Zoom Video Communications, Inc. Class A ((ZM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Zoom Video Communications, Inc. recently held its earnings call, presenting a generally positive outlook on its recent performance. The company reported strong revenue growth, particularly in the Enterprise segment, alongside significant advancements in AI adoption. However, the flat performance in the Online business and conservative future revenue growth estimates tempered the enthusiasm. Overall, the highlights significantly outweigh the lowlights, suggesting a promising trajectory for Zoom.
Strong Revenue Growth
Zoom’s total revenue grew by 4.7% year-over-year to $1.217 billion, marking the fastest growth in 11 quarters. This impressive figure was $17 million above the high end of their guidance, showcasing the company’s robust financial health and ability to exceed expectations.
Enterprise Business Strength
The Enterprise segment demonstrated remarkable strength, growing 7% year-over-year and now accounting for 60% of total revenue. Additionally, the number of customers contributing more than $100,000 annually increased by 9%, highlighting the segment’s critical role in Zoom’s overall growth strategy.
AI Adoption and Innovation
Zoom’s commitment to AI innovation is evident, with AI Companion monthly active users increasing over fourfold year-over-year. A notable deployment of Zoom Custom AI Companion was made by a Fortune 200 U.S. tech company for nearly 60,000 employees, underscoring the growing demand for AI-powered solutions.
Zoom Phone and Contact Center Growth
Zoom Phone achieved mid-teens ARR growth, while the number of Zoom Contact Center customers with over $100,000 ARR grew 94% year-over-year. This reflects the company’s successful expansion in the communications and customer service sectors.
Free Cash Flow Increase
Free cash flow saw a significant increase of 39% year-over-year, reaching $508 million and representing a free cash flow margin of 41.7%. This growth underscores Zoom’s strong operational efficiency and cash generation capabilities.
Flat Online Business
Despite the overall positive performance, Zoom’s Online business remained flat year-over-year, with average monthly churn stable at 2.9%. This indicates a need for strategic initiatives to revitalize this segment.
Guided Revenue Growth
Zoom anticipates a slowdown in revenue growth to approximately 3% year-over-year for Q3. For the full year FY ’26, the company has raised its revenue guidance to between $4.825 billion and $4.835 billion, marking a 3.5% year-over-year growth at the midpoint. Zoom also expects a full-year operating margin of 39.5% and projects free cash flow between $1.74 billion and $1.78 billion.
In conclusion, Zoom Video Communications’ earnings call highlighted a generally positive sentiment, driven by strong revenue growth and advancements in AI and enterprise solutions. While challenges remain in the Online business, the company’s strategic focus on AI and enterprise growth positions it well for future success.