Zuora, Inc.

Q2 subscription revenue was $104.1 million, up 9% year over year. Professional services revenue was $11.3 million, down 10% year over year. Non-GAAP subscription gross margin was 82%, up over 125 basis points year over year; non-GAAP blended gross margin was 73%, up over 260 basis points year over year. Non-GAAP operating income was $25.6 million, representing a record 22.2% operating margin. Adjusted free cash flow was $12.2 million, versus $4 million in the year-ago quarter. Total RPO was $577 million, up 14% year over year, and ARR was $412.3 million, up 7%. For Q3, Zuora guided to subscription revenue of $104.5 million to $105.5 million, total revenue of $115 million to $117 million, non-GAAP operating income of $20.5 million to $21.5 million, and non-GAAP EPS of $0.11 to $0.12. For FY25, it guided to subscription revenue of $414.5 million to $416.5 million, total revenue of $455.5 million to $461.5 million, non-GAAP operating income of $90 million to $93 million, non-GAAP EPS of $0.56 to $0.58, DBRR of 103% to 104%, ARR growth of approximately 6%, and adjusted free cash flow of $82 million or greater.

Tien Tzuo framed the quarter as a solid follow-up to Q1 and said Zuora is still executing its land-and-expand strategy despite a mixed macro backdrop. He positioned “total monetization” as the next phase of the company’s growth story, expanding beyond traditional subscriptions into consumption, one-time fees, outcome-based fees, prepaid, and hybrid models. He was upbeat about product momentum, customer resonance, and recognition from Gartner, ISG, and MGI, while emphasizing that new products and acquisitions are strengthening the platform.

Todd McElhatton emphasized that Q2 exceeded guidance and that Zuora hit a Rule of 30 run rate two quarters ahead of plan, despite absorbing Togai acquisition expenses. He cited subscription revenue of $104.1 million, non-GAAP operating income of $25.6 million, operating margin of 22.2%, adjusted free cash flow of $12.2 million, and cash and equivalents of $543 million. On the margin side, he pointed to 82% subscription gross margin and 73% blended gross margin, and said the cost structure is sustainable with further leverage possible. He also noted guidance assumes continued challenging macro conditions, while the company raised full-year revenue, operating income, and free cash flow targets.

Analysts focused heavily on why ARR guidance came down, whether slower sales cycles, new customer weakness, or churn were the main drivers, and how much of the revenue upside came from payment processor monetization. Management said the forecast change reflects prudence in a difficult environment, with both new logo and cross-sell assumptions tempered, and that timing risk on large install-base deals was a key reason for caution. They also said the payment processor revenue share was boosted by a catch-up plus a reset going forward, and that it is an ongoing revenue opportunity not included in ARR. Questions also probed Canva, the pre-IPO pipeline, pricing pressure, and whether AI-driven consumption billing and media/paywall investments were large enough opportunities; management said the opportunity is real and early, with strong interest and no material pricing pressure.