Zoom Q2 Earnings Surpass Estimates, Revenues Increase Y/Y

Zoom Communications’ ZM second-quarter fiscal 2026 adjusted earnings of $1.53 per share beat the Zacks Consensus Estimate by 11.68% and increased 10.1% year over year.

Revenues of $1.22 billion beat the consensus mark by 1.66% and increased 4.7% year over year. Adjusting for the impact of foreign currency, revenues in constant currency were $1.21 billion, up 4.4% year over year.

Q2 Details of ZM

Enterprise revenues, which account for 60% of total revenues, increased 7% year over year to $730.7 million. Online revenues, which account for 40% of total revenues, increased 1.4% year over year to $486.6 million.

Customers contributing more than $100,000 in revenues in the trailing 12 months grew 8.7% to 4,274. These customers accounted for 32% of revenues and grew 9% year over year.

Zoom Communications, Inc. Price, Consensus and EPS Surprise

Zoom Communications, Inc. price-consensus-eps-surprise-chart | Zoom Communications, Inc. Quote

The number of Enterprise customers at the end of the fiscal first quarter was approximately 184,000. In the second quarter, the percentage of total Online MRR pertaining to Online customers with a continued term of service of at least 16 months was 74.9%, which increased 50 basis points (bps) year over year.

The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 98% and an Online average monthly churn of 2.9%, flat year over year.

Zoom witnessed traction with Workvivo, where customers grew 142% year over year.

Non-GAAP Operating Details of ZM

Non-GAAP gross margin in the fiscal second quarter was 79.8% compared with 78.6% in the year-ago period and expanded 120 bps.

Research and development expenses increased 10.9% year over year to $133.8 million. Sales and marketing expenses increased 0.2% to $271.6 million, and general and administrative expenses decreased 4.1% to $63.1 million.

Non-GAAP operating income rose 10.5% to $503.2 million year over year. The operating margin came in at 41.3% compared with the year-ago quarter’s operating margin of 39.2%.

ZM’s Balance Sheet & Cash Flow

Total cash, cash equivalents, and marketable securities as of July 31, 2025, were $7.8 billion, which remained unchanged from the previous quarter.

Net cash provided by operating activities was $515.9 million for the fiscal second quarter, compared with $449.3 million in the year-ago quarter. Free cash flow was $508 million, compared with $365.1 million in the year-ago quarter.

ZM’s Q3 & FY26 Guidance

Zoom expects third-quarter fiscal 2026 revenues between $1.210 billion and $1.215 billion.

Non-GAAP income from operations is expected to be between $465.0 million and $470.0 million.

Non-GAAP earnings per share are expected in the range of $1.42-$1.44.

For fiscal 2026, Zoom expects revenues in the range of $4.825-$4.835 billion.

Non-GAAP income from operations is expected to be between $1.905 billion and $1.915 billion.

Non-GAAP earnings per share are expected in the band of $5.81-$5.84.

Zoom’s Zacks Rank & Stocks to Consider

Currently, ZM carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader sector are nCino NCNO, Dell Technologies DELL and Hewlett Packard HPE. While nCino sports a Zacks Rank #1 (Strong Buy) at present, Dell Technologies and Hewlett Packard carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

NCNO shares have declined 17.2% in the year-to-date (YTD) period. It is slated to report second-quarter fiscal 2026 results on Aug. 26.

DELL shares have gained 11.1% YTD. It is set to report second-quarter fiscal 2026 results on Aug. 28.

HPE shares have returned 2.3% YTD. It is scheduled to report third-quarter fiscal 2025 results on Sept. 03.

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This article originally published on Zacks Investment Research (zacks.com).

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