Market Overview - Major indexes closed mostly in the red, with the Dow down 157 points, S&P 500 down 24 points, and Nasdaq down 90 points, while the small-cap Russell 2000 gained 4 points [1] Economic Indicators - S&P flash Manufacturing PMI for August reached 53.3, significantly above the anticipated 49.5 and July's 49.8, marking a more than 3-year high [2] - August Services PMI was reported at 55.4, the second consecutive month above 55 this year [2] Company Earnings Reports - **Zoom Communications (ZM)**: Shares rose 6% after Q2 earnings beat expectations by 10% at $1.53 per share, with revenues of $1.217 billion, a 4.7% year-over-year growth, and non-GAAP operating margins at 41.3% [3] - **Intuit (INTU)**: Shares fell 5% despite beating fiscal Q4 earnings expectations by 10 cents at $2.75 per share, with revenues of $3.8 billion, a 20% year-over-year increase, attributed to lackluster guidance for the current quarter [4] - **Ross Stores (ROST)**: Shares increased by 2.3% after Q2 earnings of $1.56 per share exceeded consensus by 4 cents, with revenues of $5.5 billion, a 5% year-over-year growth, and expected comps of 2-3% going forward [5] Upcoming Events - Fed Chair Jerome Powell's address at the Economic Symposium in Jackson Hole, WY, is anticipated to provide insights on interest rate decisions for the September meeting [6] - Personal Consumption Expenditures (PCE) data is due out a week from Friday, with the last report showing year-over-year PCE at 2.6% and core PCE at 2.8% [7]

Financial Performance - For the quarter ended July 2025, Zoom Communications reported revenue of $1.22 billion, reflecting a year-over-year increase of 4.7% [1] - The earnings per share (EPS) for the quarter was $1.53, up from $1.39 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $1.2 billion, resulting in a surprise of +1.66% [1] - The company achieved an EPS surprise of +11.68%, with the consensus EPS estimate being $1.37 [1] Key Metrics - Zoom had 184,000 enterprise customers, slightly below the four-analyst average estimate of 186,862 [4] - Customers generating over $100K in trailing twelve months (TTM) revenue totaled 4,274, surpassing the average estimate of 4,233 [4] - The current remaining performance obligation (RPO) was reported at $2.41 billion, compared to the average estimate of $2.45 billion [4] - Total remaining performance obligations (RPO) stood at $3.98 billion, slightly below the two-analyst average estimate of $4 billion [4] - Non-current remaining performance obligation (RPO) was $1.57 billion, slightly above the average estimate of $1.53 billion [4] - Online revenue reached $486.6 million, exceeding the three-analyst average estimate of $477.5 million [4] - Enterprise revenue was reported at $730.7 million, also above the average estimate of $719.9 million [4] Stock Performance - Over the past month, shares of Zoom have returned -5.1%, while the Zacks S&P 500 composite has changed by +1.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - Zoom Communications reported quarterly earnings of $1.53 per share, exceeding the Zacks Consensus Estimate of $1.37 per share, and up from $1.39 per share a year ago, representing an earnings surprise of +11.68% [1] - The company posted revenues of $1.22 billion for the quarter ended July 2025, surpassing the Zacks Consensus Estimate by 1.66%, compared to year-ago revenues of $1.16 billion [2] - Over the last four quarters, Zoom has consistently surpassed consensus EPS estimates and revenue estimates [2] Group 2: Stock Performance and Outlook - Zoom shares have declined approximately 11.6% since the beginning of the year, while the S&P 500 has gained 8.7% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the sustainability of the stock's immediate price movement based on the recently released numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.38 on revenues of $1.21 billion, and for the current fiscal year, it is $5.58 on revenues of $4.8 billion [7] Group 3: Industry Context - The Internet - Software industry, to which Zoom belongs, is currently ranked in the top 30% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5]

Financial Data and Key Metrics Changes - Total revenue grew 4.7% year over year to $1.217 billion, exceeding guidance by $17 million [15][19] - Non-GAAP gross margin increased to 79.8%, up 128 basis points year over year, driven by cost optimization [17] - Non-GAAP operating income grew 10.5% year over year to $503 million, exceeding guidance by over $38 million [18] - Free cash flow increased 39% year over year to $508 million, representing a free cash flow margin of 41.7% [20] Business Line Data and Key Metrics Changes - Enterprise business revenue grew 7% year over year, representing 60% of total revenue, up one point year over year [15][16] - Average monthly churn in the online business remained flat at 2.9% [16] - The number of enterprise customers contributing over $100,000 in trailing twelve-month revenue grew approximately 9% year over year [16] - Zoom Phone sustained mid-teens ARR growth, gaining market share against competitors [11] Market Data and Key Metrics Changes - Revenue growth in the Americas was 5% year over year, EMEA grew 6%, and APAC grew 4% [17] - Deferred revenue grew 5% year over year to $1.48 billion, slightly ahead of the high end of the previously provided range [19] Company Strategy and Development Direction - The company is focused on three key priorities: delivering world-class AI, rapidly innovating Zoom Workplace, and scaling high-growth departmental solutions [5][9] - Zoom aims to strengthen its position as a leader in AI-powered collaboration, with significant growth in AI Companion monthly active users [6][7] - The company is expanding its collaboration with PwC to enhance its contact center and AI opportunities [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of customer demand and the ability to navigate a dynamic macroeconomic environment [91] - The company raised its full-year revenue guidance to a range of $4.825 to $4.835 billion, representing approximately 3.5% year-over-year growth [22] - Management noted that AI adoption is critical for driving business outcomes and customer engagement [7][11] Other Important Information - The company has been recognized with multiple awards for innovation and leadership in the UCaaS space [9] - The launch of Virtual Agent 2.0 is expected to enhance customer engagement and drive revenue growth [8] Q&A Session Summary Question: What ROI are customers seeing from AI solutions? - Management highlighted that AI adoption has significantly increased, with monthly active users growing four times year over year, indicating positive feedback and productivity improvements [28][30] Question: How are vertical-specific AI companions informing customer needs? - Management noted that early adopters are looking beyond basic functionalities and are interested in customized AI solutions that integrate with their existing systems [34][35] Question: What feedback has been received regarding the price increase for the online segment? - Management reported stable churn rates and positive customer feedback regarding the value proposition, indicating that the price increase has not led to significant pushback [41][42] Question: What is the outlook for the AI Companion add-on? - Management indicated that initial customer feedback has been positive, and there is a strong interest in customizing AI solutions to better meet specific needs [56][62] Question: What is driving the success of the contact center solutions? - Management attributed success to customer dissatisfaction with existing providers, the comprehensive feature set of Zoom's solutions, and the trust in the Zoom brand [99][100]

Financial Data and Key Metrics Changes - Total revenue grew 4.7% year over year to $1.217 billion, exceeding guidance by $17 million [14][19] - Non-GAAP gross margin increased to 79.8%, up 128 basis points year over year, driven by cost optimization [17] - Non-GAAP income from operations rose 10.5% year over year to $503 million, exceeding guidance by over $38 million [18] - Operating cash flow grew 15% year over year to $516 million, with a margin of 42.4% [20] - Free cash flow increased 39% year over year to $508 million, representing a margin of 41.7% [20] Business Line Data and Key Metrics Changes - Enterprise business revenue grew 7% year over year, representing 60% of total revenue, up one point year over year [15] - Average monthly churn in the online business remained flat year over year at 2.9% [16] - The number of enterprise customers contributing over $100,000 in trailing twelve-month revenue grew approximately 9% year over year [16] - The number of Zoom contact center customers with over $100,000 in ARR grew 94% year over year to 229 [10] Market Data and Key Metrics Changes - Revenue growth in the Americas was 5% year over year, EMEA grew 6%, and APAC grew 4% [17] - Deferred revenue at the end of the period grew 5% year over year to $1.48 billion [19] Company Strategy and Development Direction - The company is focusing on three key priorities: delivering world-class AI, rapidly innovating Zoom Workplace, and scaling high-growth departmental solutions [4] - AI adoption is expanding beyond meeting summaries to include meeting preparation, task management, and integration with other services [5][6] - The company aims to maintain a long-term goal of 80% non-GAAP gross margins while balancing investments in AI with cost efficiencies [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of customer demand and the ability to navigate a dynamic macroeconomic environment [90] - The company anticipates continued growth in AI adoption among customers, which is expected to enhance productivity and operational effectiveness [30][31] - Guidance for Q3 revenue is projected to be in the range of $1.21 to $1.215 billion, representing approximately 3% year-over-year growth [21] Other Important Information - The company has accelerated its share buyback program, purchasing 6 million shares for $463 million [20] - Upcoming event Zoomtopia is expected to showcase new product innovations and customer success stories [12] Q&A Session Summary Question: What ROI are customers seeing from AI solutions? - Management noted that AI adoption has led to significant increases in monthly active users, with a fourfold increase year over year [29] Question: How are vertical-specific AI companions informing customer needs? - Management indicated that customers are looking beyond basic functionalities and are interested in customized AI solutions that integrate with their existing systems [36] Question: Feedback on the online segment and price increase impact? - Management confirmed that the price increase is on track to add $10 to $15 million in incremental revenue, with stable churn rates and no significant pushback from customers [42][45] Question: Insights on WorkVivo's growth and market opportunities? - Management highlighted strong growth in WorkVivo, with a focus on ensuring smooth transitions for customers and expanding opportunities in the medium-sized customer segment [51] Question: What is driving success in the contact center business? - Management attributed success to customer dissatisfaction with existing providers, the comprehensive feature set of Zoom's solutions, and a strong focus on customer experience [98][100]

Zoom Communications Q2 FY26 Earnings August 21, 2025 © 2025 Zoom Communications, Inc. Use of non-GAAP financial measures In addition to the financials presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this presentation includes the following non-GAAP metrics: Revenue in Constant Currency, non-GAAP gross profit, non-GAAP gross margin, non-GAAP R&D expense, non-GAAP S&M expense, non-GAAP G&A expense, non-GAAP operating margin, non-GAAP income from operations, non-GAAP net in ...

Financial Performance - Zoom provided a stronger-than-expected annual outlook for sales growth [1] - Zoom raised its fiscal-year forecast [1] Product & Service - The raised forecast suggests interest in the company's expanded line of software products [1]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [Q2 FY2026 Financial Highlights](index=1&type=section&id=Q2%20FY2026%20Financial%20Highlights) Zoom reported strong Q2 FY2026 results, with total revenue reaching **$1.22 billion** (up **4.7% YoY**), GAAP operating margin expanding to **26.4%**, and GAAP EPS growing **65.7%**, leading to an upward revision of its full-year outlook - CEO Eric S. Yuan attributed strong performance to AI-driven innovation, leading to an increased full-year outlook for **revenue**, **non-GAAP operating income**, and **free cash flow**[3](index=3&type=chunk) Q2 FY2026 Key Financial Metrics (Year-over-Year) | Metric | Q2 FY2026 (Millions USD) | YoY Growth | | :--- | :--- | :--- | | Total Revenue | $1,217.2 | 4.7% | | Enterprise Revenue | $730.7 | 7.0% | | GAAP Operating Margin | 26.4% | +9.0 p.p. | | Non-GAAP Operating Margin | 41.3% | +2.1 p.p. | | GAAP Diluted EPS | $1.16 | 65.7% | | Non-GAAP Diluted EPS | $1.53 | 10.0% | | Free Cash Flow | $508.0 | 39.1% | - The company repurchased approximately **6.0 million shares** of common stock during the second quarter[5](index=5&type=chunk) [Q2 FY2026 Customer Metrics](index=1&type=section&id=Q2%20FY2026%20Customer%20Metrics) Zoom's Q2 customer base grew **8.7%** in high-value segments (>$100k TTM revenue), while Enterprise net dollar expansion was **98%**, and online monthly churn remained stable at **2.9%** Key Customer Metrics as of Q2 FY2026 | Metric | Value | YoY Change | | :--- | :--- | :--- | | Customers >$100k TTM Revenue | 4,274 | +8.7% | | TTM Net Dollar Expansion (Enterprise) | 98% | Not specified | | Online Average Monthly Churn | 2.9% | Flat | [Financial Outlook](index=2&type=section&id=Financial%20Outlook) [Q3 FY2026 Guidance](index=2&type=section&id=Q3%20FY2026%20Guidance) For Q3 FY2026, Zoom projects total revenue between **$1.210 billion** and **$1.215 billion**, non-GAAP income from operations between **$465.0 million** and **$470.0 million**, and non-GAAP diluted EPS between **$1.42** and **$1.44** Guidance for Q3 Fiscal Year 2026 | Metric | Expected Range | | :--- | :--- | | Total Revenue | $1.210 B - $1.215 B | | Non-GAAP Income from Operations | $465.0 M - $470.0 M | | Non-GAAP Diluted EPS | $1.42 - $1.44 | [Full Year FY2026 Guidance](index=2&type=section&id=Full%20Year%20FY2026%20Guidance) Zoom raised its full-year FY2026 guidance, now expecting total revenue between **$4.825 billion** and **$4.835 billion**, non-GAAP income from operations between **$1.905 billion** and **$1.915 billion**, non-GAAP diluted EPS between **$5.81** and **$5.84**, and free cash flow between **$1.740 billion** and **$1.780 billion** Updated Guidance for Full Fiscal Year 2026 | Metric | Expected Range | | :--- | :--- | | Total Revenue | $4.825 B - $4.835 B | | Non-GAAP Income from Operations | $1.905 B - $1.915 B | | Non-GAAP Diluted EPS | $5.81 - $5.84 | | Free Cash Flow | $1.740 B - $1.780 B | [Detailed Financial Statements](index=5&type=section&id=Detailed%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of July 31, 2025, Zoom's balance sheet reported **$11.04 billion** in total assets, including **$7.8 billion** in cash and equivalents, with total liabilities at **$2.09 billion** and stockholders' equity at **$8.95 billion** Balance Sheet Summary (as of July 31, 2025) | Account | Amount (Billions USD) | | :--- | :--- | | Cash, Cash Equivalents & Marketable Securities | $7.8 | | Total Current Assets | $8.66 | | Total Assets | $11.04 | | Total Current Liabilities | $1.95 | | Total Liabilities | $2.09 | | Total Stockholders' Equity | $8.95 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 FY2026, Zoom reported **$1.217 billion** in revenue, **$944.1 million** gross profit, **$321.7 million** income from operations (up from **$202.4 million** YoY), and **$358.6 million** net income, or **$1.16** diluted EPS Q2 FY2026 vs Q2 FY2025 Income Statement (Millions USD) | Metric | Three Months Ended July 31, 2025 (Millions USD) | Three Months Ended July 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Revenue | $1,217.2 | $1,162.5 | | Gross Profit | $944.1 | $877.4 | | Income from Operations | $321.7 | $202.4 | | Net Income | $358.6 | $219.0 | | Diluted Net Income Per Share | $1.16 | $0.70 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q2 FY2026, Zoom generated **$515.9 million** in net cash from operating activities (up from **$449.3 million** YoY), with free cash flow at **$508.0 million**, and utilized **$494.9 million** in financing activities, mainly for stock repurchases Q2 FY2026 vs Q2 FY2025 Cash Flow Summary (Millions USD) | Metric | Three Months Ended July 31, 2025 (Millions USD) | Three Months Ended July 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $515.9 | $449.3 | | Net cash used in investing activities | ($60.7) | ($540.9) | | Net cash used in financing activities | ($494.9) | ($256.3) | [Reconciliation of GAAP to Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section reconciles GAAP to non-GAAP measures, showing Q2 FY2026 GAAP income from operations of **$321.7 million** adjusted to **$503.2 million** non-GAAP, primarily due to **$195.8 million** in stock-based compensation, and GAAP net income of **$358.6 million** adjusted to **$471.3 million** non-GAAP Q2 FY2026 GAAP to Non-GAAP Reconciliation (Millions USD) | Metric | GAAP (Millions USD) | Adjustments (Millions USD) | Non-GAAP (Millions USD) | | :--- | :--- | :--- | :--- | | **Income from Operations** | **$321.7** | **$181.5** | **$503.2** | | Stock-based compensation | | $195.8 | | | Litigation settlements, net | | ($18.0) | | | Acquisition-related expenses | | $3.7 | | | **Net Income** | **$358.6** | **$112.7** | **$471.3** | - Free cash flow for Q2 FY2026 was **$508.0 million**, calculated by subtracting **$8.0 million** in property and equipment purchases from **$515.9 million** in net cash from operating activities[32](index=32&type=chunk) [Supplementary Information](index=2&type=section&id=Supplementary%20Information) [Definitions of Non-GAAP Measures and Key Metrics](index=3&type=section&id=Definitions%20of%20Non-GAAP%20Measures%20and%20Key%20Metrics) This section defines non-GAAP financial measures, excluding non-cash or non-recurring items for clearer operational performance, and clarifies key business metrics like customer types, net dollar expansion rate, and online average monthly churn [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) - Non-GAAP Income from Operations excludes **stock-based compensation expense**, related payroll taxes, **acquisition-related expenses**, and significant **litigation settlements**[17](index=17&type=chunk) - Non-GAAP Net Income adjusts GAAP net income for the same items as Non-GAAP Income from Operations, plus **gains/losses on strategic investments** and the **tax effects** of these adjustments[18](index=18&type=chunk) [Free Cash Flow and Constant Currency](index=4&type=section&id=Free%20Cash%20Flow%20and%20Constant%20Currency) - Free Cash Flow is defined as GAAP net cash provided by operating activities less **purchases of property and equipment**[19](index=19&type=chunk) - Revenue in Constant Currency adjusts GAAP revenue using average exchange rates from the comparative period to exclude **foreign currency fluctuation effects**[20](index=20&type=chunk) [Customer Metrics Definitions](index=4&type=section&id=Customer%20Metrics%20Definitions) - **Enterprise customers** are engaged by direct sales, resellers, or partners, while **Online customers** subscribe directly via the website[21](index=21&type=chunk) - Net dollar expansion rate for Enterprise customers compares **Annual Recurring Revenue (ARR)** from a customer cohort at the beginning and end of a 12-month period[22](index=22&type=chunk) - Online average monthly churn is calculated by dividing **Monthly Recurring Revenue (MRR)** from canceled or downgraded customers by the starting MRR of that quarter, then dividing by three[23](index=23&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This legal disclaimer cautions that forward-looking statements, including financial guidance and strategic initiatives, are subject to risks like macroeconomic conditions and competition, which could cause actual results to differ materially - Statements regarding financial outlook for **Q3 and FY2026**, market position, growth strategy, and product initiatives are considered forward-looking[14](index=14&type=chunk) - Actual results could differ materially due to risks including **declines in new customers**, **competition**, **macroeconomic conditions**, and **security issues**[14](index=14&type=chunk)

Core Viewpoint - Zoom Communications, Inc. reported strong financial results for the second fiscal quarter, achieving the highest year-over-year revenue growth in 11 quarters and expanding its GAAP operating margin by 9 percentage points year over year. The company raised its full-year outlook for revenue, non-GAAP operating income, and free cash flow, now expected to be between $1.74 billion and $1.78 billion [2][5]. Financial Highlights - Total revenue for Q2 was $1,217.2 million, reflecting a 4.7% increase year over year, and 4.4% in constant currency [5][6]. - Enterprise revenue reached $730.7 million, up 7.0% year over year, while Online revenue was $486.6 million, up 1.4% year over year [5][6]. - GAAP operating margin was 26.4%, and non-GAAP operating margin was 41.3% [5][6]. - GAAP EPS was $1.16, a 65.7% increase year over year, and non-GAAP EPS was $1.53, up 10.0% year over year [5][6]. Customer Metrics - The number of customers contributing more than $100,000 in trailing 12 months revenue increased by 8.7% year over year, totaling 4,274 customers [4][5]. - The trailing 12-month net dollar expansion rate for Enterprise customers was 98% [13]. - Online average monthly churn was 2.9%, remaining flat year over year [13]. Cash Flow and Securities - Net cash provided by operating activities was $515.9 million for Q2, compared to $449.3 million in the same quarter last year [6][30]. - Free cash flow for the quarter was $508.0 million, up from $365.1 million year over year [6][30]. - Total cash, cash equivalents, and marketable securities as of July 31, 2025, amounted to $7.8 billion [6]. Financial Outlook - For Q3 FY 2026, total revenue is expected to be between $1.210 billion and $1.215 billion, with non-GAAP income from operations projected between $465.0 million and $470.0 million [13]. - For the full fiscal year 2026, total revenue is anticipated to be between $4.825 billion and $4.835 billion, with non-GAAP income from operations expected between $1.905 billion and $1.915 billion [13].

Zoom Communications Inc. ZM will release earnings results for the second quarter, after the closing bell on Thursday, Aug. 21. Let's have a look at how Benzinga's most-accurate analysts have rated the company in the recent period. Considering buying ZM stock? Here's what analysts think: Analysts expect the Bentonville, Arkansas-based company to report quarterly earnings at $1.38 per share, down from $1.39 per share in the year-ago period. Zoom projects to report quarterly revenue of $1.2 billion, compared t ...