ZoomInfo (ZI) Q1 2025: Upmarket Mix Hits 71% as Downmarket Shrinks, Margin Path Clears

May 12, 2025 | By EarningsIQ Research

ZoomInfo’s Q1 2025 marked a pivotal shift as upmarket customers now represent 71% of total business, reinforcing the company’s strategic exit from lower-margin downmarket segments. With the launch of Go-To-Market Studio and continued Copilot traction, ZoomInfo is repositioning itself as a core enterprise GTM platform, not just a data provider. Guidance remains cautious despite operational outperformance, with management signaling further intentional contraction of the downmarket and margin expansion as upmarket penetration deepens.

Summary

  • Upmarket Expansion Reshapes Business: Upmarket now 71% of revenue, accelerating ZoomInfo’s margin and growth profile shift.
  • AI-Driven Platform Strategy: Copilot and new GTM Studio move ZoomInfo beyond lead data into unified revenue execution for enterprise clients.
  • Disciplined Downmarket Retrenchment: Management signals ongoing downmarket contraction to reach a smaller, more profitable mix.

Performance Analysis

ZoomInfo’s Q1 results reveal a business in strategic transition, with upmarket revenue growth of 3% year-over-year now accounting for 71% of total revenue. This shift follows four consecutive quarters of sequential improvement in large customer cohorts, including a notable increase in $1 million ACV customers. Downmarket revenue, by contrast, declined 10% year-over-year and continues to be intentionally reduced as part of the company’s risk-managed repositioning.

Operating margin remains robust, with adjusted operating income margin at 33%, aided by higher upmarket mix and disciplined cost allocation. Net revenue retention stabilized at 87% for the second consecutive quarter, with improvement concentrated in the upmarket segment. Cash flow performance was strong, with unlevered free cash flow margin at 41%. Share repurchases accelerated, with $95 million deployed in Q1 and an additional $50 million in Q2, leveraging recent share price dislocation. Remaining performance obligations (RPO) showed signs of stabilization as the company laps tougher downmarket compares and benefits from more rigorous customer qualification.

  • Upmarket Margin Leverage: Upmarket segment delivers margins several thousand basis points above downmarket, driving company-wide profitability gains.
  • Operations and Data-as-a-Service Outperform: Operations business grew double digits, with data-as-a-service new logos up 24% and average contract value up 10% year-over-year.
  • Share Repurchase Focus: Aggressive buyback activity reduces share count, with $543 million remaining authorization signaling continued capital return priority.

Performance this quarter confirms that ZoomInfo’s repositioning is translating to both top-line quality and bottom-line resilience, even as headline growth remains muted.

Executive Commentary

"We are being very intentional with the downmarket portion of our business as we continue to move our business upmarket and develop solutions that are defining the future of go-to-market. ZoomInfo now does what no other software company does. We unify first and third-party data, insights, and automation and execution to serve the entire go-to-market organization, not just sales, not just marketing, not just RevOps. That's what GTM means. It's not a department. It's the entire revenue engine."

Henry Schutt, Founder & CEO

"Over the past year, we've transformed the business from higher volumes of transactional new business to a place now where our growth foundation is rooted in more durable, upmarket customer relationships. This transition was notably evident in the first quarter as our upmarket growth of 3% year-over-year accelerated, while we intentionally continued on the path toward a smaller and healthier version of our downmarket business, with downmarket declining 10% year-over-year."

Graham O'Brien, Interim CFO

Strategic Positioning

1. Upmarket Focus and Margin Expansion

ZoomInfo’s deliberate pivot to upmarket customers—defined as those with annual contract values above $100,000—has fundamentally altered its revenue and margin structure. Upmarket accounts now comprise 71% of total revenue, up from 70% last quarter, and management targets at least 75% in the near term. This focus unlocks higher retention, larger deal sizes, and significant margin uplift, as upmarket contracts carry far superior unit economics than downmarket.

2. Platform Evolution: From Data Provider to GTM Engine

The launch of Go-To-Market Studio and continued Copilot rollout signal ZoomInfo’s evolution into a unified revenue execution platform. GTM Studio enables revenue leaders to integrate first- and third-party data, orchestrate campaigns, and deploy AI-powered agents across sales, marketing, and RevOps. Copilot adoption is expanding from sales development representatives (SDRs) to account executives (AEs) and account managers (AMs), unlocking a threefold increase in seat opportunity within existing customers. This broadens ZoomInfo’s competitive moat and aligns it with enterprise software standards, akin to Workday for HR or ServiceNow for IT.

3. Downmarket Rationalization and Digital Self-Service

ZoomInfo is actively shrinking its downmarket business, pushing micro SMBs toward digital self-service and reallocating resources to upmarket. Downmarket revenue is projected to decline at a faster pace in 2025 than in 2024, with management targeting an eventual 80/20 upmarket/downmarket mix. This transition reduces exposure to higher churn, lower-margin customers and supports a more stable, profitable revenue base.

4. Product-Led Growth and Workflow Integration

ZoomInfo’s expansion into operations and data-as-a-service is driving double-digit growth, particularly through workflow integration and automation. The company’s data management, conversation intelligence, and CRM attribution capabilities—bolstered by recent acquisitions—are now embedded deeper into customer ecosystems, increasing stickiness and ACV per customer.

5. Capital Allocation and Shareholder Returns

Management is prioritizing share repurchases over M&A in the near term, citing the significant gap between intrinsic and market value. With $543 million in remaining authorization and ongoing strong cash flow, continued buybacks are expected to be a material lever for per-share earnings growth.

Key Considerations

This quarter marks a decisive phase in ZoomInfo’s transformation from a high-churn, transactional sales data provider to a durable enterprise platform for go-to-market operations. Investors should weigh the following:

Key Considerations:

  • Mix Shift Drives Economics: Upmarket expansion is structurally improving both growth quality and profitability, but headline revenue growth remains negative as downmarket contracts.
  • AI Platform Adoption Broadens TAM: Copilot and GTM Studio position ZoomInfo to capture a larger share of enterprise revenue operations spend, well beyond traditional sales intelligence budgets.
  • Retention Gains Are Segment-Driven: Net revenue retention improvement is concentrated in upmarket; downmarket retention remains weak and is not expected to recover materially.
  • Share Repurchases Accelerate EPS Growth: Aggressive buybacks are reducing share count and supporting per-share earnings, with capital allocation tilted away from M&A for now.
  • Risk-Managed Guidance Philosophy: Management’s guidance embeds incremental caution, reflecting macro uncertainty and a conservative stance on downmarket volatility.

Risks

ZoomInfo’s strategic shift introduces risks related to execution pace, upmarket sales cycle length, and customer concentration. While upmarket retention is improving, further contraction in the downmarket could pressure near-term revenue visibility. Macro headwinds, particularly in SMB and digital self-serve channels, could exacerbate churn or slow new business formation. Cautious guidance acknowledges these uncertainties, but investors should monitor for any signs of upmarket demand softening or delayed adoption of new platform modules.

Forward Outlook

For Q2 2025, ZoomInfo guided to:

  • GAAP revenue of $295 to $298 million
  • Adjusted operating income of $101 to $104 million
  • Non-GAAP net income of $0.22 to $0.24 per share

For full-year 2025, management raised the low end of revenue guidance to $1.195 to $1.205 billion, maintained AOI and cash flow guidance, and expects:

  • Adjusted operating income of $426 to $436 million (36% margin at midpoint)
  • Unlevered free cash flow of $420 to $440 million
  • Non-GAAP net income of $0.96 to $0.98 per share

Management highlighted continued upmarket momentum, ongoing downmarket contraction, and incremental conservatism in guidance given macro uncertainty. Expectations remain for mid-single-digit upmarket growth and high-teens downmarket decline throughout 2025.

Takeaways

ZoomInfo’s Q1 2025 cements its transition toward an enterprise GTM platform, with upmarket now the clear engine for both growth and profitability.

  • Strategic Mix Shift: The ongoing migration to upmarket customers is structurally improving retention and margins, but headline growth will remain subdued until the downmarket contraction stabilizes.
  • Platform Expansion: Copilot and GTM Studio are expanding the company’s addressable market and embedding ZoomInfo deeper into enterprise workflows, supporting long-term durability and competitive positioning.
  • Execution Watchpoint: Investors should monitor upmarket sales velocity, Copilot adoption across new user personas, and the pace of downmarket stabilization as key levers for future quarters.

Conclusion

ZoomInfo’s Q1 2025 marks a critical inflection in its business model, with upmarket now the dominant force shaping economics and strategic direction. The company’s evolution into a unified GTM intelligence platform is gaining traction, but the next phase will hinge on sustaining upmarket growth and driving platform adoption deeper into the enterprise.

Industry Read-Through

ZoomInfo’s results highlight a broader SaaS industry trend: durable growth is shifting toward enterprise customers and integrated workflow platforms. The move away from transactional SMB sales and toward unified data, AI, and execution layers mirrors similar pivots at peers in sales, marketing, and RevOps software. Vendors heavily exposed to SMB or single-point solutions face rising churn and margin pressure, while those successfully embedding into enterprise workflows are capturing higher retention, upsell, and margin expansion. The rapid adoption of AI-powered agents and orchestration tools signals that competitive differentiation will increasingly hinge on data integration, automation, and depth of workflow embedding across the revenue engine.

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