Zoom (ZM) Q2 2026: AI Companion Usage Quadruples, Driving Contact Center Upmarket
Zoom’s AI-powered suite is catalyzing a fundamental shift in enterprise collaboration, with AI Companion usage up 4x year-over-year and Contact Center Elite displacing cloud incumbents. The company’s deliberate integration of AI across products is reshaping deal wins, customer retention, and upmarket expansion, as seen in the rapid growth of high-value enterprise contracts. Management’s raised guidance signals continued confidence, but the pace of monetization and competitive response in AI remain key watchpoints heading into Zoomtopia and FY27.
Summary
- AI Platform Adoption Surges: AI Companion usage up 4x YoY, underpinning product differentiation and customer stickiness.
- Contact Center Elite Wins Cloud Displacements: Top 10 deals replaced leading cloud vendors, highlighting Zoom’s innovation speed and unified platform.
- Enterprise Drives Outlook: Raised full-year guidance is anchored in enterprise momentum, while online stabilizes and AI monetization ramps gradually.
Performance Analysis
Zoom delivered its fastest revenue growth in nearly three years, with total revenue up 4.7% year-over-year to $1.217 billion, exceeding guidance by $17 million. Enterprise remains the engine, growing 7% YoY and now representing 60% of total revenue, while online business churn held at a low 2.9% as price increases and product bundling preserved customer value. Deferred revenue and remaining performance obligations (RPO) both posted 5% YoY growth, with 61% of RPO expected to convert within 12 months, signaling stability in future contracted revenue.
Profitability continued to improve, with non-GAAP gross margin reaching 79.8% (up 128 bps YoY) and operating margin expanding to 41.3% (up 216 bps YoY), both aided by cost optimization and disciplined AI investment. Free cash flow surged 39% to $508 million, reflecting strong operational leverage and lower capex. Share buybacks accelerated, with $463 million deployed in Q2, reducing share count and supporting EPS growth above guidance.
- Enterprise Expansion: Customers contributing over $100K in trailing 12-month revenue rose 9% YoY, now 32% of total revenue.
- Contact Center Elite Momentum: Number of $100K+ ARR contact center customers grew 94% YoY, with nine of ten top wins displacing cloud competitors.
- AI Monetization Early, But Building: AI Companion is included in core SKUs, with monetization limited to custom deployments; pipeline for paid AI add-ons is growing but will impact FY27 more materially.
International revenue growth outpaced the Americas, led by EMEA at 6% and APAC at 4%, though FX was a contributing factor. Management’s raised full-year guidance reflects confidence in enterprise and contact center momentum, but online is expected to remain flat as price increases are absorbed and churn remains stable.
Executive Commentary
"AI Companion Monthly active users have grown over four times year-over-year, with millions using our AI to boost business value throughout the meeting lifecycle and beyond. AI adoption now extends well beyond meeting summaries with strong momentum in meeting prep and post-meeting task management, call summaries for Zoom Phone, and AI first meeting integration and content generation capabilities for Zoom Docs."
Eric Yuan, Founder and CEO
"Non-GAAP gross margin in Q2 was 79.8%, up 128 basis points from Q2 of last year, primarily due to cost optimization efforts. We continue to reiterate our long-term goal of 80% non-GAAP gross margin and remain focused in the near term around balancing investments with AI with cost efficiencies."
Michelle Chang, Chief Financial Officer
Strategic Positioning
1. AI Companion as Platform, Not Feature
Zoom’s AI Companion is positioned as the backbone of its collaboration suite, now integrated across meetings, phone, contact center, and docs. AI adoption is broadening beyond summaries to pre/post-meeting workflows and agentic automation, driving deeper engagement. The company’s “AI-first” vision is reinforced by major enterprise deployments, such as a Fortune 200 tech firm rolling out custom AI Companion to 60,000 employees for knowledge management and workflow automation.
2. Contact Center Elite: Disrupting Cloud Incumbents
Contact Center Elite is Zoom’s fastest-growing upmarket product, with $100K+ ARR customers up 94% YoY and top deals consistently displacing established cloud vendors. Unified architecture and rapid innovation cycles are cited as key differentiators, with customers choosing Zoom for integrated AI features, consistent UX, and rapid delivery of customer-requested enhancements. Channel partnerships, such as with PwC, are extending reach into the global enterprise segment.
3. Monetization and Product Bundling Strategy
AI Companion is broadly bundled into paid SKUs, with custom AI deployments as the primary paid add-on. Management is focused on driving AI adoption as a retention and expansion lever, with monetization to scale as advanced use cases mature. Zoom Phone continues to act as a gateway into broader platform adoption, increasingly leading to bundled deals with Contact Center and Workplace, supporting upmarket expansion and cross-sell.
4. Cost Discipline Amid AI Investment
Cost optimization is offsetting incremental AI infrastructure spend, enabling margin expansion even as AI usage grows. Initiatives such as federated model selection and data center migration are cited as levers to maintain gross margin near the 80% target. Management emphasizes ongoing discipline in stock-based comp and buybacks to reduce dilution and support EPS growth.
Key Considerations
Zoom’s Q2 reflects a company in transition, leveraging AI to defend and expand its enterprise footprint while building the foundation for future monetization. The balance between rapid innovation, prudent cost management, and evolving go-to-market partnerships is shaping the company’s strategic arc.
Key Considerations:
- AI Adoption Outpaces Monetization: AI Companion usage is surging, but direct revenue impact from custom add-ons will be more pronounced in FY27 as pipeline matures.
- Contact Center as Growth Engine: Cloud displacement wins and triple-digit growth in large deals highlight product-market fit and upmarket traction.
- Online Stabilization Limits Upside: Online business remains flat, with price increases absorbed and churn steady, capping near-term topline acceleration.
- Enterprise Expansion Drives Outlook: Upsell to large customers and cross-product adoption underpin raised guidance and future ARR visibility.
- Cost Efficiency Enables Margin Expansion: AI investments are being offset by infrastructure and operational savings, supporting best-in-class margins.
Risks
AI monetization is still nascent, and competitive pressure from hyperscalers offering bundled or free AI features could compress pricing power. Enterprise-heavy growth increases exposure to elongated deal cycles and macro volatility. While cost discipline has preserved margins, sustained AI infrastructure investment may challenge this balance if usage or innovation pace accelerates faster than anticipated.
Forward Outlook
For Q3, Zoom guided to:
- Revenue of $1.21 to $1.215 billion (approx. 3% YoY growth)
- Non-GAAP operating income of $465 to $470 million (38.6% margin midpoint)
- Non-GAAP EPS of $1.42 to $1.44
For full-year 2026, management raised guidance:
- Revenue of $4.825 to $4.835 billion (3.5% YoY growth midpoint)
- Non-GAAP operating income of $1.905 to $1.915 billion (39.5% margin)
- Non-GAAP EPS of $5.81 to $5.84
- Free cash flow of $1.74 to $1.78 billion
Management emphasized that enterprise growth is the primary driver of the outlook, with online expected to remain flat. AI monetization from custom add-ons and advanced features is not yet material to FY26 guidance, but pipeline is building for FY27. Macro conditions remain dynamic, but deal scrutiny has partially abated, and churn is trending favorably in both enterprise and online.
Takeaways
Zoom’s Q2 results underscore a successful pivot to AI-powered enterprise solutions, with Contact Center Elite and AI Companion anchoring upmarket growth and customer retention. The company’s disciplined approach to cost and capital allocation is enabling margin expansion even as it invests in AI innovation.
- AI Platform Drives Differentiation: Deep integration of AI across products is translating into customer wins, but monetization lags adoption and will be a key lever to monitor as the platform matures.
- Contact Center and Phone Fuel Upmarket Expansion: Displacement of cloud incumbents and bundled deals are shifting Zoom’s revenue mix toward larger, more stable enterprise contracts.
- FY27 Will Test Monetization and Competitive Defensibility: Investors should watch for evidence of paid AI add-ons scaling, continued margin discipline, and the competitive response from hyperscalers and legacy vendors.
Conclusion
Zoom is executing on its AI-first strategy, driving both product innovation and enterprise growth, while maintaining best-in-class margins through cost discipline. The raised outlook reflects confidence in enterprise momentum, but the next phase of value creation will depend on converting AI adoption into durable, high-margin revenue streams.
Industry Read-Through
Zoom’s rapid AI adoption and successful displacement of cloud incumbents in contact center signal a broader shift in the UCaaS (Unified Communications as a Service) and CCaaS (Contact Center as a Service) markets toward integrated, AI-powered platforms. Vendors relying on fragmented or legacy architectures risk losing share to unified solutions that can deliver tangible productivity and cost benefits. The pace of AI feature bundling and monetization will be a key competitive battleground, with implications for pricing, customer retention, and enterprise IT consolidation strategies across the collaboration and customer experience landscape.