Zoom Earnings: Q2 Strength, Soft Q3 Guidance
Zoom earnings showed modest Q2 revenue and 7.8% enterprise growth, but softer Q3 guidance below expectations raises near-term earnings risk for traders.
KEY TAKEAWAYS
- Enterprise revenue rose 7.8% to $788 million, its strongest growth in three years.
- Q2 revenue was $1.3 billion with non-GAAP EPS of $1.55, while Q3 guidance missed expectations.
- Company raised full-year revenue and EPS targets and highlighted strong cash generation.
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Zoom Communications Inc. reported fiscal second-quarter 2027 revenue of $1.28 billion, up 4.9% year over year, with enterprise revenue rising 7.8% to $787.5 million, its strongest growth in three years. The company posted non-GAAP earnings per share of $1.55, but its third-quarter guidance for adjusted EPS and revenue came in below Wall Street expectations. Management highlighted enterprise momentum and expanding AI features despite the softer near-term outlook.
Quarter Results and Profitability
In a press release on Aug. 25, Zoom said revenue for the quarter ended July 31 totaled $1,277.2 million, driven by enterprise revenue growth. Enterprise sales accounted for about 61.7% of total revenue. Online revenue increased 0.6% to $489.7 million.
GAAP net income rose sharply to $1.54 billion, or $5.15 per diluted share, from $358.6 million, or $1.16 per share, a year earlier. On a non-GAAP basis, net income was $464.0 million, or $1.55 per diluted share. Non-GAAP operating income reached $510.3 million, with a 40.0% operating margin.
The company generated $494.8 million in operating cash flow and $472.4 million in free cash flow. It ended the quarter with $7.2 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. Zoom repurchased 3.7 million shares for about $352 million during the period.
Guidance and Competitive Pressure
Zoom forecast third-quarter adjusted EPS between $1.46 and $1.48 and revenue of $1.275 billion to $1.280 billion, both below analyst expectations. The softer guidance reflected competitive pressures even as the company expands its AI product offerings.
For the full fiscal year 2027, Zoom raised revenue guidance to $5.085 billion–$5.095 billion and adjusted EPS guidance to $6.08–$6.12, up from prior ranges. It also increased its free cash flow forecast to $1.78 billion–$1.82 billion. Management attributed the updated targets to enterprise momentum and AI adoption.
The quarter highlights a tradeoff for investors: strong enterprise revenue growth and cash generation bolster Zoom’s financial position, but near-term earnings visibility is clouded by increased competition and investments in AI.
