct revenue inflection, noting that enterprise revenue grew 7% in Q4 and now comprises over 60% of the business. Key growth drivers include AI monetization, product diversification beyond meetings, and channel investments. Chang outlined a strategy focused on "pragmatic AI" and a "system of action," leveraging a federated model to maintain 80% gross margins. Management issued FY 2027 operating margin guidance of 40.5%, significantly above prior long-term models, while signaling that capital allocation will prioritize offsetting dilution and pursuing small-to-medium, AI-focused M&A.

Key Takeaways

• Growth Inflection: Total revenue growth accelerated by 130 basis points to 4.4% last year, driven by Enterprise revenue which grew 7% in Q4.
• Operating Margins: FY 2027 operating margin guidance is set at 40.5%, well above the previous long-term model of 33% to 36%.
• AI Cost Management: Zoom employs a "federated approach" using both Small Language Models (SLMs) and Large Language Models (LLMs) to lower costs, aiming to maintain long-term gross margins of 80% despite a 3x increase in AI usage.
• Contact Center Momentum: The segment is seeing high-double-digit growth; in the recent quarter, "top 10 deals, 10 out of 10 are AI," and 7 of those 10 were displacements of legacy vendors.
• Anthropic Stake: Zoom’s strategic investment in Anthropic is valued at $1.6 billion, contributing to a recognized pre-tax gain of $532 million.
• Cash Flow Guidance: FY2027 free cash flow is guided to $1.74B, down from $1.9B in FY2026, driven by a normalization of CapEx cycles (~$75M impact) and lower interest income.
• Phone Growth: Zoom Phone has reached 10 million seats with mid-teens growth, with significant opportunity remaining as the company up-sells into the installed base.
• Capital Allocation: With nearly $8 billion in cash, Zoom has executed $2.7 billion of a $3.7 billion buyback authorization; future M&A will target "small to medium" AI-accretive opportunities.

Call Q&A

Josh Baer: With enterprise revenue growing 7% in Q4 and representing over 60% of the business, what key changes bent the growth curve?

• Michelle Chang: The inflection of 130 basis points was driven by four factors: product diversification beyond meetings, "AI monetization is inflecting our growth rates," heavy investment in the channel, and improved execution in direct sales.

Josh Baer: How does Zoom’s federated AI approach impact the cost structure and the ability to protect gross margins as usage scales?

• Michelle Chang: By routing common tasks through Small Language Models (SLMs) and specialized tasks through Large Language Models (LLMs), quality improves while costs decrease; this allows Zoom to "hold to those long-term margins of 80%" even as usage triples year-over-year.

Josh Baer: Regarding the $1.6 billion strategic investment line item, does this reflect the current valuation of the Anthropic stake?

• Michelle Chang: Yes, the "total base of that is $1.6 billion," predominantly the Anthropic stake; Zoom recently recognized a pre-tax gain of $532 million on this investment, and "Claude runs throughout our product set."

Josh Baer: Why is Zoom winning in the Contact Center space, and what is driving the rapid growth?