ZM Q2 Deep Dive: AI-Powered Solutions Drive Growth and Profitability Improvements

Video communications platform Zoom (NASDAQ:ZM) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 4.7% year on year to $1.22 billion. The company expects next quarter’s revenue to be around $1.21 billion, close to analysts’ estimates. Its non-GAAP profit of $1.53 per share was 11% above analysts’ consensus estimates.

Is now the time to buy ZM? Find out in our full research report (it’s free).

StockStory’s Take

Zoom delivered a quarter that exceeded Wall Street’s expectations, with growth led by increasing enterprise adoption of its AI-powered collaboration tools and robust expansion in newer solutions like Contact Center and Workvivo. CEO Eric Yuan emphasized that customer demand for AI capabilities across the Zoom Workplace platform, including the Custom AI Companion, fueled a fourfold increase in monthly active users year over year. CFO Michelle Chang highlighted that cost optimization efforts, particularly in cloud infrastructure and R&D, contributed to a notable improvement in operating margins.

Looking ahead, management attributes its raised full-year outlook to durable enterprise demand, expanding AI monetization opportunities, and continued cost discipline. Eric Yuan pointed to the upcoming launch of new AI features, including Zoom AI Companion 3.0, as a catalyst for further customer adoption and workflow automation. Michelle Chang cautioned that while AI investments will grow, ongoing efficiencies in infrastructure and disciplined spending are expected to support high operating margins and strong free cash flow.

Key Insights from Management’s Remarks

Management attributed second quarter growth to broad AI adoption, strong enterprise wins, and ongoing expansion in high-value collaboration and customer experience solutions.

• AI Companion adoption surge: Management noted a fourfold year-over-year increase in monthly active users of Zoom’s AI Companion, driven by expanded meeting lifecycle features and integration across the Workplace suite. Eric Yuan cited growing customer reliance on AI for productivity and workflow automation as a primary performance driver.
• Enterprise segment momentum: The enterprise business grew faster than other segments, with large organizations increasingly deploying AI-powered solutions. CFO Michelle Chang highlighted a 9% year-over-year increase in enterprise customers spending more than $100,000 annually, and noted that enterprise now represents 60% of total revenue.
• Contact Center wins and innovation: Zoom Contact Center secured significant customer wins, with 9 of 10 top deals involving displacement of leading competitors, and 7 of 10 deals incorporating AI. The launch of Virtual Agent 2.0, featuring conversational and agentic AI, contributed to measurable customer cost savings and improved customer experiences.
• Workvivo expansion and product integration: The Workvivo employee experience platform saw a 142% year-over-year increase in large customer accounts, supported by successful transitions from competitors and new AI-powered features. Management identified mid-market adoption as the next growth opportunity.
• Cost optimization and margin gains: Michelle Chang credited cloud infrastructure migration and disciplined R&D investments for the rise in non-GAAP gross and operating margins. She emphasized that AI costs are being offset by operational efficiencies, enabling sustained profitability even as AI usage expands.

Drivers of Future Performance

Zoom’s updated outlook is driven by growing enterprise adoption of AI solutions, continued innovation in product offerings, and disciplined cost management.

• AI innovation and monetization: Management expects the launch of new AI Companion features at Zoomtopia and broader Custom AI Companion integration to drive further adoption and upsell opportunities, particularly among large enterprise customers. These enhancements aim to automate workflows and deepen customer engagement across the platform.
• Expansion of customer experience and phone solutions: Zoom plans to leverage momentum in Contact Center and Zoom Phone, using these products as entry points for additional sales and ecosystem expansion. Michelle Chang highlighted that cross-selling and integration are increasingly central to large deal wins.
• Risks from macro environment and cost structure: While enterprise demand remains strong, management cautioned that macroeconomic uncertainty and ongoing AI investments could create variability in growth rates and margins. Cost discipline, particularly in infrastructure and R&D, is expected to mitigate these pressures and support free cash flow.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be tracking (1) customer adoption and monetization of new AI Companion features following Zoomtopia, (2) the pace of large enterprise deployments in Contact Center and Workvivo, and (3) the effectiveness of cross-selling between Zoom Phone, Contact Center, and Workplace. Execution on cost optimization initiatives and continued gross margin resilience will also be closely monitored.

Zoom currently trades at $76.28, up from $73.24 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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