Zoom Communications, Inc.
ZM · Nasdaq
Next quarter
Expected to report Nov 23, 2026 — estimated from last year’s reporting date.
Consensus is $1.01 EPS for Oct 2026 across 7 estimates, ranging $0.98 to $1.05.
ZM Jul 2026
- 7.92%
- -7.03%
- $1.01
- $0.93
- —
- $1.28B
Reported results
- $1.28B
- 77.16%
- $314.32M
- 24.61%
- $1.54B
- $5.15
Highlights
- Revenue: Second-quarter revenue was $1.277 billion, up 4.9% year over year and 3.0% from $1.24 billion in Q1 FY2027; constant-currency growth was 4.7%.
- Enterprise momentum: Enterprise revenue rose 7.8% year over year to $787.5 million, its strongest growth rate in three years, while Online revenue increased just 0.6% to $489.7 million.
- Earnings versus expectations: Reported EPS was $0.93 versus the $1.01 consensus, a $0.08 shortfall or 7.92%; the release separately reported non-GAAP diluted EPS of $1.55 and GAAP diluted EPS of $5.15.
- Underlying profitability: Non-GAAP operating income increased to $510.3 million from $503.2 million a year ago, but non-GAAP operating margin narrowed to 40.0% from 41.3%; GAAP operating income was $314.3 million versus $321.7 million.
- AI adoption: Zoom Virtual Agent customer count increased 256% year over year, while the AI-first Customer Experience portfolio delivered high-double-digit ARR expansion; AI usage also contributed to higher third-party hosting costs.
- Customer expansion: Enterprise net dollar expansion improved to 99% from 98% a year ago, and customers contributing more than $100,000 of trailing-12-month revenue rose 8.2% to 4,625.
- Investment-driven GAAP profit: GAAP net income was $1.542 billion, or $5.15 per diluted share, versus $358.6 million and $1.16 a year ago, largely because of a $1.613 billion unrealized gain on the Anthropic investment.
- Cash returns and liquidity: Zoom repurchased 3.7 million shares for approximately $351.9 million during the quarter; cash, cash equivalents and marketable securities totaled $7.2 billion, with $1.3 billion remaining under the repurchase authorization.
- Outlook: Fiscal 2027 revenue guidance is now $5.085 billion-$5.095 billion, non-GAAP EPS is $6.08-$6.12 and free cash flow is $1.780 billion-$1.820 billion; third-quarter revenue guidance is $1.275 billion-$1.280 billion.
Analysis
Zoom’s second quarter was a modest revenue beat in terms of business momentum but a reported EPS miss against expectations. Revenue of $1.277 billion grew 4.9% year over year, compared with $1.217 billion in the year-ago quarter, and increased from $1.24 billion in Q1 FY2027. Reported EPS was $0.93 versus the $1.01 consensus. The release also shows non-GAAP diluted EPS of $1.55, up from $1.53 a year ago, and GAAP diluted EPS of $5.15 versus $1.16, though the latter comparison was dominated by investment gains.
The defining feature of the print was continued mix shift toward Enterprise, where revenue growth accelerated to 7.8% and Enterprise represented 61.7% of total revenue, versus 60.0% a year ago. Expansion improved slightly, with net dollar expansion at 99%, while Online growth remained nearly flat. Zoom is investing heavily behind AI: R&D expense rose 17.5% year over year to $242.5 million, and higher AI consumption helped lift third-party hosting costs by $24.4 million. That investment pressured margins, with non-GAAP operating margin falling to 40.0% from 41.3%. Management maintained a highly cash-generative model, producing $472.4 million of quarterly free cash flow, while updating full-year revenue and EPS guidance to $5.085 billion-$5.095 billion and $6.08-$6.12, respectively.
Enterprise growth
Enterprise remained the central operating story. Revenue grew 7.8% year over year to $787.5 million, versus 0.6% growth for the Online business. Enterprise revenue represented 61.7% of total revenue, up from 60.0% a year ago. Of the Enterprise increase, 42.3% came from new customers and 57.7% from existing customers, showing that expansion within the installed base remained the larger contributor.
- Large accounts: Customers generating more than $100,000 of trailing-12-month revenue increased 8.2% year over year to 4,625, and these customers contributed 33.4% of quarterly revenue versus 32.2% a year ago.
- Expansion: Enterprise net dollar expansion improved to 99% from 98% a year ago, but remained below 100%, indicating that upsell and cross-sell activity still did not fully offset contraction and attrition.
- Online retention: Online monthly churn was unchanged at 2.9%, while customers with at least 16 months of continuous service represented 75.6% of Online MRR, up 70 basis points year over year.
AI product investment
Zoom is positioning AI as the mechanism for expanding beyond meetings into a broader system of action. During the quarter it introduced ZoomMate, the AI Productivity Suite, custom agent capabilities, Zoom AI On-Prem and real-time voice translation. The company said its AI-first Customer Experience portfolio was delivering high-double-digit ARR expansion, with Zoom Virtual Agent customer count up 256% year over year.
- Development spending: R&D expense increased 17.5% year over year to $242.5 million, including a $23.7 million increase in personnel costs and a $5.4 million increase in AI-related expense.
- Infrastructure cost: Third-party hosting costs increased $24.4 million year over year, primarily because of higher platform usage, including AI-related consumption.
- Commercial proof point: Enterprise net dollar expansion improved only one percentage point to 99%, so the quarter showed early AI adoption and product breadth more clearly than a major acceleration in monetization.
Margins and earnings
The core operating result was stable in dollars but less efficient on a margin basis. GAAP operating income was $314.3 million, down from $321.7 million a year ago but up from $310.5 million in Q1 FY2027. Non-GAAP operating income rose to $510.3 million from $503.2 million a year ago, while the margin declined as investment in AI and hosting costs grew faster than revenue.
- Gross margin: GAAP gross margin fell to 77.2% from 77.6% a year ago as higher third-party hosting costs more than offset data-center optimization.
- Operating margin: Non-GAAP operating margin was 40.0%, down from 41.3% a year ago; GAAP operating margin was 24.6% versus 26.4%.
- GAAP distortion: Net income reached $1.542 billion, or $5.15 per diluted share, compared with $358.6 million and $1.16 a year ago, primarily due to a $1.613 billion unrealized gain on Anthropic. Anthropic’s carrying value reached $3.1345 billion after a $1.613 billion quarterly remeasurement gain.
Cash generation and capital
Zoom continued to generate substantial cash despite increased AI-related spending and acquisitions. Quarterly operating cash flow was $494.8 million, down from $515.9 million a year ago, and free cash flow was $472.4 million versus $508.0 million. For the first six months, operating cash flow increased to $1.016 billion from $1.005 billion and free cash flow was $972.9 million versus $971.3 million.
- Liquidity: Cash, cash equivalents and marketable securities totaled $7.2 billion at July 31, 2026, including $6.318 billion of marketable securities.
- Repurchases: Zoom repurchased and retired 3.7 million shares for $351.9 million in the quarter and 7.9 million shares for $713.5 million year to date.
- Remaining authorization: The company had approximately $1.3 billion of repurchase authorization remaining at quarter-end.
- Strategic deployment: First-half investing cash outflow was $554.2 million, including $441.1 million of strategic investments and $248.7 million of acquisition spending.
Acquisition and legal matters
Zoom acquired Common Room on July 17 for $266.8 million in cash. The AI-native go-to-market intelligence platform adds buyer signals and AI agents to Zoom Revenue Accelerator, extending the product from sales conversations into upstream revenue workflows. Common Room contributed $198.8 million of goodwill and $43.8 million of identifiable intangible assets in the preliminary purchase-price allocation, while its operating results were not material to the quarter.
- Anthropic exposure: Zoom invested an additional $300.9 million in Anthropic during the first half and held $3.1345 billion of Anthropic preferred stock at quarter-end.
- Regulatory resolution: The Northern District of California investigation concluded in August 2026 with no further action, while the Eastern District of New York investigation remains ongoing and the company cannot estimate a potential loss.
- Acquisition strategy: Common Room and prior acquisition BrightHire broaden Zoom into revenue orchestration and recruiting, but they also add integration requirements and acquisition-related expense.
Fiscal 2027 outlook
Management’s updated full-year outlook implies continued low-single-digit revenue growth alongside very high operating profitability. The guidance does not incorporate the effect of the approximately $1.3 billion of remaining authorized repurchases on EPS or share count.
- Third quarter: Revenue is expected at $1.275 billion-$1.280 billion, non-GAAP operating income at $510.0 million-$515.0 million and non-GAAP diluted EPS at $1.46-$1.48.
- Full year: Revenue is expected at $5.085 billion-$5.095 billion, non-GAAP operating income at $2.065 billion-$2.075 billion and non-GAAP diluted EPS at $6.08-$6.12.
- Cash flow: Full-year free cash flow guidance is $1.780 billion-$1.820 billion.
