There may be a push to get people back into the corporate office, but Zoom’s latest quarterly numbers suggest there’s life beyond enabling remote working, including an “aggressive roadmap” around generative AI.
Revenue for the second quarter ended July 31 rose 3.6% year-on-year to $1.14 billion, with enterprise revenue making up $659.5 million, up 10.2% and now representing 58% of total revenue. The number of enterprise customers at the end of the quarter was up 218,110 from a year ago. CEO Eric Yuan picked out a few such customers for attention on the post-earnings analyst call:
We are very excited to expand with the United States Postal Service. In Q2, the postal service added Zoom Team Chat for 21,500 users to their existing Zoom for Government deployment. Let me also thank Brookdale Senior Living, the largest operator of senior housing in the United States. Brookdale started as a Zoom Meetings customer in fiscal 2020. A year later, they began evaluating Zoom Phone. And in Q2 they went all-in on the cloud and upgraded to Zoom One, in order to unify their communication needs under one integrated product.
Let me also thank Perdue Farms. Like many of our customers’ journeys, Perdue’s started years ago with an initial Zoom Meetings deployment. Last Fall, they went all-in with Zoom One Enterprise Plus. However, the story does not end there. In Q2, Perdue added Zoom Contact Center due to its native integration with their existing Zoom Phone deployment and our ambitious innovation roadmap.
Let me also thank Valmont Industries. Valmont came onboard as a Zoom customer a little over a year ago with Meetings and Phone and quickly became a major platform adopter, including Zoom One and a Zoom Contact Center. And in Q2, with the goal of utilizing AI to better serve their customers and also their employees, they added Zoom Virtual Agent due to its accuracy of intent understanding, ability to route issues to the correct agent, ease of use and quality of analytics. We are so delighted to see our partnership with Valmont grow so quickly and we’re committed to innovating further to support their operations.
Finally, let me thank Dollar General, America’s general store, for choosing Zoom’s Workvivo platform to connect employees as the digital heartbeat for the company. Dollar General will rollout Workvivo’s employee engagement platform for its roughly 190,000 employees to enhance the employee experience at the individual, group and district levels, drive employee dialogue, and reinforce its strong culture.
As for that “aggressive” AI roadmap, Yuan referenced the appointment of Dr. Xuedong Huang as Zoom CTO, who joins the firm from Microsoft, where he most recently served as Azure AI CTO. He’ll now be driving Zoom’s AI push, which Yuan said is becoming more and more important:
Many of our customers told us they rely on Zoom platform, like all the features today, like Meeting Summary. Someone can take a meeting manually, right? How to leverage AI improve the productivity and efficiency, right? For sure, we needed to invest more. The good news is we already invested two to three years ago, right? And that's why some of the features are already ready.
But how to further double down on that investment, right? We hired Dr. XD and also invested in a lot of the GPUs as well, our team, and we have a high confidence and those AI features will have a customer rock, right? And also our strategy is very differentiated, right? First of all, have a federated AI approach. And also the way we look at those AI features, how to help a customer improve productivity, that's very important, right? And because the customer already like us, not like some others, right, who gave you a so-called free services and then your AI features price.
That's not our case, right? We really care about the customer value and also add more and more innovations. At the same time, the way for us to look at innovations not only for incremental innovation in terms of revenue AI but also how to lever the AI due to some brand new services to innovate, to deliver more value than customer expected. That's where we can monetize to lever the AI technology. That's why we keep investing more. Again, the goal is about some brand new AI services like Zoom a lot of other services we are going to build it down the road.
Yuang emphasized the importance of trust in all this:
We are privileged to have countless customers rely on us for their communications needs. We don’t take that for granted. Earlier this month, we took the additional step in stating that Zoom does NOT use customer content to train our AI models or third-party AI models. I’m proud of the approach we are taking. By putting customers’ privacy needs first, Zoom is taking a leadership position in ensuring customers can use our AI features with confidence that their content is protected.
That’s our approach - how to leverage gen AI to make sure existing customer happy and leverage gen AI to build new services focused on innovation, innovation and innovation.
Nice idea. And of course:
At the same time, gen AI does bring huge opportunity like in terms of monetization, in terms of the new service.
Indeed. How all this plays out remains to be seen - as we keep saying, we’re only six months into this hype cycle! - but the latest quarterly numbers gave Wall Street a pleasant surprise. The necessary brand transition from being a pandemic-powered ‘work from home’ enabler needs a few more such surprises in the coming months.