Zoom (ZM) Q1 2026: Contact Center Customers Up 65% as Platform Expansion Gains Momentum

2025-05-21 | By EarningsIQ Research

Zoom’s Q1 revealed accelerating traction in high-growth segments, notably a 65% surge in Contact Center customers, as the company pivots deeper into AI-powered platform offerings and leans on channel expansion to offset enterprise deal scrutiny. With AI Companion adoption up nearly 40% sequentially and Workvivo customer growth exceeding 100%, Zoom’s product breadth is driving new cross-sell and upsell opportunities, though macro caution tempers the enterprise outlook for the remainder of the year.

Summary

• Platform Cross-Sell: Contact Center and Workvivo growth signal effective upsell and ecosystem expansion.
• AI Monetization: Custom AI Companion launches with initial customer enthusiasm, but near-term revenue impact remains modest.
• Enterprise Caution: Deal elongation and scrutiny prompt a more prudent enterprise outlook despite robust product innovation.

Performance Analysis

Zoom’s Q1 2026 results highlight modest top-line growth, with total revenue up approximately 3% year-over-year, outperforming guidance by $8 million despite a shorter quarter. Enterprise revenue now comprises 60% of total revenue, up from 58% a year ago, reflecting a continued shift toward larger customers and solution selling. The online business demonstrated record-low churn at 2.8%, aided by a recent price increase for monthly pro SKUs and increased product value, such as doubled storage limits. Deferred revenue and remaining performance obligations (RPO) both grew mid-single digits, supporting future visibility.

Segment-level trends were more dynamic: Zoom Phone posted mid-teens revenue growth and Contact Center customers grew 65% year-over-year, underscoring Zoom’s expansion beyond core meetings. Workvivo, the employee experience platform, saw customer count more than double, driven by both Meta partnership migrations and new logos, with 90% of Workvivo customers new to Zoom. Non-GAAP gross margin was 79.2%, slightly down due to ongoing AI investments, while operating margin compressed modestly as expected from bonus structure changes and R&D spend. Free cash flow and buybacks remained robust, with $418 million repurchased in Q1.

• Contact Center Outperformance: Customer count up 65% YoY, with triple-digit million ARR and high double-digit growth.
• AI Companion Usage: Monthly active users up nearly 40% sequentially, with Custom AI Companion beginning monetization.
• Workvivo Acceleration: Customer growth of 106% YoY, with Meta partnership and new logos fueling adoption.

Zoom’s financial profile remains healthy, but the company is balancing investment in innovation with disciplined capital allocation and a more cautious enterprise outlook amid macro headwinds.

Executive Commentary

Strategic Positioning

1. AI-First Platform Expansion

Zoom is aggressively positioning itself as an AI-first collaboration and customer experience platform, moving beyond meetings to embed AI into every workflow. The launch of Custom AI Companion, which enables organizations to integrate proprietary data and create tailored AI agents, is a key step toward monetizing AI features. Early customer enthusiasm is evident, but management tempers expectations for material revenue contribution in FY26, emphasizing long-term strategic value over near-term financial impact.

2. Upsell and Cross-Sell Momentum

Platform cross-sell is accelerating, with Contact Center, Phone, and Workvivo each serving as entry points for broader adoption. Notably, the Celtics expanded from Meetings to full Workplace Enterprise Plus, Phone, and Workvivo, while a major financial institution consolidated onto Zoom to simplify their stack and reduce costs. These wins illustrate the “better together” narrative and the growing importance of integration and unified experiences for large customers.

3. Channel and International Leverage

Channel transformation is unlocking new markets, with 60-70% of top Contact Center deals in Q1 sourced via partners. Recent process improvements have reduced quote-to-cash times, and the Bell Canada partnership is expected to drive further growth in North America. Internationally, EMEA and APAC are seeing slower growth than the Americas, but Workvivo and the full platform approach are resonating, especially in Europe.

4. Enterprise Sales Caution

While product innovation is robust, enterprise demand is facing increased scrutiny and elongated sales cycles, particularly with larger US customers. Management attributes this to macro uncertainty rather than competitive losses, but is guiding prudently for the remainder of the year. Net dollar expansion rates remain below 100%, though stable, and management does not expect a near-term return to expansionary levels.

5. Capital Allocation Discipline

Zoom accelerated buybacks in Q1, repurchasing $418 million in shares, and reiterated its intent to complete the remaining $1.2 billion authorization in FY26. This signals confidence in long-term fundamentals and a focus on offsetting dilution from stock compensation.

Key Considerations

Zoom’s Q1 demonstrates the early fruits of its platform and AI investments, but also reveals the limits of product innovation in offsetting macro-driven enterprise caution. Investors should weigh the following:

Key Considerations:

• AI Monetization Pathway: Custom AI Companion has strong initial traction, but revenue impact will be gradual as customers pilot and scale usage.
• Contact Center Scale: 65% customer growth and high double-digit ARR growth position Contact Center as a core engine for multi-product expansion.
• Workvivo as a New Logo Magnet: With 90% of Workvivo customers new to Zoom, the platform is expanding the top of the funnel and cross-sell opportunities.
• Enterprise Headwinds: Deal elongation and increased scrutiny risk muted growth in the largest segment, even as churn remains low.
• Buyback Acceleration: Management’s stepped-up repurchases reflect confidence, but also a lack of large-scale M&A or organic growth levers in the near term.

Risks

Zoom faces persistent macro risk in the enterprise segment, with deal elongation and increased scrutiny likely to constrain near-term growth. AI monetization remains unproven at scale, and aggressive investments could pressure margins if adoption lags. Competitive intensity from Microsoft Teams and other unified communications providers persists, especially as Teams unbundles and charges separately for AI features. Channel reliance, while driving growth, introduces execution risk if partner momentum stalls.

Forward Outlook

For Q2, Zoom guided to:

• Revenue of $1.195 to $1.2 billion, representing ~3% YoY growth at midpoint
• Non-GAAP operating income of $460 to $465 million, with a 38.6% margin at midpoint
• Non-GAAP EPS of $1.36 to $1.37

For full-year FY26, management raised guidance:

• Revenue of $4.8 to $4.81 billion (3% YoY growth at midpoint)
• Non-GAAP operating income of $1.865 to $1.875 billion (38.9% margin at midpoint)
• Non-GAAP EPS up to $5.59
• Free cash flow of $1.68 to $1.72 billion

Management highlighted:

• More prudent enterprise outlook due to macro uncertainty and deal elongation
• Raised online segment outlook following successful price increase and record-low churn

Takeaways

Zoom’s platform evolution is yielding tangible results in high-growth segments, with Contact Center and Workvivo fueling ecosystem expansion and AI Companion deepening customer engagement. However, macro-driven enterprise caution and a measured approach to AI monetization temper near-term upside, making disciplined execution and cross-sell motion critical to sustaining momentum.

• Contact Center and Workvivo are emerging as growth engines, offsetting enterprise headwinds and expanding Zoom’s addressable market.
• AI Companion usage and Custom AI monetization are gaining traction, but revenue impact will be gradual as customer deployments scale.
• Investors should monitor enterprise deal cycles and cross-sell effectiveness, as well as ongoing buyback execution for capital return.

Conclusion

Zoom’s Q1 2026 underscores a successful pivot to a broader platform strategy, leveraging AI and new product lines to drive growth amid a cautious enterprise backdrop. Execution in Contact Center, Workvivo, and AI Companion will be decisive for sustaining durable growth as macro headwinds persist.

Industry Read-Through

Zoom’s results highlight a sector-wide shift toward AI-powered collaboration and customer experience platforms, with integrated offerings and cross-sell driving growth beyond core video. Contact Center as a Service (CCaaS) and employee experience solutions are becoming key battlegrounds, with AI features increasingly table stakes for large deals. Channel transformation and international expansion remain critical levers for scale, and the ability to monetize AI at enterprise scale will likely differentiate winners from laggards across the unified communications and productivity software landscape.

ZM Technology Unified Communications AI Contact Center Workplace Collaboration Channel