Hello, and welcome to Zoom's Q2 FY '26 Earnings Release Webinar. As a reminder, today's webinar is being recorded. I will now hand things over to Charles Eveslage, Head of Investor Relations. Charles, over to you. Charles

Thank you, Megan. Hello, everyone, and welcome to Zoom's earnings video webinar for the second quarter of fiscal year 2026. I'm joined today by Zoom's Founder and CEO, Eric Yuan; and Zoom's CFO, Michelle Chang. Our earnings release was issued today after the market closed and may be downloaded from the Investor Relations page at investors.zoom.com. Also on this page, you'll be able to find a copy of today's prepared remarks and a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results. These measures should not be considered in isolation from or as a substitution for financial information prepared in accordance with GAAP. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the third quarter and full fiscal year 2026, our expectations regarding financial and business trends, impacts from a macroeconomic environment, our market position, stock repurchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations, and product initiatives, including future products and future releases and the expected benefits of such initiatives. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, let me turn the discussion over to Eric, who like last quarter, is giving his prepared remarks via Zoom Custom Avatar. Eric?

Thank you, Charles. We delivered strong results highlighted by revenue growing at its fastest rate in 11 quarters. We also achieved meaningful progress on our 3 key priorities: delivering world-class AI to enhance customer value, rapidly innovating Zoom Workplace, and scaling high-growth departmental solutions. Zoom is strengthening its position as a leader in AI-powered collaboration helping customers work smarter, operate more efficiently, and deliver greater value to their organizations. Reflecting this impact, AI Companion monthly active users have grown over 4x 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. This progress is just the beginning and we look forward to sharing more AI Innovations at Zoomtopia next month. Our broadening AI adoption is also translating into greater customer investment as organizations increasingly see our AI as critical to driving business outcomes. In Q2, a Fortune 200 U.S. tech company deployed Zoom Custom AI Companion, our paid AI add-on for Zoom Workplace, for nearly 60,000 employees to tap into company knowledge during meetings, generate action-ready summaries that power agentic workflows, and integrate directly with their AI bot to streamline IT service operations. Customers are also benefiting from our AI supporting human agents in our Contact Center Elite offering, which is a critical component driving revenue growth in Zoom customer experience. One example is ATPI, a leading U.K.-based global travel and events management company known for its expertise in complex sectors, who in Q2 selected Zoom Contact Center Elite alongside Zoom Phone to transform their global customer engagement. ATPI chose Zoom over the competition for our better together voice and contact center offering and because of the measurable potential of our AI features across AI Expert Assist, quality management, and workforce management to significantly reduce hours spent by both agents and supervisors on repeatable tasks. Lastly, we are also excited about the Q2 launch of Virtual Agent 2.0, which advances from conversational to agentic AI designed to deliver measurable customer outcomes. In its first month, we saw deals including SecureOne, a private security company, who replaced an expensive manual after-hours answering service with ZVA for Voice. The solution integrated seamlessly with their existing Zoom Phone deployment, reduced costs by tens of thousands of dollars annually, and enhanced sales prospecting through intelligent automation. This is just one example of how Zoom’s agentic AI tools can help customers drive both meaningful cost savings and new revenue opportunities. Zoom continues to innovate with Zoom Workplace, delivering a seamless and integrated collaboration experience with Zoom Meetings, Phone, Team Chat, Events, Docs, Whiteboard, and Rooms. We have been honored with four UC Today Awards, recognizing our continued innovation and leadership including Most Innovative Product for AI Companion, Best UC Platform for Zoom Workplace, Best UCaaS Provider Americas, and Best Contact Center Solution. Furthermore, in recognition of our customer focus and innovation, we are proud to be named a UCaaS leader in the Forrester Wave. Our continued momentum reflects not only strong customer demand for our modern collaboration solutions but also the success of meeting buyers where they are— through preferred channels like AWS Marketplace. In Q2, for example, Hubspot expanded to Zoom Workplace, including Zoom Phone, Rooms, Sessions, Whiteboard, translated captions, and more. This will deliver the benefits of our modern, integrated, and cohesive collaboration suite to help them enable hybrid work across their global workforce, reduce costs and simplify billing on AWS Marketplace. Our focus on customer value led many companies to boomerang to Zoom after trying other services. One such company is F5, a global technology leader in application delivery and security. F5 bounced back to Zoom with a 7-figure ARR deal due to the increased productivity and lower total cost of ownership of our modern, easy-to-use platform. And finally, Zoom Phone delivered another strong quarter, sustaining mid-teens ARR growth and gaining market share versus leading competitors an impressive result given its already large scale as a UCaaS leader. Our better together vision unifying best-in-class voice collaboration and customer engagement solutions drove a major 5-year, 7-figure ARR Zoom Phone deal displacing Cisco, which also includes Workplace and Contact Center Elite. We also continue to drive amazing growth with our customer experience and employee experience solutions. As I mentioned earlier, AI adoption is increasing within our customer experience offering and transforming how brands engage their customers and build loyalty with our set of modern, differentiated, AI-first tools. You see this momentum in the number of Zoom Contact Center customers with over $100,000 ARR, which grew 94% year-over-year to 229, highlighting our ability to win with large accounts in high-stakes deployments and migrate them into the high-end AI products. Our top 10 contact center deals were all displacements of leading competitors, and all but one were cloud displacements. Inland Real Estate Group, whose member companies employ more than 1,200 people, faced challenges for years managing disparate systems. In Q2, they chose the full Zoom platform, including Workplace, Phone, and Contact Center, to unify their collaboration and customer experience and future-proof their business. We have also made progress in building additional routes to market. We are excited about our newly established collaboration with PwC, which expands our Zoom Contact Center and AI opportunity and ability to meet the needs of global enterprise customers. Together, we have already co-sold several large deals, including a Fortune 50 technology firm, for which PwC will provide advisory and implementation services. In Q2, our employee experience offering continued to shine, with Workvivo reaching 168 customers with over $100,000 ARR—, up 142% year-over-year. One of these large deals was Marubeni Corporation, a large, diversified Japanese conglomerate that transitioned to Workvivo from Meta Workplace with more than 10,000 licenses to elevate how it informs, connects and engages employees. Before I hand it to Michelle to take us through the financial results, let me close by saying that on September 17, we look forward to bringing you Zoomtopia 2025: “For the People,” our biggest event of the year. You'll learn about exciting product reveals, inspiring stories, and much more. See you there.

Thank you, Eric, and hello, everybody. I'm excited to share Zoom’s Q2 FY '26 financial performance today. In Q2, total revenue grew 4.7% year-over-year to $1.217 billion, or 4.4% in constant currency. The result was $17 million above the high end of our guidance. Our Enterprise business continues to be a key point of strength with revenue growing 7% year-over-year and representing 60% of our total revenue, up 1 point year-over-year. Our Online business continues to show signs of stabilizing. In Q2, average monthly churn was flat year-over-year at continued lows of 2.9%. In our Enterprise business, we saw approximately 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers make up 32% of our total revenue, up 1 point year-over-year. Our trailing 12-month net dollar expansion rate for Enterprise customers in Q2 held steady at 98%. Pivoting to our growth internationally; our Americas revenue grew 5% year-over-year, EMEA grew 6%, and APAC grew 4%. Moving to our non-GAAP results, which as a reminder excludes stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, net litigation settlements, and all associated payroll tax effects. 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 margins and remain focused in the near term around balancing investments with AI with cost efficiencies. Non-GAAP income from operations grew 10.5% year-over-year to $503 million, exceeding the high end of our guidance by over $38 million. Non-GAAP operating margin for Q2 was 41.3%, up 216 basis points from Q2 of last year. The operating margin improvement was driven by ongoing cost management and timing of spend. Non-GAAP diluted net income per share in Q2 was $1.53 on approximately 308 million non-GAAP diluted weighted-average shares outstanding. This result was $0.16 above the high end of our guidance and $0.14 cents higher than Q2 of FY '25. The EPS growth reflects strong business performance, effective cost management, and less dilution, driven by our buyback program and disciplined stock compensation management. Turning to the balance sheet. Deferred revenue at the end of the period grew 5% year-over-year to $1.48 billion, slightly ahead of the high end of our previously provided range. In Q3, we expect deferred revenue to be up 4% to 5% year-over-year. Looking at both our billed and unbilled contracts, our RPO increased over 5% year-over-year to approximately $4 billion. We expect to recognize just under 61% of the total RPO as revenue over the next 12 months, slightly up from 60% in Q2 of FY '25. Operating cash flow in Q2 grew 15% year-over-year to $516 million, representing an operating cash flow margin of 42.4%. Free cash flow in the quarter grew 39% year-over-year to $508 million, representing a free cash flow margin of 41.7%, up 10 points year-over- year. The year-over-year increase in free cash flow margin was driven by the timing of tax payments and the lapping of significant PP&E investments. We ended the quarter with approximately $7.8 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. In Q2, we again accelerated execution of our existing $2.7 billion share buyback plan, purchasing 6 million shares for $463 million, an increase of approximately 389,000 shares quarter-over-quarter, underscoring our commitment to delivering value to our shareholders. Turning to guidance. In Q3, we expect revenue to be in the range of $1.21 billion to $1.215 billion. This represents approximately 3% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $465 million to $470 million, representing an operating margin of 38.6% at the midpoint. Our outlook for non-GAAP earnings per share is $1.42 to $1.44 based on approximately 307 million shares outstanding. As a reminder, future share repurchases are not reflected in the share count and EPS guidance. For the full year FY '26, we are excited to raise both our revenue and profitability guidance. We now expect revenue to be in the range of $4.825 billion to $4.835 billion, which at the midpoint represents approximately 3.5% year-over-year growth. We expect our non-GAAP operating income to be in the range of $1.905 billion to $1.915 billion, representing an operating margin of 39.5% at the midpoint. In addition, our outlook for non-GAAP earnings per share in FY '26 is increasing to $5.81 to $5.84, based on approximately 308 million shares outstanding. With the strength in free cash flow in the first half and increased outlook for operating income in FY '26, we now expect free cash flow to be in the range of $1.74 billion to $1.78 billion for the full year. In closing, we've made progress improving top-line growth, we've sustained best-in-class profitability, and reduced dilution. We're executing on our three priorities with discipline and momentum, and we remain committed to building on this success to deliver lasting value for our shareholders. Thank you to the entire Zoom team, our customers, and our investors for your trust and support. With that Megan, please queue the first question.

[Operator Instructions] Our first question will come from Peter Levine with Evercore.

Congrats on a good quarter. Maybe one for Eric, you're seeing kind of your AI solution kind of really take off. But maybe can you help us share with us like what's the ROI that your customers are seeing, right? In terms of like the 2.0, you referenced the customer, a pretty large customer that adopted 2.0. So I would love to know like what's the use case that you're seeing in the ROI? And then second, just from a macro perspective, anything you can share with us in terms of what you're hearing or seeing from your customers in terms of their appetite, IT budgets for collaboration.

Yes. Great question. So yes, I'm using my phone to join this earning call. I think in terms of AI, you are right. We launched the Zoom AI Companion 2.0 and hopefully, we're also going to announce something exciting at Zoomtopia next month as well. Because 2 years ago, right, everyone talked about AI, right, the first step for us to leverage AI to improve our functionalities, like meeting summary, transcription, so on and so forth. That's already done very well. And the reason why we announced Zoom 2.0 is how to leverage agentic capabilities and also not only do we support the meeting summary, but also look at the entire meeting lifecycle from premeeting, how to schedule a meeting to leverage AI and premeeting experience and post-meeting experience and also how to leverage AI to improve our other product experience like a Phone and other -- the Workplace, the point of product as well. So overall, the feedback is pretty positive and look at the usage, right, compared to last year, in terms of monthly active users, it's 4x more, right, this quarter compared to the quarter last year. I think overall, I think customers, they all look at how to leverage AI to improve the productivity and work effectiveness and so many things for us to do, right? And in terms of the IT budget, I think the overall -- I think if you look at almost every customer, they all look at how they can leverage the AI to make their product better, how to work together with their vendors to leverage AI. That's the reason why many of our customers either already enabled AI Companion or in the process to enable AI Companion, not to mention our AI Companion is part of their offering. We do not charge customer extra except for customized AI Companion.

Our next question comes from Meta Marshall with Morgan Stanley.

You noted the AI Companion vertical-specific win with the Fortune 2000 -- or 200 tech company. And I guess just how are some of these wins that you're getting on these vertical-specific AI Companions informing just what customer needs are, what they can do with AI beyond what we traditionally think of as like summarization.

Yes, good question. So since we introduced AI Companion, for sure, there were some early adopters, right, who adopted AI early already for a while. Now they look beyond AI Companion. Are there any other things they can achieve with our AI capabilities. That's the reason why they paid for Customized AI Companion where we connect with their index, their content, or with the customized meeting template for their summary, so on and so forth. I think for sure, some other customers are still in the process to adopt the AI Companion, right? So AI Companion, again, as I mentioned earlier, is part of a package, more and more customers are going to adopt that or already adopted that. At the same time, customers, for those customers who already adopted AI Companion look at beyond today's AI Companion. Are there any new things? That's the reason why we offer Customized AI Companion. I think ultimately -- and we also want to innovate more, right? It's not only do we have a AI Companion 2.0, Customized AI Companion. That's why we're very excited for the new AI Companion announcement at Zoomtopia next month.

Our next question comes from Tyler Radke with Citi. You might be having some technical difficulty. Tyler, are you there? All right. Our next question comes from William Power with Baird.

This is Yanni Samoilis on for Will Power. A couple on the online segment. So I know you folks instituted a price increase for the monthly pro SKU earlier this summer, I think. So first of all, I think you mentioned last quarter that you were expecting that to add $10 million to $15 million of incremental revenue this year or at least as it compares to your initial forecast. And based on what you've seen so far, I'm wondering if any of your assumptions around that have changed or if your expectations there are still consistent. And then also just taking a step back, I was hoping you could comment on any feedback you've heard from customers so far, just in general. It looks like churn largely held stable. But I'd be curious if you have observed any other changes in customer behavior, maybe customers switching to annual plans to avoid that price increase or any other dynamics that you might have noticed.

Yes, I can take that one. So first, we're pleased with the growth of 1.4% and pleased with continued low churn with that. I'd reiterate that same range of guidance from $10 million to $15 million still on track for that. And I continue to guide to a flat online number on the full year. We did see, to your question, some shift to long term, but nothing I would say extreme. And maybe a little bit more color in terms of the customer conversation is that we didn't see a lot of pushback, and I think that's really a statement of -- it's a relatively small price increase. But it has to do, I think, even more with the value that we've put in the Workplace SKU, be it AI or so many of the more products in there as well as with the particular price increase we increased storage limits. So for us and what we heard, the value prop was still very much there.

Our next question is from James Fish with Piper Sandler.

Two-parter though, Eric, for you, Workvivo continues to have another strong quarter really, spike in usage from what we can tell. I guess what are you seeing with that asset as we head into the back half of the year, both from that partnership angle with Meta and the overall market? And then just Michelle, on the numbers here, you raised by 25% to the top line, beat by 20% on the quarter, have FX in your favor. Walk us through why we're not getting more of a roll forward of kind of the top line upside here? Is it just prudency or anything to think about for the back half of the year?

Michelle, you want me to address the first one?

Sure.

Yes. So in terms of Workvivo growth, and for sure, a major partnership certainly helped us a lot since last year. For now, our top priority is, make sure for those customers switch to our Workvivo platform. We got to help them transition to our platform -- Workvivo platform very smoothly, right? Make sure every feature works, new regression and that is still the top priority. At the same time, a lot of the customers realized they needed to have a customer -- the employee engagement platform and more and more opportunities in the pipeline. And also at the same time, we are going to innovate more, right, and add a lot of innovations upon our Workvivo platform. I think also the AI is also another way for us to innovate as well to further improve our Workvivo, the platform experience. I think -- it used to be -- we just focus on very, very large deals. I think a lot of the commercial -- the medium- sized customers also will benefit from deploying Workvivo platform. And that's kind of our -- the next growth opportunity for the Workvivo platform.

Yes. Maybe a couple of comments, James, in terms of the forecast. First, as you noted, we feel good about the consistent beat as well as the raise regardless of U.S. constant currency. We feel good about the steady progress made towards the growth rate despite dynamic macro conditions. So raising, for example, from 2.7% at the beginning of the year to now 3.5%. We feel good about the three areas of strategic focus and the progress that we see within those. Maybe the color that I gave you is that we already talked about online and sort of the guidance being flat, relatively speaking, the H1 versus H2 dollars -- revenue is relatively consistent and it's really the growth rate from Enterprise that is driving the H2 outlook. So look, we've used a consistent forecast methodology, and we've assumed macro conditions that are strong in their demand and durable with respect to our drivers, but still a dynamic economic environment. Maybe then, if I could insert a little bit, James, some comments on last quarter, you'll remember that I said we saw some scrutiny -- no losses, but additional scrutiny in some geographies. And I'm pleased to say that we saw a partial abatement to that in Q2. And as such, we've sort of expected that H2 outlook will be in line with what we saw in Q2.

Samad Samana from Jefferies will take the next question.

This is Billy Fitzsimmons on for Samad. Eric, maybe for you. There have been a couple of questions on the AI Companion, but I want to dig deeper on the custom AI Companion add-on. It's still early. It's only been a few months now since launch. And I'm guessing we'll hear more at Zoomtopia. But can you share some anecdotes around what some of the initial customers who've purchased the add-on are saying about it, some prominent use cases day-to-day. I know you have third-party integrations with a bunch of different vendors. And then just how from a product or sales standpoint, you're getting customers to move for -- from the included AI Companion to the paid add-on? And then if I could sneak in one more for Michelle. It just launched, it's still early. I imagine it will be more of a fiscal 2027 tailwind. But can you just level set for us if there will be any kind of benefit in the guide in the back half of this year?

Yes. I can address the AI Companion question. So first of all, please join at our user conference Zoomtopia next month. Again, a lot of exciting stuff around the Zoom AI Companion. For those customers who deploy AI Companion for a while, they love AI Companion. However, at the same time, they also asked about what they can do to leverage the company to help them more, right? Because some companies deploy AI Companion, they also have other applications like ServiceNow, Salesforce, Workday and a lot of other applications, also Knowledge Base as well. How to connect with all those different data sources, right? Or some customers, they even use other data index like Amazon Q or Glean, you also need to connect with them as well. And we offer the basic meeting summary template. Customers, they want to have very flexible customized template and also connected with their dictionary and their knowledge base, a lot of the capabilities can be added into AI Companion to further improve the AI Companion for those customers. That's the reason why those customers talk with us, "Hey, we want to enable Custom AI Companion." And also share a lot of feedback with us. And this is the reason why we want to announce more and more innovations upon our AI Companion, the platform.

Yes. With respect to kind of how to think about AI products and what's in and out of our forecast, I kind of break it into 2 pieces. First, we're already seeing notable progress from AI in our Contact Center business. We talked about broadly the Contact Center business growing high double digit, and it continues to be. And certainly, our Elite SKU, which is where you get the AI value as well as ZVA are part of that. So I would sort of say that's in the '26 numbers. In terms of the other products that just GA-ed in the April time frame, this is sort of first quarter, and we're pleased with the customer examples that we shared and the pipeline building. But really, we just continue to emphasize what I've said previously, which is those won't really come in until '27, given law of large numbers, building product, et cetera.

Our next question is from Michael Funk with Bank of America.

Also on the AI products, can you provide any color on the size of the funnel and the growth in the funnel that you're seeing, very strong growth, obviously, in 2Q? And then any commentary on the uplift in customer ARR from adding AI solutions would be helpful.

Yes. Maybe I can address some of your questions. Michelle feel free to chime in. But given there's so many AI questions, I wish our AI Companion can answer to those questions on behalf of me next time. So overall, I think if you look at AI Companion, not only for improve our meeting, our Workplace platform. Actually, AI Companion is a back end. It's our AI infrastructure platform and also our other product also benefit a lot from AI Companion. I'll give one example. Take Zoom Virtual Agent 2.0, for example. Literally, we just announced recently, and we offer the voice and agent. And this is very important and very helpful to our Contact Center customers. But the back-end architecture, a lot of innovations are coming from AI Companion as well. So AI Companion is a platform, right? It's a phone, Contact Center, almost every service will benefit from our AI Companion. Look at the core workplace meeting services, AI Companion is part of that. We only monetize for Custom AI Companion. But AI Companion is extremely important for us to empower our other services. That's a way for us to further monetize AI Companion.

Maybe I'll jump in as well. I took sort of the spirit of your question of how do we really think about and what we look at with respect to AI and measurement, certainly...

And also, Michelle, just a -- also just in the context of revenue growth acceleration several years ago, management talked about accelerating revenue back to mid-single digits. You're well on your way there now, at 4.4% constant currency this quarter. So trying to think about contribution to future growth, talking about funnel size and uplift ARR, so we can contextualize the benefit.

Which one do you want -- do you want me go AI usage or you want to go revenue?

Really the usage and then the benefit to annual recurring revenue, if you have any thoughts on that, how it's benefiting?

Okay. So look, in terms of the framework of how we think about AI and AI health, broadly, we originally started talking about enable, then we went to -- let's talk about MAU. Eric shared in his write-up that our MAU is up 4x year-over-year now in the millions. I would say we also look quite heavily at the depth of usage, right? Things like moving more into the productivity lifecycle, moving more into the meetings lifecycle with our customer is using things like side panel much more, tasks, much more, using AI integration in products like phone, for example, as well as using AI features that are agentic and go across our platform like things with calendar management. So we look very closely at broad, breadth and depth usage. Obviously, innovation and recognition and pace of that is important to Eric and I. And then obviously, you hit on the last piece, which is the monetization. And look, I just continue to reiterate the frame I gave earlier, which is Contact Center, Elite, ZVA, those are the more mature or I should say Contact Center Elite is the more mature. Putting AI value in all of our paid SKUs and what that could do to churn and bringing in new customers. Those are sort of the more immediate ones. And then certainly, with Custom AI Companion or the 2.0 launch of ZVA and some of our vertical SKUs that offers a lot more going forward.

Alex Zukin with Wolfe Research will ask the next question.

Maybe two quick ones. Eric. The first one for you and then Michelle, one for you as well. Eric, if I think about the way AI adoption is progressing inside of your customer base, both on the online portion as well as the Enterprise portion. How is that changing your opinion around the time line, the timing of monetization to the extent they can start to bend the growth curve and the competitive framing environment, both against two hyperscalers with two very different opinions on pricing. One, incrementally higher and one, it's part of it for free. I love kind of your thought process on that going forward and then a quick follow-up.

Yes. Alex, great question. So as I mentioned earlier, Zoom AI Companion is a platform. AI Companion is empowering almost every product, we announced, right, or the customer that used. That's the reason why if you look at our Contact Center, for example, why we are doing so well? Because if you look at our top 10 deals, 9 out of 10 switched from other cloud vendors because when they look at our product, take Zoom Virtual Agent, for example, right? We build everything from the ground up. Why the innovation, the speed is very fast because we can leverage the capabilities from AI Companion, right? We announced Zoom Virtual Agent 2.0. Internally, we deploy that, our support team very, very satisfied with the Zoom Virtual Agent powered by AI Companion. So when we look at AI Companion as a platform, how to leverage, empower all other point of services, either Phone or Contact Center, Whiteboard and a lot of other things, we are going to win. That can help us win more deals. At the same time, if you look at our core, the meeting product, right? It's a lot of features and it's a part of AI Companion, customers love that as well. And again, we are going to innovate faster. And that's the reason why I mentioned a few times, and please join our user conference next month. One of the key themes around Zoomtopia this year, really about AI and Zoom AI Companion.

Perfect. Michelle, maybe for you. Leading indicators are always important. It sounds like some of the deal cycle elongation that you saw resolved, I assume some of those deals that may be pushed also closed. Is there anything we're not seeing that is maybe creating a headwind in terms of the CRPO metrics in terms of billings that maybe is not painting the same picture around those KPIs as the largest beat that you've had in the years on a revenue basis, maybe is. So there seems to be a little bit of a divergence, anything that you can point us to, to help us kind of marry those two data points?

Yes. Maybe let me start, Alex, with just backing up on some broad comments on macro and then talk a little bit about RPO. So first, from a macro perspective, what I said in Q2 -- or in Q1 last time was that we saw strong demand -- broad strong demand, and we think we have durable drivers in a dynamic macro environment. And certainly, I would say that is still true. It's still a dynamic environment, as we all know. But last time we talked, as you noted, around some scrutiny that we're seeing in some geos, I want to make clear that we've seen a partial abatement of that. And we've seen SMB demand continue to be very strong. And you see that reflected, I think, in the revenue results, and you see it reflected in churn -- low churn on the online side, but also churn going down year-over-year consistently over multiple quarters on the Enterprise side. So look, it's still dynamic, but we feel good about that. To your RPO question, RPO growth of 5% is strong. I would also point out that it's lapping a very high comparable and that our RPO bookings are sort of the highest in many years. From a current RPO, it's really just the strong comparable at play there. I guess that's what I'd call out. Maybe one thing we didn't touch on, but just in terms of thinking about the overall growth rate, if I sort of look, Alex, at the spirit of your question, we talked about the FX piece. We talked about the easier comparable might be another thing. We're lapping that trough that we talked about for a very long time as well as to a much lesser degree, we had some professional services onetime recognition.

Our next question is from Arjun Bhatia with William Blair.

Eric, I want to touch on a point that you actually brought up proactively on the last question about Contact Center. And I have a million questions on this, but I'll try to focus in on a couple of questions. The fact that you're winning contact center deals against other cloud providers is very surprising, not for anything other than the fact that there are so many on-prem to cloud migrations that are happening. And I'm curious what's driving the cloud displacements. Are those failed implementations? And what are customers seeing, I guess, in Zoom? Is it the AI capabilities? Is it a cleaner tech stack? Is it easier to implement? What are the kind of key drivers that are creating success for Zoom Contact Center, especially against the other cloud providers.

Yes. It's a great question. Well, it's not surprising to us at all. We know we are going to win. And again, there's more -- I think more reasons, number of reasons, customers, they were not happy to the existing cloud contact center providers. If they are very happy, no matter what you do, they say, I don't want to switch, right? So they are not happy. Sometimes this is either quality is not good, outage, or they too expensive, or [ worst ] innovation or architecture is wrong, AI adoption is slow and so on. All reasons are very different. However, for those customers, they really want to look at a modern contact center solutions. When they test the Zoom, say, "Wow, I cannot believe that. You almost had every feature we need." Not to mention, they trust us, they trust our -- the core meeting of Zoom platform and also -- and they know actually, our company culture is really focused on deliver happiness. We do all we can deliver -- delight our customers, right? Because of the capabilities, because of the culture, because of the innovation speed, those customers, "I trust Zoom." I'll give you one example. You look at the recent UC Awards, Zoom won 4 awards. One thing you might be -- you might feel surprising as well, Zoom is the best contact center solution, right? So customers, partners, analysts, they know what we are doing. That's the reason why -- and given that we have a very solid foundation, we're going to double down on that. As long as we innovate faster, focus on the product and customer experience, I think we're going to win more. So that's kind of the way I look at why we are winning.

Maybe let me just jump in and give a couple of stats that might give you a little dimension to some of our wins. We look at a lot of our top 10 wins. So 9 of 10 are replacing the leading contact center provider, 7 of 10 on AI. We're seeing triple-digit growth in our Elite and 8 of 10 coming from channels. So just another evidence point of us really building out more of a channel and what's resonating with customers.

Yes. Another thing, if you look at the product experience, not like some other vendors. They needed to acquire this company, that company. You need to put everything together, the experience is not consistent. We have our own virtual agent. We have our own quality management, workforce management and the core platform integration, [indiscernible] very consistent experience. That's another reason why customers really want to select Zoom as their contact center solution provider.

All right. Well, congrats on the success.

Our next question is from Rishi Jaluria with RBC Capital Markets.

Eric and Michelle, really appreciate the time. Nice to see continued strength in the business in spite of everything going on there. Maybe two, AI-related questions I'd like to ask, one for Eric, one for Michelle. From a financial perspective, look, Eric, you've talked about your ambitions to become an AI-first company. And obviously, you're seeing this is great traction with your AI SKUs. As we think about the cost of inferencing and all these models, right, no matter how efficient you are, how do we square that away with the continued raise in cash flow guidance? And how should we be thinking about the long-term financial implications as the usage of AI among your customer base grows, as the use cases continue to expand, et cetera? And then maybe a little bit related to that, obviously, you've been doing great things with AI so far. How do we think about your plan to really leverage all the vast troves of unstructured data that's going through the Zoom platform and maybe build out even newer use cases on that in ways that are harder for customers to do themselves and relies on your domain expertise, your engineering talent, et cetera.

Yes, Rishi. This is a wonderful question. You are so right, how to leverage the data, right, how to leverage the product, right, all AI to create something new, right? So AI first experience, I give one example. I used to schedule a meeting. I need to go to my calendar to schedule a meeting, right, or maybe my [indiscernible] to help me to schedule a meeting. It will take a lot of clicks, a lot of manual steps. Now there is a way for me to schedule a meeting, I just go to Zoom AI Companion, and I chat with the AI Companion. Please schedule meeting with Michelle next week for 30 minutes. It's a conversational interface. It's a very, very smooth experience. I do not need to click so many things. I do not need to learn any GUI interface. That's AI first experience. In terms of innovation, you are so right. We announced 2.0. Next month, we're going to announce 3.0. 3.0 is really everything is about agentic framework, right? How to automate your work, how to leverage the data. Like say today, I can use Zoom AI Companion to write a Zoom Doc. I still imagine, create so many things, click here and there. How to leverage AI Companion to help you write something very cool and very easy, frictionless experience. I think also another thing is, let's say, in my day-to-day work, I need to manually do so many things, toggle this application and open another application and workflow is becoming more and more important as well. I usually look at the workflow, right? You need to manually and tell the workflow system, what you want. But how to leverage AI. In just -- AI first, I just tell Zoom AI Companion what I want. Zoom AI Companion more like a super agent will toggle each of other systems or applications and get things done, make it fully automated. That's part of our vision. That's the reason why I want to invite you to join the Zoomtopia next month, you will see a lot of new capabilities we are going to introduce to further beef up our core capabilities of AI Companion.

Maybe, Rishi, I'll hit the more -- what I took as a P&L question and come back if I didn't answer it. But we're proud of the fact that like we're still hitting 79.8% gross margin, up over 100 basis points year-over-year. That's because we're offsetting AI investments and AI usage with cost optimization. There was a little bit of onetime benefit in the second quarter, but there's durable elements that we're actively working across this on the COGS side, and then I'll drop and make some quick comments on the OpEx side. Of migrating cloud to colo, which still continues to be a lever for us on the COGS side. We talked about the federated approach and making sure that we're applying the right model to the right tasks so that we can get both best quality and best cost for our customers. And then obviously, just making sure that we're constantly looking at AI costs purse as we go through. On the R&D side, we've made a lot of investments, and we'll continue to invest in AI. And look, we're going to need to offset that with other efficiencies that we see in the business, of which AI is one for us. So we're going to live the same reality that our customers are living there. So...

Tom Blakey with Cantor Fitzgerald will ask the next question.

Wondering if you could maybe -- it maybe an extension from some of the questions that were asked prior. Could you just maybe talk about CCaaS and some of the momentum on a sequential basis, that strong 94% call out, Eric, I remember asking you about a year or 2 ago about the monetization efforts here in CCaaS and you got awfully excited about it. So just -- and it is an extension for that, maybe for Michelle, what is kind of embedded in guidance there in terms of maybe continued momentum in CCaaS. So again, just the sequential growth color would be helpful. And if you want, maybe expand on seats versus price, that would be helpful. And again, similarly, continued momentum in Phone, we've been monitoring this for years. With this acceleration in CCaaS and continued strong double-digit growth in Phone, could you just maybe combine into one big question, talk about what you're seeing in terms of going into the second half, maybe even further out into fiscal '27, where maybe some of the down sells or some of the other kind of structural things that are happening in the core could abate and we can see kind of like 100% plus kind of NRR going forward. This -- again, these strong numbers in CCaaS and Phone are just awesome, Eric.

Michelle, do you want to address that question?

I mean, look, we don't give kind of forward-looking product guidance for Contact Center and Zoom Phone. So I'd probably just comment on the nature of that and then broadly expectations for the future. So starting on Contact Center, another quarter of high double digit, which we're very proud of. I think I covered earlier kind of the nature of the top deals, so I won't repeat it there. And then you mentioned the stat, of course, about us making progress upmarket, which is obviously a key consideration. That is all with a not ZVA 2.0 number. And so we look to the future and the reality that our customers are facing in growing labor costs and poor customer experience and see a durable driver in contact center going forward. From a Zoom Phone perspective, continue to see mid-teens. We said that last time. We're saying it now. Maybe the things that haven't come out as much on this call that I'd mention for investors is really twofold. Just how much we're seeing Phone be a gateway in our deals to other products, right? Starting with meetings, you often go to phone, but now much more of a [Technical Difficulty] to contact center, so sort of that better together story of being able to solve the customer problem, go back in the office and have that seamless experience that Eric talked about. And we see that being a durable thing. Also some new announcements that we're very excited about with the connection of ZVA and Zoom Phone as well as we're seeing connections of Zoom Phone to Zoom Revenue Accelerator. So a lot of real momentum. And then maybe the second thing that I would say on Zoom Phone that we would feel good about when we look to the future is just the AI progress within it. So sequentially, the MAU quarter-over-quarter has gone up over 30%. So we're proud to see that as well.

Our next question comes from Mark Murphy with JPMorgan.

This is Sonak Kolar on for Mark Murphy. Congrats on the results. Eric, first, I just wanted to hit on the recent launch of the AI first Auto Dialer to streamline outbound sales. Would love to hear how you're thinking about the long-term opportunity here and some of the feedback you're picking up since launch. And particularly, how you see this opening up doors for incremental wallet share in some of your customers? And then I had a quick follow-up for Michelle. Any items to call out in terms of diverging demand patterns, whether by geo or vertical, I saw international growth slightly outpaced that of the Americas. Is that -- much of that delta largely FX driven or something else to consider?

Yes, great questions. So regarding the Contact Center innovations, right, recently in Q2, we had quite a few Contact Center innovations. One thing is, as you mentioned, is agentless outbound dialers, right? Essentially, we call that -- internally, we call that proactive AutoReach feature. Essentially, the way it works is, it automatically place outbound calls and prerecorded messages, right, something like appointment reminders and without requiring a live agent to do so many things manually, right? So this is one of the innovations the customer, they told us, they love that, right? So they shared a feedback with us, we quickly deliver. Again, this is just one of the innovation. That's the reason why back to the Contact Center wins, why customers like a Zoom Contact Center because when they share a feedback, we can quickly deliver. Every quarter, there are so many innovations. And it's like Q2, right, we also deliver like another feedback like division features, right? Contact center -- the customer use our Contact Center, sometimes use support internal hyperdesk use Zoom Contact Center. All the tech and support team also use that, right? That's the reason why we got to support the divisions as well. So a lot of new innovations we introduced to the market every quarter. So -- and outbound dialer just one of those innovations.

Yes. Maybe I'd also just tag on to what Eric said and say that I am excited just as the CFO, a lot of the AI innovations now bring us much more into that value conversation of helping the customer create a better experience for their customers, drive revenue increasingly in many instances. So I think it's an exciting direction in terms of the value that we can provide customers. Real quick to your question. I wouldn't really call out any difference in broad demand. And then I'd say that FX was primarily an impact on the EMEA results.

Our final question comes from Siti Panigrahi with Mizuho.

This is Sameer. I'm calling in for Siti. One thing I do want to check if you could double-click on the onetime margin benefit that you saw in the quarter. You mentioned it's because of professional services and some AI-related adjustments you are doing, if you could clarify that for me.

Yes, different. What I talked about with the professional services was sort of a onetime small impact to the Q2 revenue growth rate. And then I think I separately mentioned on the gross margin that we did see some sort of onetime savings cost. But broadly what's going on the revenue side are durable elements to revenue growth, all the things that we talk about, product diversification, moving up market, et cetera. And broadly, what we -- what's going on, on the gross margin is incremental AI investments and costs, and we're offsetting those with efficiencies.

Great. And just another clarification is for the second half outlook, the main driver is the Enterprise side of things, and that's why the beat is not getting carried forward as much as it should be...

So what I did in the guide was reiterate what I'd said previously that we're going to capture the online price increase in the amount that we previously communicated. We're going to hold to online being flat, which is consistent to what I said last quarter and the raise is really on the Enterprise side, combination of many broad things across Enterprise that we talked about today.

This concludes the Q&A portion of today's call. I'll turn it back over to Michelle for closing remarks.

Yes. I just wanted to close to say that we look forward to hosting everyone for a virtual investor session, Q&A and a little bit of a presentation after Zoomtopia on the 17th of September. We're going to have an exact panel with Eric and myself and other Zoom executives. We're going do -- just a time to talk about insights onto our business strategy, key initiatives and the innovations that we'll be debuting. So we look forward to hosting everyone.

Thank you. Thank you all.

Thank you.