Zoom Q3 Earnings & Revenues Surpass Estimates, Both Increase Y/Y

Zoom Communications’ ZM third-quarter fiscal 2026 adjusted earnings of $1.52 per share beat the Zacks Consensus Estimate by 6.29% and increased 10.1% year over year.

Revenues of $1.23 billion beat the consensus mark by 1.4% and increased 4.4% year over year. Adjusting for the impact of foreign currency, revenues in constant currency were $1.23 billion, up 4.2% year over year.

Q3 Details of ZM

Enterprise revenues, which account for 60.3% of total revenues, increased 6.1% year over year to $741.4 million. Online revenues, which account for 39.7% of total revenues, increased 2% year over year to $488.4 million.

Customers contributing more than $100,000 in revenues in the trailing 12 months grew 9.2% to 4,363. These customers accounted for 32% of revenues.

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 third quarter was approximately 185,100. In the fiscal third quarter, the percentage of total Online MRR pertaining to Online customers with a continued term of service of at least 16 months was 74.4%, which increased 30 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 2.7%, flat year over year.

Zoom witnessed traction with Workvivo, where customers grew 70% year over year.

Non-GAAP Operating Details of ZM

Non-GAAP gross margin in the fiscal third quarter was 80% compared with 78.9% in the year-ago period and expanded 110 bps.

On a year-over-year basis, Research and development expenses increased 5.6% to $137 million. Sales and marketing expenses increased 0.1% to $278.1 million, while general and administrative expenses decreased 1.7% to $62.4 million.

Non-GAAP operating income rose 10.7% to $507 million year over year. The operating margin came in at 41.2% compared with the year-ago quarter’s operating margin of 38.9%.

ZM’s Balance Sheet & Cash Flow

Total cash, cash equivalents and marketable securities as of Oct. 31, 2025, were $7.9 billion, compared with $7.8 billion as of July 31, 2025.

Net cash provided by operating activities was $629.3 million for the fiscal third quarter, compared with $515.9 million in the previous quarter. Free cash flow was $614.3 million, compared with $508 million in the prior quarter.

ZM’s Q4 & FY26 Guidance

Zoom expects its fourth-quarter fiscal 2026 revenues to be between $1.230 billion and $1.235 billion. Revenues on a constant currency basis are expected to be between $1.224 billion and $1.229 billion.

Non-GAAP income from operations is expected to be between $477.0 million and $482.0 million.

Non-GAAP earnings per share are expected in the range of $1.48-$1.49.

For fiscal 2026, Zoom expects revenues in the range of $4.852-$4.857 billion. Revenues on a constant currency basis are expected to be between $4.844 billion and $4.849 billion.

Non-GAAP income from operations is expected to be between $1.955 billion and $1.960 billion.

Non-GAAP earnings per share are expected in the band of $5.95-$5.97.

Zoom’s Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader Computer and Technology sector are nCino NCNO, Ciena CIEN and Docusign DOCU. While nCino and Ciena currently sport a Zacks Rank #1 (Strong Buy) each, Docusign carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NCNO shares have declined 28.2% in the year-to-date period. It is slated to report third-quarter fiscal 2026 results on Dec. 3.

CIEN shares have soared 131.7% year to date. It is set to report fourth-quarter fiscal 2025 results on Dec. 11.

Shares of DOCU have fallen 26.5% year to date. It is set to report third-quarter fiscal 2026 results on Dec. 4.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research