Zoom Communications, Inc. (ZM)

Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Quarterly Report on Form 10-Q.

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Overview

Zoom is redefining modern work as a system of action, turning live collaboration into completed results and moving conversations to completion. From entrepreneurs to global enterprises, customers choose Zoom to seamlessly collaborate, communicate, and drive outcomes across meetings, chat, phone, contact center, events, and more — all with the built-in assistance of Zoom AI Companion. Our culture of delivering happiness, grounded in our core value of care, is fundamental to everything we do at Zoom.

Our AI-first, open work platform bridges work both inside and outside the organization by integrating AI capabilities across employee collaboration and customer-facing workflows, enabling seamless communication, collaboration, and engagement through Zoom Workplace and Zoom Business Services. Zoom Workplace with AI Companion brings together Zoom’s core communication and productivity tools—including Zoom Meetings, Zoom Phone, Zoom Team Chat, Zoom Canvas (formerly Zoom Docs), Zoom Whiteboard, and Workvivo—to support collaboration across organizations of varying sizes. Zoom’s Business Services offerings support customer engagement across the customer lifecycle, including Zoom Contact Center and Zoom Virtual Agent for customer service teams, Zoom Revenue Accelerator for sales teams, and Zoom Events and Zoom Webinars for marketing teams. Trust is a cornerstone of the Zoom platform. We equip users with a comprehensive set of tools designed to make their interactions safe, secure, and private. We believe that strong security should never compromise a great user experience.

AI is core to Zoom’s product innovation. We continue to advance our AI capabilities, focusing on three priorities that bring our system of action to life: elevating Zoom Workplace with AI, driving growth of new AI products, and scaling AI-first customer experience. Zoom AI Companion is our smart assistant designed to empower workers to increase productivity, improve team effectiveness, and enhance skills. Our federated approach to AI enables the use of multiple large language models (“LLMs”), including Zoom’s own, to complete tasks for users. Zoom’s federated approach allows its platform architecture to dynamically select from multiple AI models, which currently include those from OpenAI, Anthropic, and NVIDIA, making AI accessible and affordable so more people can incorporate it into their day-to-day workflows. In addition to AI Companion, we have embedded AI capabilities across our broader product portfolio, including Zoom Revenue Accelerator and Zoom Virtual Agent, to support sales and customer service use cases. With these advancements in AI Companion and across our AI-enabled products, we believe we are well-positioned as AI technology continues to advance. We are enhancing our agentic AI capabilities within AI Companion to continue delivering practical value to customers while advancing our ambitious vision of AI that truly amplifies human potential. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications (such as poll results, whiteboard, and reactions) to train Zoom’s or third-party AI models.

Zoom’s platform prioritizes security and privacy, with 18 co-located data centers globally and robust encryption options. We are committed to safeguarding our customers' data.

Revenue is driven by subscriptions to Zoom Workplace and Zoom Business Services. Our core offerings include Zoom Workplace Pro, Business, and Enterprise bundles, as well as vertical-specific plans for Education, Healthcare, and Government. We also offer Zoom Phone, with regional and international calling plans, and Zoom Contact Center, providing advanced customer experience solutions designed to meet diverse customer needs.

Our revenue was $1,239.0 million and $1,174.7 million for the three months ended April 30, 2026 and 2025, respectively, representing period-over-period growth of 5.5%. We generated net income of $425.7 million and $254.6 million for the three months ended April 30, 2026 and 2025, respectively. Net cash provided by operating activities was $521.6 million and $489.3 million for the three months ended April 30, 2026 and 2025, respectively.

Macroeconomic Conditions and Other Factors

The macroeconomic environment, including ongoing geopolitical uncertainties, evolving monetary policy, energy market volatility, and foreign currency exchange rate fluctuations, has created and may continue to create uncertainty in demand for subscriptions to our AI-first, open work platform. Recent geopolitical events, including the conflict involving Iran and disruptions to energy supply routes, have contributed to elevated energy prices and heightened volatility in financial markets, which may influence inflation expectations, corporate cost structures, and global growth prospects. Although headline inflation in many major economies has moderated relative to prior years, cost pressures remain uneven across regions, and the combined effects of interest rates, policy actions, and slower global growth conditions continue to influence corporate spending patterns. These dynamics, together with shifts in customers’ internal priorities, including budget realignment and evolving

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investment focus, have contributed to variability in sales cycles and continued caution in enterprise spending decisions, potentially affecting customer upsell, downsell, or renewal activity.

We continue to monitor the potential effects of these circumstances as well as the overall global economy and geopolitical landscape on our business and financial results. The implications of macroeconomic conditions on our business, results of operations, and overall financial position, particularly over the long term, remain uncertain.

Refer to “Part II—Other Information, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q for further discussions of the potential impacts of the current macroeconomic conditions on our business.

Key Business Metrics and Factors Affecting Our Performance

We review the following key business metrics and strategic factors to measure our performance, identify trends, formulate financial projections, and make strategic decisions, including evaluating our ability to grow the number of customers who use our AI-first, open work platform. Our operating results and growth prospects will depend, in part, on our ability to attract new customers. While we believe there is a significant market opportunity for our platform, it is difficult to predict customer adoption rates, the future growth rate, or the size of the market for our platform.

Large Enterprise Customers - Customers Contributing More Than $100,000 of Trailing 12 Months Revenue

We focus on growing the number of customers that contribute more than $100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 32.7% and 31.9% of total revenue for the three months ended April 30, 2026 and 2025, respectively. As of April 30, 2026 and 2025, we had 4,534 and 4,192 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our increasing penetration of larger organizations. These customers are a subset of Enterprise customers.

Expansion of Zoom Across Existing Enterprise Customers - Net Dollar Expansion Rate

We believe that there is a large opportunity for growth with many of our existing Enterprise customers. Historically, customers have increased the size of their subscriptions as they expanded their use of our AI-first, open work platform across their operations. Over the past few years, macroeconomic headwinds resulted in slower hiring and higher seat count downsells from our existing Enterprise customers in key markets, which impacted the rate of expansion and caused our net dollar expansion rate for Enterprise customers to drop below one hundred percent. Despite the decline, we believe there are still opportunities for future growth with our existing Enterprise customers as we innovate our platform with additional product offerings and by incorporating AI. Expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Zoom Contact Center, and Workvivo. To address this opportunity and expand the use of our products by our existing Enterprise customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers’ requirements for enterprise-grade solutions.

We quantify our expansion across existing Enterprise customers through our net dollar expansion rate. We define Enterprise customers as distinct business units who have been engaged by either our direct sales team, resellers, or strategic partners. Revenue from Enterprise customers represented 61.0% and 60.0% of total revenue for the three months ended April 30, 2026 and 2025, respectively. Our net dollar expansion rate includes the increase in user adoption within our Enterprise customers, as our subscription revenue is primarily driven by the number of paid licenses within a customer and the purchase of additional products, and compares our subscription revenue from the same set of Enterprise customers across comparable periods. We calculate net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from all Enterprise customers as of 12 months prior (“Prior Period ARR”). We define ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contractions, and attrition. We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, we take an average of the net dollar expansion rate over the trailing 12 months. Our net dollar expansion rate may fluctuate as a result of a number of factors, including the level of penetration within our Enterprise customer base, expansion of products and features, and our ability to retain our Enterprise customers. Our trailing 12-month net dollar expansion rate for Enterprise customers was 99% and 98% as of April 30, 2026 and 2025, respectively.

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Retention of Online Customers - Average Monthly Churn Rate & Percentage of MRR from ≥16-Month Customers

In addition to Enterprise customers, we also have a significant number of customers who subscribe to our services directly through our website (“Online customers” or “Online business”). Online customers

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Annual Report on Form 10-K.

Overview

Zoom provides the AI-first, open work platform built for human connection and purposefully designed to move conversations to completion. Zoom enables customers to seamlessly collaborate, communicate, and drive outcomes across meetings, chat, phone, contact center, events, and more — all with the built-in assistance of Zoom AI Companion.

We strive to simplify the workday with AI-first tools that drive meaningful team collaboration and customer engagement. Zoom Workplace supports businesses by providing a secure, scalable solution for communication and collaboration. In addition, Zoom is further helping businesses foster stronger customer and employee relationships through Zoom Business Services, which includes Zoom Contact Center, Zoom Revenue Accelerator, as well as Zoom Events, which empowers sales, marketing, and customer experience teams.

AI is core to Zoom’s product innovation. During fiscal year 2026, Zoom has continued to invest in AI, expanding its agentic AI skills, agents, and models, focusing on three key areas: supporting individual productivity, powering better collaboration, and helping customer-facing teams get more done, do better work, and strengthen relationships with AI Companion. Our federated approach to AI dynamically leverages multiple Large Language Models (“LLMs”) (including those from OpenAI, Anthropic, and Meta), as well as Small Language Models (“SLMs”), making AI more accessible and affordable so that more people can incorporate it in their day-to-day workflows. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications-like customer content (such as poll results, whiteboard, and reactions) to train Zoom’s or its third-party AI models.

Zoom’s platform prioritizes security and privacy, with 20 co-located data centers globally as of January 31, 2026 and robust encryption options. We are committed to delivering high-quality, real-time video, even in low-bandwidth conditions, while safeguarding our customers' data.

Revenue is driven by subscriptions to Zoom Workplace and Zoom Business Services. Our core offerings include Zoom Workplace Pro, Business, and Enterprise bundles, with vertical-specific plans for Education, Healthcare, and Government. We also offer Zoom Phone, with regional and global calling plans, and Zoom Contact Center, providing advanced customer experience solutions designed to meet diverse customer needs.

Our revenue was $4,868.8 million, $4,665.4 million, and $4,527.2 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively, representing year-over-year growth of 4.4% and 3.1%, respectively. We had net income of $1,900.1 million, $1,010.2 million, and $637.5 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. Net cash provided by operating activities was $1,989.0 million, $1,945.3 million, and $1,598.8 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively.

Macroeconomic Conditions and Other Factors

The macroeconomic environment, including geopolitical and trade uncertainties, changing monetary policy, and ongoing foreign currency exchange rate volatility, has created and may continue to create uncertainty in demand for subscriptions to our open work platform. Although headline inflation in many major economies has moderated compared with prior years and moved closer to central bank targets, cost pressures remain uneven across regions, and uncertainties around interest rates, policy actions, and global growth continue to influence corporate spending patterns. These dynamics, together with shifts in customers’ internal priorities, including budget realignment toward digital transformation and AI initiatives, have contributed to elongated sales cycles and continued caution in enterprise spending, potentially affecting customer upsell, downsell, or renewal activity.

We continue to monitor the potential effects of these circumstances as well as the overall global economy and geopolitical landscape on our business and financial results. The implications of macroeconomic conditions on our business, results of operations, and overall financial position, particularly over the long term, remain uncertain.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, introducing several significant corporate income tax provisions, including the option to immediately deduct domestic research and development expenses or continue to capitalize and amortize such expenses for tax years beginning after December 31, 2024, the permanent extension of 100% bonus depreciation for qualified property placed in service after January 19, 2025, and modifications to international tax rules

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such as future changes to the calculation of Global Intangible Low-Taxed Income (GILTI) and the Foreign-Derived Intangible Income (FDII) deduction. The impacts of OBBBA on our financial statements for the fiscal year ended January 31, 2026 were not material; however, OBBBA resulted in a favorable impact on cash taxes and an increase in our effective tax rate. As our business operations or financial results change, or as additional regulations and administrative guidance are issued, we will evaluate any further impacts to our consolidated financial statements.

Refer to “Part I, Item 1A. Risk Factors” of this Annual Report on Form 10-K for further discussions of the potential impacts of the current macroeconomic conditions on our business.

Key Business Metrics and Factors Affecting Our Performance

We review the following key business metrics and strategic factors to measure our performance, identify trends, formulate financial projections, and make strategic decisions, including evaluating our ability to grow the number of customers who use Zoom Workplace and Zoom Business Services. Our operating results and growth prospects will depend, in part, on our ability to attract new customers. While we believe there is a significant market opportunity that our platform addresses, it is difficult to predict customer adoption rates or the future growth rate and size of the market for our platform. We will need to continue to invest in sales and marketing in order to address this opportunity by hiring, developing, and retaining talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time.

Large Enterprise Customers - Customers Contributing More Than $100,000 of Trailing 12 Months Revenue

We focus on growing the number of customers who contribute more than $100,000 of trailing 12 months revenue since it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 32.8%, 31.0%, and 29.2% of total revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. As of January 31, 2026, 2025, and 2024, we had 4,468, 4,088, and 3,810 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our penetration of larger organizations, including enterprises. These customers are a subset of Enterprise customers, as defined in the following section.

Expansion of Zoom Across Existing Enterprise Customers - Net Dollar Expansion Rate

We believe that there is a large opportunity for growth with many of our existing customers. Historically, customers have increased the size of their subscriptions as they have expanded their use of our platform across their operations. Over the past few years, macroeconomic headwinds have resulted in slower hiring and higher seat count downsells from our existing Enterprise customers in key markets, which have impacted the rate of expansion and have caused our net dollar expansion rate for Enterprise customers to drop below one hundred percent. Despite the decline, we believe there are still opportunities for future growth with our existing customers as we innovate our platform with additional product offerings and the use of AI. This expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Zoom Contact Center, and Workvivo. To address this opportunity and expand the use of our products with our existing customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers’ requirements for enterprise-grade solutions.

We quantify our expansion across existing Enterprise customers through our net dollar expansion rate. We define Enterprise customers as distinct business units who have been engaged by either our direct sales team, resellers, or strategic partners. Revenue from Enterprise customers represented 60.3%, 59.0% and 57.9% of total revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. Our net dollar expansion rate includes the increase in user adoption within our Enterprise customers, as our subscription revenue is primarily driven by the number of paid licenses within a customer and the purchase of additional products, and compares our subscription revenue from the same set of Enterprise customers across comparable periods. We calculate net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from all Enterprise customers as of 12 months prior (“Prior Period ARR”). We define ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contractions, and attrition. We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, we take an average of the net dollar expansion rate over the trailing 12 months. Our net dollar expansion rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our Enterprise customers. Our trailing 12 month net dollar expansion rate for Enterprise customers was 98%, 98%, and 101% as of January 31, 2026, 2025, and 2024, respectively.

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Retention of Online Customers - Average Monthly Churn Rate & Percentage of MRR from ≥16-Month Customers

In addition to Enterprise customers, we also have a significant number of customers who subscribe to our services directly through our website (“Online customers” or “Online business”). Online customers represent a diverse customer base, ranging from individual consumers to solopreneurs to small and medium-size businesses. We continue to focus on acquisition and retention of our Online customer base through various s

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