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Why Is Zoom (ZM) Down 2.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Zoom Communications (ZM - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Zoom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Zoom Q2 Earnings and Revenues Top Estimates, Show Momentum
Zoom Communications reported second-quarter fiscal 2027 adjusted earnings of $1.55 per share, which beat the Zacks Consensus Estimate by 12.32% and remained flat compared to $1.53 per share in the year-ago quarter. The figure also exceeded analyst expectations of $1.38 per share.
Revenues of $1.28 billion beat the consensus mark by 1.26% and increased 4.9% year over year, demonstrating steady top-line growth. Adjusting for foreign currency impact, revenues in constant currency were $1.27 billion, up 4.7% year over year.
ZM's Q2 Details
Enterprise revenues, which account for 61.7% of total revenues, increased 7.8% year over year to $787.5 million. Online revenues, which represent 38.3% of total revenues, increased 0.6% year over year to $489.7 million. Customers contributing more than $100,000 in revenues in the trailing 12 months grew 8.2% to 4,625. These customers accounted for approximately 38% of revenues.
The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 99%, up from 98% in the year-ago quarter. Online average monthly churn was 2.9% in the second quarter, consistent with 2.9% in the prior-year period. The percentage of total Online MRR from Online customers with a continued term of service of at least 16 months was 75.6%, up 70 basis points year over year.
ZM's Margin & Operating Details
Non-GAAP gross margin in the fiscal second quarter was 77.1% compared with 77.5% in the year-ago period. On a GAAP basis, research and development expenses increased 17.5% year over year to $242.5 million. Sales and marketing expenses declined 2.5% to $330.5 million, and general and administrative expenses increased 27.6% to $98.2 million. Non-GAAP operating income rose 1.4% to $510.3 million year over year.
The non-GAAP operating margin was 40.0%, down 130 basis points from 41.3% in the year-ago quarter. GAAP income from operations was $314.3 million, with a GAAP operating margin of 24.6%, down 180 basis points year over year.
ZM's Balance Sheet & Cash Flow
Total cash, cash equivalents and marketable securities, excluding restricted cash, as of July 31, 2026, were $7.2 billion, compared with $7.7 billion as of January 31, 2026. Net cash provided by operating activities was $494.8 million for the fiscal second quarter compared with $515.9 million in the year-ago quarter. Free cash flow was $472.4 million compared with $508.0 million in the prior-year quarter. In the second quarter, Zoom repurchased 3.7 million shares of common stock for approximately $352 million.
ZM's Q2 Developments
During the quarter, Zoom advanced its AI-first strategy with notable momentum in its Customer Experience portfolio. The company's Zoom Virtual Agent (ZVA) customer count grew 256% year over year, with 9 of the top 10 Customer Experience deals including paid AI features. Licensed monthly active users of AI features in Workplace grew 125% year over year, demonstrating strong adoption of AI capabilities across the platform. The company launched multiple AI-powered products including ZoomMate, My Notes, AI Productivity Suite, and ZVA Receptionist. Additionally, Zoom made strategic acquisitions of Common Room and BrightHire to expand its AI-driven solutions across collaboration, customer experience, revenue orchestration, recruiting, and employee experience. Alongside the earnings release, Zoom's board maintained an authorized share repurchase plan with approximately $1.3 billion remaining as of July 31, 2026.
ZM's Q3 & Fiscal 2027 Guidance
Zoom expects its third-quarter fiscal 2027 revenues to be between $1.275 billion and $1.280 billion. Revenues on a constant-currency basis are expected to be between $1.275 billion and $1.280 billion. Non-GAAP income from operations is expected to be between $510 million and $515 million. Non-GAAP earnings per share are expected to be in the range of $1.46-$1.48, based on approximately 301 million weighted average shares outstanding.
For fiscal 2027, Zoom reaffirmed its guidance and now expects revenues in the range of $5.085-$5.095 billion. Revenues on a constant-currency basis are expected to be between $5.071 billion and $5.081 billion. Non-GAAP income from operations is expected to be between $2.065 billion and $2.075 billion. Non-GAAP EPS are expected to be in the band of $6.08-$6.12. The company expects free cash flow between $1.78 billion and $1.82 billion.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Zoom has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a score of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zoom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Zoom (ZM) Down 2.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Zoom Communications (ZM - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Zoom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Zoom Q2 Earnings and Revenues Top Estimates, Show Momentum
Zoom Communications reported second-quarter fiscal 2027 adjusted earnings of $1.55 per share, which beat the Zacks Consensus Estimate by 12.32% and remained flat compared to $1.53 per share in the year-ago quarter. The figure also exceeded analyst expectations of $1.38 per share.
Revenues of $1.28 billion beat the consensus mark by 1.26% and increased 4.9% year over year, demonstrating steady top-line growth. Adjusting for foreign currency impact, revenues in constant currency were $1.27 billion, up 4.7% year over year.
ZM's Q2 Details
Enterprise revenues, which account for 61.7% of total revenues, increased 7.8% year over year to $787.5 million. Online revenues, which represent 38.3% of total revenues, increased 0.6% year over year to $489.7 million. Customers contributing more than $100,000 in revenues in the trailing 12 months grew 8.2% to 4,625. These customers accounted for approximately 38% of revenues.
The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 99%, up from 98% in the year-ago quarter. Online average monthly churn was 2.9% in the second quarter, consistent with 2.9% in the prior-year period. The percentage of total Online MRR from Online customers with a continued term of service of at least 16 months was 75.6%, up 70 basis points year over year.
ZM's Margin & Operating Details
Non-GAAP gross margin in the fiscal second quarter was 77.1% compared with 77.5% in the year-ago period. On a GAAP basis, research and development expenses increased 17.5% year over year to $242.5 million. Sales and marketing expenses declined 2.5% to $330.5 million, and general and administrative expenses increased 27.6% to $98.2 million. Non-GAAP operating income rose 1.4% to $510.3 million year over year.
The non-GAAP operating margin was 40.0%, down 130 basis points from 41.3% in the year-ago quarter. GAAP income from operations was $314.3 million, with a GAAP operating margin of 24.6%, down 180 basis points year over year.
ZM's Balance Sheet & Cash Flow
Total cash, cash equivalents and marketable securities, excluding restricted cash, as of July 31, 2026, were $7.2 billion, compared with $7.7 billion as of January 31, 2026. Net cash provided by operating activities was $494.8 million for the fiscal second quarter compared with $515.9 million in the year-ago quarter. Free cash flow was $472.4 million compared with $508.0 million in the prior-year quarter. In the second quarter, Zoom repurchased 3.7 million shares of common stock for approximately $352 million.
ZM's Q2 Developments
During the quarter, Zoom advanced its AI-first strategy with notable momentum in its Customer Experience portfolio. The company's Zoom Virtual Agent (ZVA) customer count grew 256% year over year, with 9 of the top 10 Customer Experience deals including paid AI features. Licensed monthly active users of AI features in Workplace grew 125% year over year, demonstrating strong adoption of AI capabilities across the platform. The company launched multiple AI-powered products including ZoomMate, My Notes, AI Productivity Suite, and ZVA Receptionist. Additionally, Zoom made strategic acquisitions of Common Room and BrightHire to expand its AI-driven solutions across collaboration, customer experience, revenue orchestration, recruiting, and employee experience. Alongside the earnings release, Zoom's board maintained an authorized share repurchase plan with approximately $1.3 billion remaining as of July 31, 2026.
ZM's Q3 & Fiscal 2027 Guidance
Zoom expects its third-quarter fiscal 2027 revenues to be between $1.275 billion and $1.280 billion. Revenues on a constant-currency basis are expected to be between $1.275 billion and $1.280 billion. Non-GAAP income from operations is expected to be between $510 million and $515 million. Non-GAAP earnings per share are expected to be in the range of $1.46-$1.48, based on approximately 301 million weighted average shares outstanding.
For fiscal 2027, Zoom reaffirmed its guidance and now expects revenues in the range of $5.085-$5.095 billion. Revenues on a constant-currency basis are expected to be between $5.071 billion and $5.081 billion. Non-GAAP income from operations is expected to be between $2.065 billion and $2.075 billion. Non-GAAP EPS are expected to be in the band of $6.08-$6.12. The company expects free cash flow between $1.78 billion and $1.82 billion.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Zoom has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a score of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zoom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.