Zoom at Emerging Technology Summit: Strategic Expansion and AI Focus

On Tuesday, March 4, 2025, Zoom Video Communications (NASDAQ: ZM) took center stage at the 18th Annual Emerging Technology Summit. CFO Michelle Chang, recently transitioned from Microsoft, laid out a strategic roadmap for Zoom, highlighting both growth opportunities and challenges. The company is focusing on expanding its platform and leveraging AI, with an eye on maintaining profitability amidst these investments.

Key Takeaways

• Zoom aims to evolve into a comprehensive "Workplace" platform, integrating meetings, chat, phone, email, calendar, and documents.
• AI plays a crucial role in Zoom’s strategy, with both base-level and premium AI offerings targeting specific monetization opportunities.
• The online business has stabilized post-pandemic, while the enterprise segment focuses on growth through channel development and international expansion.
• Strategic partnerships and disciplined M&A are prioritized, especially in Contact Center as a Service (CCaaS) and employee experience sectors.
• Long-term guidance reflects a balance between revenue growth and profitability, with a focus on strategic investments.

Financial Results

• Margin Control: Zoom is actively managing margins, notably AI-related expenses, through initiatives like shifting to colocation facilities and implementing savings programs.
• AI Cost Management: The federated AI approach utilizes multiple models, favoring open-source options to optimize costs and quality.
• Updated Guidance: Long-term guidance has been updated to reflect potential variations in operating income based on revenue performance.

Operational Updates

• Online Business: Post-pandemic stabilization has been achieved, with three-quarters of online customers with Zoom for over sixteen months.
• Enterprise Business: Focus remains on landing and expanding, particularly by integrating phone services into existing meeting spaces.
• AI Innovations: AI Companion 2.0 extends beyond meetings, enhancing overall work processes. Custom AI Companion is monetized at $12 per user per month.

Future Outlook

• AI Monetization: Monetization strategies include custom AI companions, healthcare, education, and frontline worker applications.
• Strategic Partnerships and M&A: Zoom is exploring strategic synergies through smaller acquisitions that align with core priorities.
• Revenue and Profitability: Investment in operating income is contingent on clear revenue growth indicators.

Q&A Highlights

• AI Monetization Strategy: Zoom evaluates market norms and customer perspectives to shape its AI monetization approach.
• Consumption Models: There is a shift towards more consumptive pricing models over time.
• Workplace Pricing: Prices range from $15 to $30, depending on organization size and phone service inclusion.

In conclusion, Zoom’s presentation at the summit underscored its commitment to innovation and strategic growth, balancing investment with profitability. For a more detailed understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - 18th Annual Emerging Technology Summit:

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: All right, great. Good morning, everybody. Welcome to the twentieth KeyBanc Capital Markets Emerging Technology Summit. My name is Jackson Adar, Enterprise Software Analyst. Here at KeyBank.

We are thrilled to have Michelle Chang from Zoom join us this morning. So just to set the stage, we’ll we’ve got about twenty, twenty five minutes. I’ll ask a bunch of questions, but then audience be ready. I’ll ping you guys a couple of times if, you know, just if you have any questions, raise your hand, but, we’ll try and do our best to make sure that we hit everybody’s questions in the room. I think that’s about it.

Right? Michelle, do you wanna just quickly introduce yourself, introduce the company, and then we’ll we’ll get started.

Michelle Chang, CFO, Zoom: Alright. So let’s see. Michelle Chang, CFO of Zoom. Been actually just started in October, so it’s been about twenty five years at a competitor at Microsoft. And just really excited to to talk about where Zoom is going.

I think, you know, we have a ton of brand awareness, and yet we’re in this kind of pivotal moment as a company. So excited to get down. I’m sure we’ll talk more

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: about it. Can we just talk about the, your background at the competitor? I mean, you know, you know, that your CFO position at at Microsoft in a in a particular division, then what, you know, what prompts the move from Yeah. Yeah. Divisional CFO to now stand alone public company CFO at a at a competitor?

Michelle Chang, CFO, Zoom: Yeah. So let’s see. Twenty five years at Microsoft, I won’t bore you with the details of where I went, but, think about three primary roles. I was a CFO of what they call their modern work business, which is like office, windows, and Teams during the pandemic. So I got a really deep, honestly, respect for for Zoom, as a competitor at that point.

I was the CFO of our cyberware division, and then I finished being the CFO of Microsoft’s commercial unit, so, from a go to market perspective. Great. And, honestly, I I joined Zoom, really over an arc of conversations that happened between Eric and I, starting in the summer, that really talked about, you know, his vision. He’ll call it Zoom two point o, but really pivoting from, you know, this iconic company that that helped the world, in the pandemic. But it we got talking over over a lot of conversations about where he wanted to go with it.

And, you know, we talk broadly at Zoom about three primary priorities that we have right now. And and it’s a good frame for so many of our conversations and why I got excited, and why I made the choice to to leave, which is the first priority is really and something that Zoom has been working on quite a bit, which is taking this iconic brand of meetings and moving to, what we call a more platform based. Our platform is called Workplace. Think of this as, like, you’re in one place where you can get all your work done. You don’t have a toggle text.

You’re doing chat as well as meetings to phone to, email to calendar to docs and and many other things. So, like, that central place where you can go to kinda get work done. So that’s sort of Zoom’s first business priority. The second, thing that Zoom has been working on, that got me excited is they’ve moved into natural adjacencies in two primary areas. I’ll just talk about the two that are driving a big part of our growth, which is contact center, and then employee experience in a product that we have called Work Vivo.

So we got excited about the seeds and the signals as I began to kind of sort through things of, you know, really the diversification that Zaman built. And I think and let me do the third one and then kind of wrap with some general comments on Zayman. The third thing that is a major priority for Zoom is really not dissimilar to many, I’m sure, but AI. And not just putting AI in kind of the core of our product, but in Zoomtopia, we began to talk about AI monetization and where we wanna go in higher value scenarios, so beyond sort of the basics of kind of where I think a lot of customers are using AI today. So just as Eric and I got excited, it felt like a really good, path for the future.

There were a lot of those tough seeds planted. And yet, like, as I began to think about, well, what can I do to help the company? How can I bring sort of what I learned at Microsoft to to help a company scale? Got really excited about things that I could also help, ensure in terms of, you know, having seen an AI transformation. I mean, frankly, seen many transformations over my twenty five years and and where I could really help Zoom.

So

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Can we, stick with that third priority just for just for the time being on AI? You know, you had AI one point o. Zoom’s now kinda talking about their AI two point o. What’s the difference? And then also, we’ll talk about monetization maybe after you set the stage there.

Michelle Chang, CFO, Zoom: Perfect. So, yeah, I wasn’t here for for the one point o. I I joined for two point o. But think of it as, like, you know, when when most users experience AI from a workplace, if you will, fashion. They already kinda have that consumer exposure.

And and so quite often in the workplace, it’s I couldn’t attend a meeting, summarize a meeting. And and so it honestly sort of started in the meeting scenario. Makes sense from a Zoom perspective. And, really, you know, AI Companion two point o is just us really bringing that, from meetings into our platform. So bringing AI value to phone, for example, bringing AI value to chat, bringing, an AI companion that can look across that entirety of of kind of your work scenario.

And so I always like to tell this with with this group in particular, but I just finished an earnings cycle. Right? And, let me just paint a picture of, like, what it looks like to use it. You have a meeting with an analyst. What were the last things they said?

You know? And you’re just writing it, sorry, in a in a left handrail. What were the last things they said about our stock? When was the last time I met with them? What were the notes about it?

What did we talk about? Right? What are they writing about my competitors? When you’re prepping for earnings, what are the broad themes that we’re seeing? Are there any hot topics that came up in Q and A?

And so think about the hours saved. Right? And then you go internal, scenarios. So I what I think I always say is we really breathe life with AI Companion two point o into it, really percolating far beyond meetings, into really just how people get work done.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Okay. Yeah. Okay. On monetization Yeah. I know an analyst who, about a year ago, said something along the lines of be wary of those software companies that embed AI into their products but don’t explicitly charge

Michelle Chang, CFO, Zoom: for it.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: That person was scared that you’re gonna spend all this money developing AI Mhmm. And paying for inference. Right?

Michelle Chang, CFO, Zoom: Mhmm.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: And then not actually get a return on it because it was just going to we were gonna net retention our way into, like, you know, magic money. Right? That was me, by the way. That was, you know I

Michelle Chang, CFO, Zoom: thought that.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: To to bit a horrible joke. But Zoom kind of zagged. Right? You went the other way. The the embedding it, you know, and I think Eric has said, it’s only valuable if people are using it.

Right? Like, which I completely understand that ethos. But why is now a good time to start monetizing it a little bit more directly? What has changed that’s like, okay, now is the moment that, you know, embedding no longer works and why monetization should

Michelle Chang, CFO, Zoom: be the

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: right thing going forward?

Michelle Chang, CFO, Zoom: I would actually say it’s not a change in anything that we’ve done. It’s just a natural sort of extension. And maybe I’ll even take a couple liberties to talk about Sure. The other way I’ve seen it, though.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Yeah.

Michelle Chang, CFO, Zoom: So for for those that may not be aware, what we said is that a certain amount of AI, I think of I call it base level AI. The stuff that I just described to you is gonna be included in our paid SKUs at no additional cost. And it was a bold decision. Yeah. I mean, it was a bold decision.

It’s very different than our competitor sets that are out there trying to have a $30 per user per month Mhmm. Conversation. Where then the conversation I’m just gonna, I talked to a lot of CFOs. I talked to to them in my old seat as well as in this seat, who are then turning to their boards and saying, well, if Susie and Johnny get two hours back, how do I know they’re not going to the gym? How do I know how do I prove productivity to justify what is a large uptick in cost?

And so, look, we took a a step to say we’re gonna do it differently. We’re gonna have base level AI, which, you know, look, may we monetize one day in discount reduction and, you know, price increase? I don’t know. Never say never. It’s it’s not on the current radar.

But the priority for us was to get people in and using it and to start the change in behavior. And then what we announced at Zoomtopia was a pivot to say there are scenarios where it does make sense to monetize it, and that’s where a customer can see higher value in the tier. Those are the scenarios where it doesn’t take long for a CFO to go, hey, turns out AI in a contact center when my costs are going high makes sense. You know what I mean? It’s an easy justification to make.

Turns out so the the ways we monetize the way we monetize AI, I would think about it this way. We put the base level AI in our SKUs, and and there’s no plans, at this stage to monetize that other than we hope it stems churn, it’s stickiness in the platform, all the things you would expect. We are currently monetizing on contact centers. So you may hear us talk quite a bit in our earnings release about how much contact center is driving growth, right, a big driver, the, you know, I think 80% of our top 10 deals, the bulk of what’s driving that cost in tech center revenue is the highest tier SKU includes AI. And then what we announced in Zaptopia that will come out here in the spring is really monetization on three vectors beyond that.

One, monetization on something called custom AI companion. When a customer wants to take AI value, add in their own data source, low code look at a workflow, and and, you know, kind of transform a process within an organization, that that will monetize on at $12 per user per month. When there are specific high value workloads for verticals, the two we started in our health care and education, they tend to be very strong areas for Zoom, we’ll monetize there. And then, we’ll we’ll monetize in our frontline workers queue where we think it’s sort of an untapped market. So look, we’ve taken a differentiated approach, but I think it’s a it’s a good balance.

Right? Probably just having the chapter of it’s all free when you when you wrote your comment made total sense, but I I think we will balance that out in a way where it will have been a smart decision in terms of how the market full unfolds. Okay.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Because

Michelle Chang, CFO, Zoom: I’m hearing from a lot of CFOs, it is tough to justify across your entire knowledge worker base $30 per user per month in in these conditions.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: There’s a cost side to it. Yeah. You guys have shown Totally. Pretty remarkable reduction in COGS on the AI front. What’s driving that?

Michelle Chang, CFO, Zoom: Well, we’ve been growing COGS, and and it’s been growing off AI.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: As a as a percentage The margin is Yeah. The margins on the You know,

Michelle Chang, CFO, Zoom: to your point, very well controlled. And really, there’s a couple of things. Let me talk Zoom had room to control its margins in general, you know, beyond AI, shifting to colos and and various things and savings initiatives. I believe it’s an always on motion. From an AI perspective, we are very much I mean, when you take a bold decision, you have to then grind out costs.

So we are very focused on AI active user costs. But one of the things inherently keeping our cost structure down, is something we call our federated approach to AI, which is we will not be sort of beholden, as frequent competitors are to one model or the other. We will build our own. We will also serve you know, look at other models, preference towards open source, and we will pick, the model that best serves the need. And that’s why you’re seeing a lot of our quality, beats, competitors.

And then when you have different models, you can also choose best quality at best price. And so that’s a lot of what is driving those cost per share. So it’s something that we’re very focused on.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Can we shift back to the to the first priority you mentioned? Kind of taking this iconic brand and spreading it around. Right? Feels like that’s, you know, what Zoom has been trying to do for many moons now. What is the change in the strategy or, you know, that makes that the top priority?

How is that gonna be different in the next two to three years than maybe in the last two to three years for Zoom?

Michelle Chang, CFO, Zoom: So maybe let me parse it out and talk online versus enterprise. So for those that may not be aware, our online business is about 40% of our revenue. Our enterprise business is about 60%. In online, post pandemic, we very much came off, you know, challenging times as many, did, but probably extra for Zoom as well, and worked very hard to sort of stabilize our base. And what’s different, I would say, at this point is I I consider us materially through that on both the online and the enterprise side.

And the stat that I look at that tells me that we’re materially through that is if you look at our online customer base, about three quarters of our customer base has been with us for over sixteen months. And you might say, well, should that be 100? Probably not because you’re always going to have some degree of seasonality in your usage. And so where we’re pivoting now, now that we’ve kind of gotten through that stabilization era, we’re pivoting in online is really then looking at how do we take it to the next level in terms of growth. We’ve done some price increase, so we think we have pricing power in the market.

But really, where we’re focused is really studying customer need, looking at pricing and packaging, where can we take value that already exists, examine, extend it more naturally to small businesses, solopreneurs, etcetera, which I think plays to the Zoom strengths, which tend to be it’s easy to use, it’s intuitive, we have a fast pace of innovation. So that’s what I would say is the differential on the online side. On the enterprise side, then we get into, you know, things like contact center and work view, but I’ll focus Yeah. You know, on just what’s different on the meetings and phone side. And what I would say is we went through that similar kind of arc of post pandemic.

Yeah. The stat I used to kind of internalize that with a lot of investors and even internally how we look at it is, in contrast to prior years, only 6% of the renewals that are coming up this year in enterprise are their first time post COVID. Right? And we know that once they’re sort of the through that first time, right, you get a lot more stabilization in that. And so then, really, we’re about landing and expanding.

And even within meetings, one of the one of the most common land and expand scenarios that we start on is taking sort of a meeting space and adding on phone. Mhmm. And so that’s you know, and there, really, our focus is building out channel, building out channel, building out international presence, continuing to mature our phone. But really channel is sort of, we think, the big unlock. We’ve seen tremendous progress in winning share against certain competitors, and then we’re gearing up to take on others.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Great. Okay. I want to shift to priority two, CCaaS and WorkVivo. But after this, then, you know, we’ll come to the audience. So be thinking of questions, but we want to touch on priority two.

CCaaS, I think, you know so both of these have an m and a component to them. Right? And and CCaaS Zoom had, you know, made attempts, I guess, if you wanna call it, to to acquire Five nine in the past and then WorkVivo on the on the employee experience was just an outright acquisition. Are these areas still the extension of Zoom? Is that kind of the more buy versus build?

Whereas if we think about the core platform

Michelle Chang, CFO, Zoom: question. I I might say it a little differently, which is, like, Zoom has historically been a very, build company. Yeah. Look, if you look at the heart of what makes Zoom, Zoom, its incredible pace of innovation, ease of use, hyper focus on the customer, which honestly has been an utter delight coming in, you know, where it’s not a given that it’s that way, in many places. So look, we’re going to continue to build.

Okay. That being said, we’re grown up here, and we need to also You

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: guys have a lot of cash. I mean

Michelle Chang, CFO, Zoom: We do. Yeah. We also need to focus on strategic partnerships and more M and A. We we got sort of our first we’ve done two, acquisitions, I would say, of of size one being Solvion and then WorkVivo being, the q one. But I think you can we look very heavily at m and a.

I think if we do m and a, it will be in the three areas that I talked about.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Yeah.

Michelle Chang, CFO, Zoom: We’re gonna be thoughtful and disciplined about it, having been on the other side of of many deals sound good on paper and they’re tough to translate in the real world. And we’re going to look for acquisitions that have strategic synergies, and accelerate our ability to execute. Realistically, that’s probably small to medium sized deals for Zoom.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Okay. Got it. All right. Any questions from the audience on things that we either have touched on or haven’t touched on before I before I move on. Yeah.

Sure. Right back here. Yeah. So just for the recording

Michelle Chang, CFO, Zoom: Repeat it?

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Yeah. I’ll just repeat. The the crux of the question is, on AI monetization, how are the what how are you actually gonna drive the the levers to, you know, charge people money?

Michelle Chang, CFO, Zoom: Yeah. So, like, broadly in in business models, we look at, you know, what’s the norm in market, and, you know, what do we think makes sense from a customer perspective. We’re broadly a per user, per month. The custom AI companion, we’ve come out and said will be a per user per month. I think you can expect, over time on on some things that will go to more consumptive packs, which we started, to do.

We have not yet said what the sort of business model on on frontline or excuse me, health care and education will be, but I would probably veer more charge per user per month.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Yeah.

Michelle Chang, CFO, Zoom: But I think your broad your broad question of like will we differentiate our business model as we grow, yeah.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Yeah. Consumption is in vogue. But like you said, you have roots in this is how people are comfortable paying for for our solutions. I think that makes some sense. I saw another one in the back, but it unless that was

Michelle Chang, CFO, Zoom: Yeah.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Sure. Go ahead. So what’s the what’s the top amount that you would charge a per user per month if they had, you know, all in Zoom, including AI bundled,

Michelle Chang, CFO, Zoom: meeting center. Maybe my IR team cannot be looking at them out here.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Contact center out just, you know, looking for, you know

Michelle Chang, CFO, Zoom: So the the way to think about, workplace is generally, it’s somewhere in the 15 to 30 depending on size of the organization and depending on whether you have phone. AI, that base level AI would be included in those prices. Then you get to the scenarios that we talked about for monetization, and and those would be $12 on top, and we haven’t yet come out with the pricing on those, vertical SKUs or the friendly.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Can I sneak a couple more in? Yeah. And then but if there are any other questions, certainly raise your hand. Okay. So the call it medium term or updated long term outlook, right, on on the margin.

The margin profile is significantly different from, like, the margin profile implied in your guidance for Yep. This year.

Michelle Chang, CFO, Zoom: Yep.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Implies a lot more investments. Right? How why does Zoom see a future where their operating margins are so far below where they are today? And what would that imply for the top line then, you know, for growth if you’re going to make those investments?

Michelle Chang, CFO, Zoom: Great question. So maybe for those that are less familiar, we updated in Zoomtopia our long term guidance, gave quite a breadth of potential down to the negative of what operating income could be. And I think it was just to give, one, I think even if I got my history right, I was just day two in John, but I think prior to that, it it had been even more. So we were trying to kind of tighten up and and update things. And then in ’26, in this last earnings, I came out and and sort of said, there’s maybe, like, roughly a one point, degradation.

We didn’t necessarily we talked about this on some of the calls afterwards, but really think about, like, the entirety of what’s driving that, degradation is we’ve been making some changes from our stock based comp, which Zoom had been very heavy in in the pandemic, to to more in market, like, cash based. And so that’s really the entirety of kind of what’s going on there. And so I think, look, I think you should think about the delta between those two statements as we will not invest in operating income until we have sort of the proof point on the top line of revenue. And I think it was very important to me to show that, that we hold those two things in tension. And then look, like, if we find that thing and we see an inflection in growth and we feel conviction, could we do that?

But I tend to think of it as maybe a floor, if you will,

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: in terms

Michelle Chang, CFO, Zoom: of how to pick that up.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Yes. That makes sense. Only a couple, oh, we’re red. We’ll sneak one more in. I know we’re getting the wrap

Michelle Chang, CFO, Zoom: up. Yes.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: Okay. All right. Well, shameless plug, we have if you’re interested in some video, we also have some panels for UCaaS and CCaaS throughout the conference. So if you want to hear more about AI in the contact center for UCaaS, be looking out for those. But Michelle, thanks so much for being here.

Michelle Chang, CFO, Zoom: This is great. Yeah. Yeah.

Jackson Adar, Enterprise Software Analyst, KeyBanc Capital Markets: All right.

Michelle Chang, CFO, Zoom: Take care. It’s great.

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