8-K: Zoom Communications Reports Solid Q1 2026 Results, Exceeding Guidance

Zoom Communications announced its Q1 2026 financial results, reporting revenue of $1,174.7 million and GAAP EPS of $0.81, exceeding expectations.

Summary

• Zoom Communications reported its financial results for the first quarter of fiscal year 2026, ended April 30, 2025.
• Total revenue for the quarter was $1,174.7 million, a 2.9% increase year-over-year, or 3.4% in constant currency.
• Enterprise revenue grew by 5.9% year-over-year to $704.7 million, while Online revenue decreased by 1.2% to $470.0 million.
• GAAP operating margin was 20.6%, and non-GAAP operating margin was 39.8%.
• GAAP EPS was $0.81, up 18.7% year-over-year, and non-GAAP EPS was $1.43, up 6.0% year-over-year.
• The number of customers contributing more than $100,000 in trailing 12 months revenue increased by 8.0% year-over-year.
• Zoom repurchased approximately 5.6 million shares of common stock during the quarter.
• For the second quarter of fiscal year 2026, Zoom expects total revenue between $1.195 billion and $1.200 billion and non-GAAP diluted EPS between $1.36 and $1.37.
• For the full fiscal year 2026, Zoom expects total revenue between $4.800 billion and $4.810 billion and non-GAAP diluted EPS between $5.56 and $5.59.
• Full fiscal year free cash flow is expected to be between $1.680 billion and $1.720 billion.

Sentiment

Score: 7

Explanation: The sentiment is positive due to exceeding guidance, strong enterprise growth, and share repurchases. However, slower overall revenue growth and decreased cash flow temper the enthusiasm.

Positives

• Zoom exceeded guidance in both revenue and profitability for Q1 2026.
• Enterprise revenue showed strong growth at 5.9% year-over-year.
• GAAP EPS increased significantly by 18.7% year-over-year.
• Zoom is actively returning value to shareholders through share repurchases, buying back 5.6 million shares in Q1.
• Online average monthly churn decreased by 40 bps from the same quarter last fiscal year, indicating improved customer retention.
• The percentage of total Online MRR from Online customers with a continual term of service of at least 16 months was 74.2%, up 40 bps year over year.

Negatives

• Online revenue decreased by 1.2% year-over-year.
• Net cash provided by operating activities decreased from $588.2 million to $489.3 million year-over-year.
• Free cash flow decreased from $569.7 million to $463.4 million year-over-year.
• The trailing 12-month net dollar expansion rate for Enterprise customers was 98%, indicating some contraction or attrition.

Risks

• The company acknowledges an uncertain macroeconomic environment.
• The forward-looking statements are subject to numerous uncertainties and risks, including competition, macroeconomic conditions, and security concerns.
• The company's future performance could be affected by declines in new customers, renewals, or upgrades.
• The company's future performance could be affected by delays or outages in services from our co-located data centers, failures in internet infrastructure or interference with broadband access.

Future Outlook

Zoom expects Q2 2026 revenue between $1.195 billion and $1.200 billion and non-GAAP diluted EPS between $1.36 and $1.37. For the full fiscal year 2026, Zoom expects total revenue between $4.800 billion and $4.810 billion and non-GAAP diluted EPS between $5.56 and $5.59. Full fiscal year free cash flow is expected to be between $1.680 billion and $1.720 billion.

Management Comments

• Eric S. Yuan, Zoom's founder and CEO, stated that the company delivered another solid quarter, exceeding guidance in both revenue and profitability.
• He highlighted the strength of Zoom's platform and AI-first innovation.
• Yuan noted that customers are turning to Zoom to drive efficiency, improve customer and employee experiences, and future-proof their businesses.
• He mentioned continued momentum in Zoom Customer Experience, Zoom Revenue Accelerator, and Workvivo.

Industry Context

Zoom's focus on AI-driven features and platform enhancements aligns with the broader industry trend of integrating AI into communication and collaboration tools. The company's emphasis on customer experience and employee engagement reflects the increasing importance of these factors in the current business environment.

Comparison to Industry Standards

• Zoom's non-GAAP operating margin of 39.8% is strong compared to other SaaS companies, such as Salesforce and Microsoft, which typically have operating margins in the 20-40% range.
• The company's enterprise growth of 5.9% is slower than hyper-growth SaaS companies but is respectable for a company of Zoom's size.
• Zoom's focus on share repurchases is a common practice among mature tech companies with strong cash flow, similar to Apple and Alphabet.

Stakeholder Impact

• Shareholders will benefit from the share repurchase program and the company's focus on profitability.
• Customers will benefit from Zoom's AI-first innovation and platform enhancements.
• Employees may benefit from the company's focus on employee engagement and culture.

Next Steps

• Zoom will host a Zoom Video Webinar for investors on May 21, 2025, to discuss the company's financial results, business highlights, and financial outlook.

Key Dates

Keywords

Zoom Communications, financial results, Q1 2026, revenue, EPS, guidance, enterprise, online, share repurchase, AI