Zoom Communications, Inc. (ZM): Results of Operations and Financial Condition
Zoom Communications, Inc. (ZM) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Zoom Communications Reports Financial Results for the Second Quarter of Fiscal Year 2027 • Second quarter total revenue of $1,277.2 million, up 4.9% year over year as reported and 4.7% in constant currency • Second quarter Enterprise revenue of $787.5 million, up 7.8
How this was made
The 30-second read
Why it matters
The earnings beat and updated guidance are likely to support a short‑term rally, while the share buyback adds further support.
Market read
Zoom's strong performance and forward outlook may lift related tech stocks and reinforce confidence in AI‑driven collaboration services.
What to watch
Potential competitive pressure from integrated platforms and macroeconomic headwinds.
Second quarter total revenue of $1,277.2 million, up 4.9% year over year, led by 7.8% Enterprise revenue growth; GAAP operating margin was 24.6% and non-GAAP operating margin was 40.0%.
Revenue growth accelerated in Enterprise and customer expansion improved, while GAAP operating income, GAAP and non-GAAP operating margins, operating cash flow, free cash flow, and non-GAAP net income declined versus the prior-year quarter. GAAP net income was lifted by $1,614.2 million of gains on strategic investments, net.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenueGAAP | $1,277.2 million | – | up 4.9% year over year |
| Revenue in constant currencynon-GAAP | $1,274.5 million | – | up 4.7% year over year |
| Cost of revenueGAAP | $291.7 million | – | – |
| Gross profitGAAP | $985.5 million | – | – |
| Research and development expenseGAAP | $242.5 million | – | – |
| Sales and marketing expenseGAAP | $330.5 million | – | – |
| General and administrative expenseGAAP | $98.2 million | – | – |
| Total operating expensesGAAP | $671.2 million | – | – |
| Income from operationsGAAP | $314.3 million | – | – |
| Operating marginGAAP | 24.6% | – | – |
| Income from operationsnon-GAAP | $510.3 million | – | – |
| Operating marginnon-GAAP | 40.0% | – | – |
| Gains on strategic investments, netGAAP | $1,614.2 million | – | – |
| Other income, netGAAP | $66.4 million | – | – |
| Provision for income taxesGAAP | $452.5 million | – | – |
| Net incomeGAAP | $1,542.4 million | – | – |
| Diluted net income per shareGAAP | $5.15 per share | – | – |
| Net incomenon-GAAP | $464.0 million | – | – |
| Diluted net income per sharenon-GAAP | $1.55 per share | – | – |
| Net cash provided by operating activitiesGAAP | $494.8 million | – | – |
| Operating cash flow marginGAAP | 38.7% | – | – |
| Free cash flownon-GAAP | $472.4 million | – | – |
| Free cash flow marginnon-GAAP | 37.0% | – | – |
| Cash and cash equivalentsGAAP | $932.0 million | – | – |
| Marketable securitiesGAAP | $6,317.7 million | – | – |
| Total cash, cash equivalents, and marketable securities, excluding restricted cashother | $7.2 billion | – | – |
| Six-month revenueGAAP | $2,516.2 million | – | 5.2% |
| Six-month income from operationsGAAP | $624.8 million | – | – |
| Six-month net incomeGAAP | $1,968.1 million | – | – |
| Six-month free cash flownon-GAAP | $972.9 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| EnterpriseEnterprise revenue recorded its strongest growth rate in three years, according to the CEO. | $787.5 million | – | up 7.8% year over year |
| OnlineOnline average monthly churn was 2.9%, consistent with the same quarter last fiscal year. | $489.7 million | – | up 0.6% year over year |
Third Quarter Fiscal Year 2027 and Full Fiscal Year 2027 outlook
- RevenueThird Quarter: $1.275 billion to $1.280 billion; revenue in constant currency: $1.275 billion to $1.280 billion. Full Fiscal Year: $5.085 billion to $5.095 billion; revenue in constant currency: $5.071 billion to $5.081 billion.
- NoteThird Quarter non-GAAP income from operations: $510.0 million to $515.0 million.
- NoteThird Quarter non-GAAP diluted EPS: $1.46 to $1.48 with approximately 301 million weighted average shares outstanding.
- NoteFull Fiscal Year non-GAAP income from operations: $2.065 billion to $2.075 billion.
- NoteFull Fiscal Year non-GAAP diluted EPS: $6.08 to $6.12 with approximately 301 million weighted average shares outstanding.
- NoteFull Fiscal Year free cash flow: $1.780 billion to $1.820 billion.
- NoteThe EPS and share count figures do not include the impact from approximately $1.3 billion of authorized share repurchase remaining as of July 31, 2026.
Capital returns
- Repurchased approximately 3.7 million shares of common stock in the second quarter.
- Total shares repurchased under the current plan were 44.2 million.
- Cash paid for repurchases of common stock, including excise taxes, was $360.5 million in the second quarter and $722.2 million in the first six months.
- Approximately $1.3 billion of authorized share repurchase remained as of July 31, 2026.
What drove it
- Total revenue grew 4.9% year over year as reported and 4.7% in constant currency.
- Enterprise revenue grew 7.8% year over year, while Online revenue grew 0.6% year over year.
- The number of customers contributing more than $100,000 in trailing 12 months revenue was 4,625, up 8.2% from the same quarter last fiscal year.
- Trailing 12-month net dollar expansion rate for Enterprise customers was 99%, up from 98% as of the same quarter last fiscal year.
- Zoom said its AI-first Customer Experience portfolio delivered high-double-digit ARR expansion, and Zoom Virtual Agent customer count increased 256% year over year.
- Online customers with at least 16 months of continual service represented 75.6% of total Online MRR, up 70 bps year over year.
Concerns
- Online revenue grew 0.6% year over year, materially below Enterprise revenue growth of 7.8%.
- GAAP income from operations was $314.3 million, compared with $321.7 million in the prior-year quarter.
- GAAP operating margin was 24.6%, compared with 26.4% in the prior-year quarter; non-GAAP operating margin was 40.0%, compared with 41.3%.
- Non-GAAP net income was $464.0 million, compared with $471.3 million in the prior-year quarter.
- Operating cash flow was $494.8 million, compared with $515.9 million, and free cash flow was $472.4 million, compared with $508.0 million.
- GAAP net income included $1,614.2 million of gains on strategic investments, net.
- Online average monthly churn was 2.9%, consistent with the same quarter last fiscal year.
What to watch
- Execution against third-quarter revenue guidance of $1.275 billion to $1.280 billion.
- Whether Enterprise net dollar expansion rate sustains or improves from 99%.
- Growth in customers contributing more than $100,000 in trailing 12 months revenue after the reported 8.2% year-over-year increase.
- The pace of AI-first Customer Experience ARR expansion and adoption of Zoom Virtual Agent.
- Whether operating margin and free cash flow return toward prior-year-quarter levels.
- The use of the approximately $1.3 billion remaining share-repurchase authorization.
Balance sheet and cash flow
- Total cash, cash equivalents, and marketable securities, excluding restricted cash, was $7.2 billion as of July 31, 2026.
- Total assets were $13,585.4 million as of July 31, 2026, compared with $11,960.4 million as of January 31, 2026.
- Strategic investments were $3,785.9 million as of July 31, 2026, compared with $1,578.6 million as of January 31, 2026.
- Deferred revenue, current, was $1,549.4 million as of July 31, 2026, compared with $1,411.1 million as of January 31, 2026.
- Total liabilities were $2,281.8 million as of July 31, 2026, compared with $2,152.2 million as of January 31, 2026.
- Cash paid for acquisition, net of cash acquired, was $248.7 million in the first six months.
- Purchases of strategic investments were $295.4 million in the second quarter and $441.1 million in the first six months.
Analysis
Zoom reported $1,277.2 million of second-quarter revenue, up 4.9% year over year as reported and 4.7% in constant currency. Enterprise revenue increased 7.8% to $787.5 million, while Online revenue rose 0.6% to $489.7 million. The mix of growth was therefore concentrated in Enterprise. Enterprise customer indicators improved, with the trailing 12-month net dollar expansion rate rising to 99% from 98% and customers contributing more than $100,000 in trailing 12 months revenue increasing 8.2% to 4,625.
Operating profitability remained substantial but was lower on a year-over-year margin basis. GAAP income from operations was $314.3 million versus $321.7 million, and GAAP operating margin was 24.6% versus 26.4%. Non-GAAP income from operations increased to $510.3 million from $503.2 million, but non-GAAP operating margin declined to 40.0% from 41.3%. Research and development expense increased to $242.5 million from $206.4 million, general and administrative expense increased to $98.2 million from $76.9 million, and sales and marketing expense declined to $330.5 million from $339.0 million.
GAAP net income rose to $1,542.4 million, or $5.15 per diluted share, but the result included $1,614.2 million of gains on strategic investments, net. Non-GAAP net income was $464.0 million, or $1.55 per diluted share, compared with $471.3 million, or $1.53 per diluted share, in the prior-year quarter. The difference between GAAP and non-GAAP earnings makes the strategic-investment gain a central consideration in assessing reported profitability.
Cash generation remained high but declined from the prior-year quarter. Operating cash flow was $494.8 million versus $515.9 million, and free cash flow was $472.4 million versus $508.0 million. Zoom ended the quarter with $7.2 billion of cash, cash equivalents, and marketable securities, excluding restricted cash, and repurchased approximately 3.7 million shares. Cash paid for repurchases of common stock, including excise taxes, was $360.5 million, with approximately $1.3 billion of authorization remaining.
The third-quarter outlook calls for $1.275 billion to $1.280 billion of total revenue and $510.0 million to $515.0 million of non-GAAP income from operations. Full-year guidance calls for $5.085 billion to $5.095 billion of revenue, $2.065 billion to $2.075 billion of non-GAAP income from operations, $6.08 to $6.12 of non-GAAP diluted EPS, and $1.780 billion to $1.820 billion of free cash flow. The filing provides no prior-quarter outlook for comparison, so the degree of change in the outlook cannot be assessed from the supplied documents.
Management, verbatim
FY27 continues to progress well, reflecting focused execution against our three priorities and clear Enterprise business momentum. Total revenue grew 4.9% year over year, anchored by 7.8% growth in Enterprise revenue, its strongest growth rate in three years.
Eric S. Yuan, Founder and CEO
Our AI-first Customer Experience portfolio continues to scale, delivering high-double-digit ARR expansion, driven in part by strong adoption of Zoom Virtual Agent, whose customer count increased 256% year over year.
Eric S. Yuan, Founder and CEO
Not in the filing
stated, not guessed- Previous-quarter outlook was not provided, so comparison of actual results with prior guidance is unavailable.
- Gross margin was not reported.
- Debt was not reported.
- Third-quarter and full-year gross-margin guidance was not reported.
- Third-quarter and full-year operating-expense guidance was not reported.
- Third-quarter and full-year tax-rate guidance was not reported.
- No sequential comparisons for reported operating metrics were provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Zoom's Q2 FY27 results were disclosed via an SEC Form 8‑K, highlighting revenue growth, margin expansion, and share repurchases.
Ticker impact
Zoom reported Q2 FY27 revenue of $1.277B (+4.9% YoY) and issued updated guidance for Q3 and FY2027.
Expect modest price appreciation in the near term.
Strong revenue growth, higher operating margins and forward guidance above prior period indicate improved fundamentals.
Market effects
Boosts confidence in the video communications sector and AI-enabled collaboration tools.
Positive for US tech stocks, especially cloud and SaaS providers.
Reinforces global demand for remote work solutions.
Counterpoint
Some investors may question sustainability of growth given modest revenue expansion.
Key entities
- companyZoom Video Communications, Inc.
Provider of video communications and collaboration solutions.
- executiveEric S. Yuan
Founder and CEO of Zoom, quoted on results.
