Zendesk Says AI ARR Could Hit $400M to $500M in 2026

As the customer service software market undergoes a seismic shift driven by artificial intelligence, Zendesk is positioning itself at the epicenter of transformation. Three years after Tom Eggemeier succeeded co-founder Mikkel Svane as chief executive, the company has evolved into what it claims is an “AI first” company. Its efforts appear to be paying off, as it will close out this year with $200 million in AI annual recurring revenue and approximately 20,000 customers. Zendesk reveals to The AI Economy that AI ARR could reach up to $500 million in 2026, a 150 percent year-over-year jump—and up from zero just two years ago.

“We are AI first,” Eggemeier declares during an interview on the sidelines of AWS re:Invent, where he unveiled a new strategic partnership between the two companies. “We are the ones who are leading this transformation. We’re the biggest customer service company in terms of AI ARR, [the number of customers] using our AI, and [the volume] of resolutions that we’re providing our customers.”

He admits that two years ago, he couldn’t imagine such rapid growth. But things are different from his time at Genesys, when companies were transitioning from on-premise infrastructure to the cloud, and such migrations took decades. Eggemeier predicts that because “AI is way more rapid,” the AI effect in service centers won’t happen between 20 and 25 years, but rather five to ten years.

“I did not think it was going to be this rapid. We thought it would be big, but you always have that metaphor about people overestimating technology changes in the short-term, but they underestimate them in the mid- to long-term. I think it’s the case here, but the short-term has been much faster than we anticipated.”

What’s the cause of this increase in demand from customers? According to Eggemeier, they’re able to automate up to 80 percent of their interactions and provide a better experience for both customers and employees. “That’s why people are so focused on it because it is disrupting how traditionally companies interact with consumers, employees, or other businesses. And people see it—it’s not just hype. It actually is changing their workflows [and] what people do.”

Dealing With A Growing Marketplace

Becoming AI-first wasn’t an overnight process. Zendesk has been hard at work developing new tools and products. It has rolled out Copilots and AI agents to support human workers across every channel—it believes bots can restore humanity to stressful customer service calls. The company has also introduced dynamic pricing plans to help organizations avoid sticker shock and launched a comprehensive resolution platform that bundles all the AI tools needed to handle service requests.

But during this time, more competitors have entered the market—would Zendesk be able to maintain its advantage? Not only does it have to compete against Salesforce, Freshworks, Microsoft, Google, ServiceNow, Oracle, SAP, Intercom, Zoho Desk, Dialpad, and Genesys, but it now faces challenges from AI startups like Sierra, which recently reported $100 million ARR in two years, Decagon, Dolphin AI, and Yellow AI.

Eggemeier doesn’t appear worried about all the players in the space. “If we’re providing phenomenal value to our customers, we’re going to be in a great position,” he responds. He references an unnamed customer company that is achieving 73 percent automation with Zendesk’s AI agent and has also embraced its voice contact center with Amazon Connect. “They’ve got the whole platform. We deliver that type of value to our customers. We don’t have to worry about the competition.”

He cites a lack of constraints on the Total and Serviceable Addressable Markets as the reason for the rise of new customer service providers. This signals a large opportunity with a relatively low barrier to entry. “People have looked at software TAM or SAM in the past, and they said customer service TAM or SAM is ‘X.’ We’re looking at it differently. We’re saying it’s all the labor that’s in the market right now,” Eggemeier explains. “For instance, [with] our $2 billion approximately ARR every year, there’s over $20 billion of labor. So we are not constrained. And I think that’s why there are a lot of competitors coming into the market—there’s not a TAM or SAM constraint. It’s about how you can transform people’s customer companies and their customers.”

From ‘Humbledence’ to Confidence

And while enterprise tech providers are busy declaring their software the “operating system” of X or Y, Eggemeier takes a different approach—for now. Reflecting on Zendesk’s culture, he recalls a guiding principle from three years ago: “Humbledence”—a combination of humbleness and confidence—which the company has since evolved into pure confidence.

Eggemeier demonstrates the principle in action, re-emphasizing the company’s scale and leadership in customer service: “We are the biggest, we are the best. We are solving the most customer service interactions on a daily basis from our customers. We’re the largest in AI ARR, with almost $200 million by the end of the year. We’re the biggest in terms of customers, [with] 20,000 customers. We’re the biggest in terms of impact on five billion automated resolutions a year right now, and so we think the resolution platform is that operating system that’s the basis for what we’re trying to do.”

He posits that, just as with the on-premises-to-cloud transition, all SaaS companies will need to undergo an AI-first transition. For those who complete this process, they’ll be “wildly successful.” However, Eggemeier warns that there will be some who can’t make this transition quickly enough.

And as Zendesk moves forward with this new chapter in its history, he plainly states to all his employees, customers, and the market: “We are going to be the disruptor…not the disrupted.”

Disclosure: I am attending AWS’ 2025 re:Invent as a guest, with a portion of my travel expenses covered by the company. However, Amazon did not influence the content of this post—these thoughts are entirely my own.

Featured Image: Zendesk CEO Tom Eggemeier speaks at the company's Relate conference in Las Vegas, Nevada on March 26, 2025. Credit: Ken Yeung