Eric Yuan: Yeah. Just quickly, in terms of pricing power and most of the businesses, they still view employ experience as the number one priority, right? That’s why they really wanted to kind of give a customer the best service like a Zoom platform. Otherwise, probably they do not experience on price, that’s not the case, right? And most of the customers we talked with has really appreciated the value and ease of use and quality of Zoom service.
Kasthuri Gopalan: Thanks so much.
Eric Yuan: Thank you, Kash. Appreciate. You bet.
Operator: Our next question comes from Michael Funk with Bank of America.
Michael Funk: Yeah. Hi. Thank you for taking the question today. So congratulations on new logo additions, good momentum there and the Phone adds as well. Just wondering, Kelly, I mean, what has to happen with some of the other metrics, it did decelerate during the quarter. India decelerated sequentially. Online churn up sequentially. Enterprise customer additions also slowed sequentially. So thinking about the acceleration in revenue growth we’ve been expecting or hoping for, which of those metrics is going to turn first? And how much visibility do you have into that turn?
Kelly Steckelberg: Yeah. So a couple of things. Let me just comment on a couple of the metrics that you called out specifically. First of all, the Online term metric. As a reminder, we expect Q2 and Q4 to be seasonally higher than Q1 and Q3. So while it was up over Q1, it was down over Q4, and that’s because of summer and winter holiday. So I think the 3.2 number is a really great number. And we are going to continue and continuing to focus on opportunities to improve that. In terms of the Enterprise, we’re really focusing on some of the approach as we’ve talked about earlier. Certainly, Zoom Phone is one of the key drivers in terms of expanding our customers use to the platform. That doesn’t necessarily result in new customers, but you could see that in the Enterprise customer metric as that starts to expand also the success of Zoom One is going to drive that expansion of more customers in the $100,000.
So I think those are the metrics that you should watch as great indicators as our Enterprise team continues to in Phones in One in Contact Center. And then, of course, as AI becomes more front and center, you’ll get to see that as well.
Michael Funk: So just quickly then, so the NDRR for Enterprise that should improve as we exit the year, is that expectations of 109 (ph) just should improve off that number?
Kelly Steckelberg: You remember, it’s a trailing 12-month number. It may come down a little bit more yet, but then start to inflect potentially at the back half of the year, but it might be into early of FY ’25.
Michael Funk: Okay. Thank you, Kelly. Thank you, Eric.
Eric Yuan: Thank you.
Operator: Our next question comes from James Fish from Piper Sandler.
James Fish: Hey, guys. Thanks for the questions. Kelly, for you or Eric, are you seeing optimizations on your seats showing a slowdown or a similar pace to what you’ve seen more recently? Is there any way to talk about the linearity in general? And Eric, we get the investment behind AI, and it seems like it’s causing gross margins to drop a couple of points and guide sequentially. I guess what can you say that gives confidence that this isn’t just further price degradation or just a higher level of conservatism on the other side of the coin?
Eric Yuan: Kelly, you wanted to address the first one?
Kelly Steckelberg: So in terms of the optimization of seats, what we’ve seen is, I think we talked about the sales motion before that our reps have the opportunity to really get in there and talk to our customers and they’ve done a great job about logo retention. And even if they are customers because they’ve had a dislocation in their employee base, taking that opportunity then to replace that revenue with an upsell of another product like Zoom Phone and showing them how overall we can drive such a great ROI for them and save them. And our sales team has been incredibly successful at that. And so that’s what we’re seeing, even though there’s still a little bit of shifting, I would say, of seats in there, we’re seeing lots of momentum on those upsells at that renewal period.
And I just want to highlight, we only — in terms of gross margin, we had 80.3 this quarter, and we only guided to 79.7. So it’s not even 100 basis points of degradation. So Eric can talk about the reasons and why that is and what we’re investing in.
Eric Yuan: Yeah. Gross margin is very, very strong. Again, in terms of the impact, it’s just a short term, not long term. The reason why — when it comes to AI, it’s 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 feature 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?
