AI and Zoom Phone were front and centre of Zoom’s Q2 earnings call as the vendor posted year over year revenue growth.
Q2 revenues grew year over year by 3.6 percent to $1.14 billion, with Eric S. Yuan, Zoom CEO, citing AI-powered solutions — including Zoom IQ Meeting Summary, Zoom Intelligent Director and Team Chat Compose — that help bring “value and enhanced productivity to our customers” as influential operational highlights.
Yuan also alluded to Zoom’s hiring of Dr XD Huang, Microsoft’s former Azure AI CTO, as Zoom’s new CTO earlier this summer. Yuan commented:
Dr. XD joins us at an optimal moment in our AI journey. In the past few months, we brought several new AI innovations to the market and announced an aggressive roadmap aimed at empowering our customers to work smarter and serve their customers better. And, as we develop and deploy AI solutions, we strongly believe that technology should advance trust.”
There was also a significant milestone for Zoom Phone, with Zoom CFO Kelly Steckelberg reporting that Zoom Phone reached around $0.5 billion in annualized run rate revenue.
Other Operational Highlights
Q2 2024 also saw notable growth for Zoom’s contact centre and CX business.
Zoom customers bought Zoom Virtual Agent this quarter, including renewable energies business Valmont, while Zoom Contact Centre surpassed 500 customers six quarters after it was launched.
Yuan said that Zoom is rolling out around 90 features and updates for Zoom Contact Centre each quarter and described the early life of Zoom Workforce Management last month as “off to a great start”, adding the solution will “help customers streamline customer communications, manage agent needs, and transform their customer experience all from a single, unified platform”.
Yuan also stressed the growth of Team Chat in Q2, which Yuan ascribed to the “increased adoption of Zoom One and new features like Continuous Meeting Chat”. Yuan outlined that Zoom currently has two Fortune 15 companies, one major consulting firm, a global F&B brand, and a leading law firm leveraging Team Chat for their text-based communications.
Notable Financial Takeaways
Net cash provided by operating activities was $336 million for Zoom’s Q2 second quarter, an increase of 30.6 percent year over year.
Zoom also increased its revenue forecast for the fiscal year 2024, stating it now expects revenue for the full year to come in at $4.49 billion-$4.5 billion rather than $4.7 billion-$4.9 billion.
Likewise, Yuan suggested AI investments will drive Zoom’s positive full financial year, especially in the margins. “For the full year, we expect non-GAAP gross margin to be approximately 79.7 percent, as we make additional investments in new AI technologies,” the CEO said.
Zoom posted second-quarter Enterprise revenue of $659.5 million, up 10.2 percent year over year, and second-quarter GAAP operating margin of 15.6 percent and a non-GAAP operating margin of 40.5 percent, the latter an improvement on 35.8 percent this quarter last year.
Zoom and AI
Zoom’s earnings call has been posted two weeks after the tech giant was in the news for stirring controversy around its use of AI, with critics alleging that Zoom’s updated Terms of Service (TOS) included an updated section that enabled the training of AI on user content without users being able to opt-out.
The section of Zoom’s TOS that caused controversy was its mention of leveraging data for AI and machine learning, including “for the purposes of training and tuning of algorithms and models”, which critics interpreted as the TOS allowing Zoom to train its AI through user content.
Zoom strongly opposed this reading of its new TOS. Yuan posted on LinkedIn that “given Zoom’s value of care and transparency”, the company would “absolutely never train AI models with customers’ content without getting their explicit consent”. Zoom later amended Section 10.4 of the new TOS with a version of that statement, introducing: “For AI, we do not use audio, video, or chat content for training our models without customer consent.”
Zoom’s Work Culture
Yuan also alluded to Zoom’s revamped hybrid working policy, which was announced a fortnight ago and entails employees who live within 50 miles of a Zoom office to attend on-site twice a week.
“A few weeks ago, we announced internally a structured hybrid approach, asking Zoomies that live within commuting distance to come into their local office twice a week,” Yuan said in the earnings call. “Zoom is purpose-built for hybrid work, and it is on us to understand what our customers are experiencing in their hybrid journeys and what works and does not work for them. We believe that this approach will enable us to continue to innovate for our customers and deliver what they need to succeed.”
Zoom’s previous policy had been flexible in allowing staff to work remotely, on-premises, or on a hybrid model of their selection.
The policy impacts a global Zoom workforce of around 8,000 employees across 12 offices worldwide, including its new London office, which opened earlier this month.
