Zoom Communications (ZM) beat expectations and nudged its full-year outlook higher, yet the stock’s early bounce didn’t last.
Shares briefly rose about 2% in early trading before reversing to close down roughly 1.3%, a reminder that investors want more evidence of accelerating growth even as profitability improves.
Adjusted earnings landed at $1.53 per share, topping the $1.38 consensus. Revenue reached about $1.22 billion—roughly $50 million more than the same quarter a year ago—growing 4.7% year over year (about 4.4% in constant currency) and marking the fastest pace in roughly 11 quarters. Net income jumped 63% to $358 million from $219 million, an increase of about $140 million, reflecting tighter cost controls and a sturdier enterprise mix.
Enterprise revenue rose 7% to $730.7 million, while online revenue edged up 1.4% to $486.6 million. Large-customer momentum continued: the tally of clients generating more than $100,000 in trailing 12-month revenue grew 8.7% to 4,274. One blemish: the enterprise net dollar expansion rate stood at 98%, signaling softer upsells inside existing accounts even as new wins arrive.
Despite the beat, the stock couldn’t hold early gains and finished the session down 1.3%, a tell that investors are parsing second-half dynamics and the durability of demand as growth stabilizes off pandemic highs.
International Revenues: EMEA Leads, APAC Holds Steady
Zoom’s global footprint provided a cushion. Asia-Pacific (APAC) contributed $148.34 million, or 12.2% of total revenue—slightly ahead of expectations and up from roughly $142 million last quarter and a year ago. Europe, the Middle East and Africa (EMEA) delivered $194.92 million, about 16% of revenue, also a touch above forecasts and higher than both the prior quarter ($185 million, 15.8%) and the year-ago period ($184.48 million, 15.9%).
Street expectations imply a steady mix ahead: for the current quarter, total revenue around $1.21 billion with APAC near 12.3% ($148.38 million) and EMEA about 15.9% ($192.91 million). For the full year, revenue around $4.8 billion with APAC contributing roughly $586.61 million (12.2%) and EMEA about $763.55 million (15.9%). In plain terms, about three dollars out of every ten still come from outside the Americas, with EMEA now edging higher as APAC stays consistent.
This spread helps balance uneven domestic demand but brings trade-offs: currency moves, geopolitical risk, and divergent macro trends—all factors that can tug on reported growth.
AI, Cash, and the Second-Half Debate
AI remains the demand engine. Zoom cited a fourfold year-over-year increase in monthly active users of its AI Companion, which pulls together meeting summaries and automates workflows; a Fortune 200 company rolled it out to 60,000 employees. The company’s Virtual Agent 2.0 and deeper AI integration across Zoom Workplace and Contact Center aim to bolster both productivity and customer service.
Cash generation was a bright spot. Free cash flow jumped 39% year over year to $508 million. Management lifted full-year fiscal 2026 guidance: revenue to $4.825–$4.835 billion (about a $9 million lift on either side) and free cash flow to $1.74–$1.78 billion. The modest guidance raise—smaller than the size of this quarter’s beat—kept some analysts cautious on the second-half setup even as others turned more constructive. Price-target chatter reflected that split, with some pushing targets toward or above $100 and others trimming to the high-$60s.
Context matters: the stock remains down around 85% from its October 2020 peak and is roughly flat year-to-date, trading near its 52-week range. Historically, big single-day swings have been rare for Zoom; that made the early pop and red close all the more notable.
AI remains the demand engine. Zoom cited a fourfold year-over-year increase in monthly active users of its AI Companion, which pulls together meeting summaries and automates workflows; a Fortune 200 company rolled it out to 60,000 employees. The company’s Virtual Agent 2.0 and deeper AI integration across Zoom Workplace and Contact Center aim to bolster both productivity and customer service.
Cash generation was a bright spot. Free cash flow jumped 39% year over year to $508 million. Management lifted full-year fiscal 2026 guidance: revenue to $4.825–$4.835 billion (about a $9 million lift on either side) and free cash flow to $1.74–$1.78 billion. The modest guidance raise—smaller than the size of this quarter’s beat—kept some analysts cautious on the second-half setup even as others turned more constructive. Price-target chatter reflected that split, with some pushing targets toward or above $100 and others trimming to the high-$60s.
Context matters: the stock remains down around 85% from its October 2020 peak and is roughly flat year-to-date, trading near its 52-week range. Historically, big single-day swings have been rare for Zoom; that made the early pop and red close all the more notable.
Conclusion
Zoom is executing: earnings beat, cash up, AI adoption broadening, and international contributions—especially from EMEA—adding resilience. Yet the market’s reversal into the close underscores what’s still required to re-rate the shares: clearer second-half acceleration, stronger upsell into the existing base, and continued steadiness across APAC and EMEA. Watch the international mix and enterprise expansion; they’ll likely set the tone for estimate revisions—and the stock—into year-end.
Zoom is executing: earnings beat, cash up, AI adoption broadening, and international contributions—especially from EMEA—adding resilience. Yet the market’s reversal into the close underscores what’s still required to re-rate the shares: clearer second-half acceleration, stronger upsell into the existing base, and continued steadiness across APAC and EMEA. Watch the international mix and enterprise expansion; they’ll likely set the tone for estimate revisions—and the stock—into year-end.
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