Zoom Earnings Beat, Raises Outlook on AI Demand
Zoom earnings reported a Q3 beat and a guidance lift tied to AI-driven enterprise demand, boosting buyback capacity and tightening trader positioning.
KEY TAKEAWAYS
- Q3 results beat expectations and drove a full-year revenue and EPS guidance raise tied to AI demand.
- Operating cash flow and free cash flow rose sharply, supporting a $1.0 billion repurchase authorization increase.
- Non-GAAP gross margin widened and operating income rose, underpinning stronger cash returns.
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Zoom Video Communications (NASDAQ: ZM) reported Q3 results on Nov. 24, 2025, with earnings beating estimates as enterprise customers accelerated use of AI-powered tools. The company raised full-year revenue and profit guidance and expanded share repurchases.
Earnings Beat and Raised Guidance
Zoom’s third-quarter fiscal 2026 revenue reached $1.23 billion, up 4.4% year over year, surpassing both its guidance and Wall Street estimates. Non-GAAP earnings per share (EPS) rose 10.1% to $1.52, beating consensus by about $0.08 to $0.10. Following the report, the company raised its full-year revenue guidance to a range of $4.852 billion to $4.857 billion and lifted non-GAAP EPS guidance to $5.95 to $5.97. It also set targets for non-GAAP operating income and free cash flow and provided Q4 revenue and EPS ranges. The updated outlook assumes continued enterprise and AI adoption, stable customer churn, and ongoing cost discipline.
Management highlighted enterprise demand and new AI features as key drivers. CFO Michelle Chiang said, “Our enterprise revenue grew 6.1% year over year, representing 60% of our total revenue, up 1 point year over year. Our online business continues to show signs of stabilizing.” The company emphasized product launches including Phone, Contact Center, and Virtual Agent, along with a partnership with Nvidia to support AI Companion 3.0 across key industries.
Margin Expansion and Cash Returns
Profitability improved as non-GAAP gross margin widened 117 basis points to 80%, while non-GAAP operating income rose 11% to $507 million, lifting the operating margin by 234 basis points to 41.2%. Operating cash flow increased 30% year over year to $629 million, and free cash flow rose 34% to $614 million, reflecting stronger enterprise demand and cost discipline.
As of Oct. 31, 2025, Zoom held $7.9 billion in cash, equivalents, and marketable securities. The company repurchased 5.1 million shares for $414 million during the quarter and increased its share repurchase authorization by $1 billion. The quarter’s earnings beat, raised guidance, and expanded buyback program signal management’s confidence in sustained enterprise demand and faster AI adoption supporting margin growth and capital returns.
