What impact does the transition to Zenvia Customer Cloud have on the company's operating margins and cash flow expectations?

Fundamental impact

The migration to the Zenvia Customer Cloud is now progressing “as expected,” and with CPaaS revenues still expanding (+23% YoY) the company is seeing a cleaner, higher‑margin revenue mix. The shift from on‑premise or hybrid models to a pure‑cloud subscription business reduces the cost‑of‑goods component of each deal and lifts the gross‑margin profile. Because the cloud platform is a SaaS, recurring ARR replaces the lower‑margin, project‑based fees that historically drove Zenvia’s operating costs. As a result, management expects operating margins to expand in the second half of the year versus the Q2 baseline, where margins were still weighed down by the upfront implementation spend required to move customers onto the cloud.

Cash‑flow outlook

While margin expansion is positive, the transition entails a near‑term cash outlay—larger onboarding, data‑migration and infrastructure‑scaling expenditures are being booked as capitalised operating costs. The press release stresses “strict expense control,” indicating that Zenvia is capping discretionary spend to avoid a cash‑burn drag. Consequently, cash‑flow generation will remain modest in the short term, but the company’s guidance points to a meaningful uplift once the bulk of the migration spend is amortised over the longer‑term subscription horizon. In other words, expect a short‑run dip or flat net‑cash flow followed by a step‑up in free‑cash‑flow generation from recurring subscription revenues later in 2025 and into 2026.

Trading implications

The margin and cash‑flow trajectory is bullish for the stock: a clear pathway to higher operating profitability and a delayed but credible turn to positive free‑cash‑flow. Given the “moving as expected” language and the FY guidance that still emphasizes disciplined spending, the upside potential is priced in but not fully realised. Technically, ZENV shares have been testing the $6‑$6.30 range (the June‑July swing low) and show a bullish flag forming on the 4‑week chart. A break above the $6.30 resistance—especially on volume—could trigger a short‑to‑mid‑term entry, with a target around $7.20‑$7.50 as the market prices in the projected margin expansion and cash‑flow tailwinds. Conversely, a clear retest of $5.80 support would merit caution until the next earnings update clarifies the speed of the cloud migration.