10-K: Zoom Communications Reports Strong FY26 Net Income Amid AI-First Platform Expansion

Sentiment:

Annual Report 27 February 2026 5:18 PM

📋All filings for Zoom Communications, INC

Zoom Communications, Inc. reported a significant increase in net income for fiscal year 2026, driven by strong Enterprise customer growth and strategic AI investments, despite a moderating revenue growth rate.

Capital raiseThe company states, "We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may choose or be required to seek additional equity or debt financing.""If we raise additional funds through the issuance of equity or equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and our stockholders may experience dilution."

Better than expectedNet income increased significantly from $1,010.2 million in FY2025 to $1,900.1 million in FY2026.Gross margin improved to 77.0% in FY2026 from 75.8% in FY2025.Net cash provided by operating activities increased to $1,989.0 million in FY2026 from $1,945.3 million in FY2025.Free cash flow (non-GAAP) increased to $1,924.1 million in FY2026 from $1,808.7 million in FY2025.Gains on strategic investments, net, were substantially higher at $969.8 million in FY2026 compared to $177.1 million in FY2025.The SEC investigation concluded with no enforcement action, reversing an $18.0 million accrual.

Summary

Revenue for the fiscal year ended January 31, 2026, increased by $203.3 million, or 4.4%, to $4,868.8 million, compared to $4,665.4 million in fiscal year 2025.
Net income for fiscal year 2026 surged to $1,900.1 million, up from $1,010.2 million in fiscal year 2025 and $637.5 million in fiscal year 2024.
Net cash provided by operating activities increased to $1,989.0 million in fiscal year 2026 from $1,945.3 million in fiscal year 2025.
Free cash flow (non-GAAP) was $1,924.1 million in fiscal year 2026, up from $1,808.7 million in fiscal year 2025.
Gross margin improved to 77.0% in fiscal year 2026 from 75.8% in fiscal year 2025, primarily due to a reduction in stock-based compensation and operational efficiencies.
Gains on strategic investments, net, significantly increased to $969.8 million in fiscal year 2026 from $177.1 million in fiscal year 2025, mainly from privately held securities.
The company acquired BrightHire, Inc. for $98.0 million in cash on December 1, 2025, to enhance recruiting and candidate engagement capabilities.
The amortization period for deferred contract acquisition costs was increased from three years to five years, effective January 31, 2026, expected to reduce sales and marketing expenses by $90.0 million to $95.0 million in fiscal year 2027.
The company repurchased 20,385,361 shares of Class A common stock for $1.6 billion during fiscal year 2026, with $1.0 billion remaining under authorization as of January 31, 2026.
The SEC investigation concluded on July 30, 2025, with no enforcement action recommended, leading to the reversal of an $18.0 million accrual.
A securities class action lawsuit was settled for $150.0 million, with $60.0 million net payment made in fiscal year 2024 (partially covered by insurance).
A shareholder derivative lawsuit was settled, with the court approving the settlement and awarding plaintiffs counsel $1.35 million in fees on July 31, 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong financial performance, particularly in net income and cash flow, driven by strategic AI investments and operational efficiencies. While revenue growth has moderated and Enterprise net dollar expansion is below 100%, the company's focus on innovation and shareholder returns through repurchases is positive.

Positives

Net income significantly increased to $1,900.1 million in fiscal year 2026, demonstrating strong profitability.
Gross margin improved to 77.0% in fiscal year 2026, reflecting operational efficiencies and reduced stock-based compensation.
Net cash provided by operating activities grew to $1,989.0 million, indicating robust cash generation from core operations.
Free cash flow (non-GAAP) increased to $1,924.1 million, providing ample liquidity for future growth.
Substantial gains on strategic investments, net, of $969.8 million contributed significantly to overall income.
Enterprise customer revenue grew by 6.5% year-over-year, with 68.4% of the increase attributable to existing customers, showing strong expansion within larger organizations.
The acquisition of BrightHire, Inc. strengthens recruiting and candidate engagement capabilities, aligning with platform expansion.
The SEC investigation concluded with no enforcement action, reversing a prior $18.0 million accrual.
Ongoing stock repurchase programs totaling $3.7 billion authorized, with $1.0 billion remaining, signal confidence in valuation and return capital to shareholders.
The company continues to invest heavily in AI, launching Zoom AI Companion 3.0 and expanding agentic AI capabilities, positioning for future innovation.
The increase in the amortization period for deferred contract acquisition costs is expected to reduce sales and marketing expenses by $90.0 million to $95.0 million in fiscal year 2027.

Negatives

Revenue growth rate moderated to 4.4% in fiscal year 2026, down from prior periods, indicating a slower pace of expansion.
Trailing 12-month net dollar expansion rate for Enterprise customers was 98% as of January 31, 2026, remaining below 100% due to macroeconomic headwinds, slower hiring, and seat count downsells.
Interest income from cash and marketable securities decreased by $23.4 million, partially offsetting favorable foreign currency exchange rates.
The company has experienced and may continue to experience employee turnover due to restructuring actions.
The company has incurred net losses in the past and there are no assurances of maintaining or increasing profitability in the future.
The dual-class stock structure concentrates voting control with pre-IPO stockholders, including the CEO, limiting the influence of other shareholders.

Risks

Dependence on attracting new customers, retaining and upselling existing customers, and upgrading free users; any decline would harm the business.
Revenue growth rate has fluctuated and may decline in future periods, impacted by market penetration, increased competition, macroeconomic conditions, and slowing demand.
Interruptions, delays, or outages in service from co-located data centers or cloud hosting services could impair delivery, require credits/penalties, and harm the business.
Operating in highly competitive markets with competitors benefiting from greater name recognition, longer operating histories, and larger resources.
Business may be significantly affected by changes in the economy, including high inflation, recessionary environments, interest rate fluctuations, and geopolitical tensions.
Lengthening sales cycles and greater deployment challenges as sales to large organizations increase.
Decline in demand for the platform or communications and collaboration technologies in general would harm the business.
Incurred net losses in the past and no assurances of maintaining or increasing profitability in the future.
Inability to respond to rapid technological changes, extend the platform, or develop new features, especially with advancements in AI.
Security measures, and those of third parties, have been compromised in the past and may be compromised in the future, leading to reputational harm, fines, and liability.
Limited operating history at the current scale of the business makes future results difficult to evaluate.
Actual or perceived failure to comply with stringent and evolving privacy, data protection, and information security laws and regulations could harm reputation and business.
Loss of Chief Executive Officer or other senior management team members could impair business strategy execution.
Significant and expanding international operations subject the company to increased business, regulatory, and economic risks, including geopolitical tensions (e.g., US-China).
Subject to U.S. and international laws, including anti-corruption, export controls, and telecommunications regulations (Zoom Phone), with non-compliance leading to claims, increased costs, or liability.
Use of generative AI in products and services may result in operational challenges, legal liability (IP infringement, bias), reputational concerns, competitive risks, and regulatory concerns.
Dual-class stock structure concentrates voting control with pre-IPO stockholders, limiting influence of other shareholders.
Future sales and issuances of capital stock could result in additional dilution and cause stock price to decline.
Provisions in corporate charter documents and Delaware law may prevent or frustrate attempts by stockholders to change management or acquire a controlling interest.
Estimates of market opportunity and growth forecasts may be inaccurate, and business may fail to grow at similar rates.
Business could be disrupted by catastrophic events, including natural disasters, cyber-attacks, or health epidemics.
Strategic investments carry risks of partial or complete loss of invested capital and volatility in financial results.
Changes in accounting principles generally accepted in the United States could adversely affect reported results.
May need additional capital, and financing may not be available on favorable terms or at all.
Failure to maintain an effective system of disclosure controls and internal control over financial reporting could impair ability to produce timely and accurate financial statements.
Stock market price and trading volume could decline if analysts publish inaccurate or unfavorable research.
Incurs costs and demands from complying with public company laws and regulations.
Expectations regarding environmental, social, and governance (ESG) factors may impose additional costs and risks.
Climate change may impact the business.

Future Outlook

The company plans to continue investing in AI, expanding agentic AI skills, agents, and models, with a focus on supporting individual productivity, powering better collaboration, and helping customer-facing teams. It aims to further enhance Zoom Workplace and Zoom Business Services, including new products like Zoom Tasks, Zoom Workplace for Frontline Workers, Zoom Workplace for Clinicians, and a next-generation Zoom Virtual Agent. International expansion remains a key long-term growth strategy, with efforts to increase global market awareness and adapt to diverse regulatory environments. The company will continue to monitor macroeconomic conditions, including geopolitical and trade uncertainties, and their potential effects on demand and financial results.

Management Comments

Zoom is redefining modern work as a system of action, turning live collaboration into completed results.
Our mission to deliver happiness, grounded in our core value of care, is fundamental to everything we do at Zoom.
Zoom's mission is to deliver an AI-first work platform for human connection.
We believe we're well-positioned as AI technology continues to evolve, with our federated approach to AI dynamically selecting from multiple AI models.
We are evolving agentic AI capabilities within AI Companion that will continue to deliver practical value to customers while building on our ambitious vision of AI that truly amplifies human potential for our customers.
Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications to train Zoom's or third-party AI models.
Our engineers aim to stay on the cutting edge of communication, collaboration, and AI technologies that enhance productivity and streamline workflows.

Industry Context

StockSavvy.ai notes that Zoom Communications operates in a highly competitive and rapidly evolving market for communication and collaboration technologies. The company faces strong competition from bundled productivity suite providers like Microsoft 365 (with Teams) and Google Workspace (with Meet), as well as legacy web-based meeting providers such as Cisco Webex and GoTo. In the UCaaS and Contact Center segments, competitors include Avaya, RingCentral, 8x8, Five9, Genesys, and NICE inContact. The increasing focus on AI-powered solutions across the industry, as highlighted by Zoom's significant investments in AI Companion and its federated AI approach, reflects a broader trend towards enhancing productivity and automation in workplace and customer engagement platforms. The company's emphasis on an 'AI-first' strategy and expanding its product portfolio beyond core video conferencing positions it to compete in a market increasingly demanding integrated, intelligent solutions for flexible work environments.

Comparison to Industry Standards

Zoom is recognized as a leader in the Gartner Magic Quadrant for UCaaS for the sixth consecutive year, indicating strong performance against industry benchmarks like Microsoft Teams and Cisco Webex.
Workvivo was named a leader in the Magic Quadrant for Intranet Packaged Solutions, demonstrating competitive strength in employee experience platforms against solutions from providers like Microsoft SharePoint or Google Workspace.
Zoom Contact Center was recognized in the 2025 Gartner Magic Quadrant for Contact Center as a Service, positioning it against established players such as Five9, Genesys, and NICE inContact.
Zoom Revenue Accelerator debuted as a "Strong player" in Forrester Wave for Conversational Intelligence, competing with other conversation intelligence software providers.
IDC named Zoom Events as a leader in its IDC MarketScape for Worldwide Virtual Events Applications, showcasing its competitive standing in the virtual and hybrid events market.
The company's "AI-first" approach and federated AI model, leveraging multiple LLMs (OpenAI, Anthropic, NVIDIA) and SLMs, is a competitive strategy to offer accessible and affordable AI, differentiating it from competitors who might rely on single-source AI or less integrated solutions.
The company's commitment to not using customer content for AI model training addresses a key privacy concern, potentially offering a competitive advantage over platforms with less transparent AI data policies.
The total cost of ownership of the Zoom platform is stated to be less than competitors, which is a significant competitive factor in enterprise adoption.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Information Security Officer	Michael Adams	Sandra McLeod	NA	Succession, Ms. McLeod brings nearly 25 years of experience.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Company Name Change	Changed name from Zoom Video Communications, Inc. to Zoom Communications, Inc.	2024-11-01	Reflects a strategic rebranding or simplification of corporate identity.
Shareholder Derivative Lawsuit Settlement	Settlement included corporate governance reforms and a $1.35 million fee to plaintiffs' counsel.	2025-07-31	Aims to address alleged failures in board supervision and strengthen internal controls, potentially improving investor confidence.
Dual-Class Stock Structure	Maintains a dual-class common stock structure with Class B shares having 10 votes per share, concentrating voting control with pre-IPO stockholders, including the CEO.	NA	Limits the ability of other stockholders to influence corporate matters, including director elections and significant corporate transactions.
Board Structure and Removal	Board of directors is divided into three classes with three-year terms, and directors may only be removed for cause by stockholders.	NA	Tends to discourage hostile takeovers and makes it more difficult for stockholders to replace a majority of directors.
Stockholder Action Limitations	Eliminates the right of stockholders to act by written consent and requires all stockholder actions to be taken at a meeting.	NA	Restricts stockholders' ability to take action without a formal meeting, potentially slowing down corporate changes.
Voting Rights	Does not permit stockholders to cumulate their votes in the election of directors.	NA	Allows holders of a majority of voting common stock to elect all directors standing for election.
Anti-Takeover Provisions	Subject to Section 203 of the Delaware General Corporation Law, which prohibits certain business combinations with interested stockholders for three years.	NA	Discourages coercive takeover practices and encourages negotiation with the board of directors.
Exclusive Forum Provisions	Designates the Court of Chancery of the State of Delaware and federal district courts as exclusive forums for certain disputes.	NA	Aims to centralize litigation in specific jurisdictions, potentially reducing legal costs but limiting stockholders' choice of forum.

Legal Proceedings

Ongoing grand jury subpoenas from the Department of Justice's U.S. Attorney's Office for the Eastern District of New York (EDNY) and Northern District of California (NDCA) regarding interactions with foreign governments (including China), user data storage and access, privacy policies, and responses to Chinese government law enforcement requests. The outcome and potential financial exposure are uncertain.
SEC investigation into security, data protection, privacy matters, encryption, and usage metrics concluded on July 30, 2025, with no enforcement action recommended, leading to the reversal of an $18.0 million accrual.
Shareholder derivative lawsuits consolidated in the U.S. District Court for the District of Delaware, alleging failure of the board to supervise management, policies, and internal controls. A settlement was preliminarily approved on April 16, 2025, and finally approved on July 31, 2025, involving corporate governance reforms and a $1.35 million fee to plaintiffs' counsel.
Securities class action complaints filed in the U.S. District Court for the NDCA, alleging violations of federal securities laws due to false and misleading statements about data privacy and security. A settlement of $150.0 million (net $60.0 million after insurance) was preliminarily approved on May 28, 2025, and finally approved on November 10, 2025.

Stakeholder Impact

Shareholders: Potential dilution from future equity issuances, concentrated voting power due to dual-class stock, benefits from stock repurchase programs, reliance on stock price appreciation for returns (no dividends), and risks of stock price volatility.
Employees: Impact of restructuring actions on retention and motivation, intense competition for talent, fluctuations in equity compensation value, and benefits of a flexible working environment and comprehensive compensation packages.
Customers: Enhanced product offerings with AI Companion 3.0 and new services, continued focus on security and privacy, potential service interruptions, impact of competitive pricing, and reliance on high-quality support.
Suppliers/Partners: Continued reliance on third-party cloud hosting and data centers, ongoing integration with third-party applications, and risks associated with third-party security practices.
Creditors: The company's strong financial health and cash flow from operations support its ability to meet contractual obligations.

Next Steps

Continue to invest in AI, expanding agentic AI skills, agents, and models.
Further enhance Zoom Workplace and Zoom Business Services, including new products like Zoom Tasks, Zoom Workplace for Frontline Workers, Zoom Workplace for Clinicians, and a next-generation Zoom Virtual Agent.
Drive international expansion by opening offices in new jurisdictions and providing the platform in additional languages.
Selectively pursue acquisitions in high-growth markets aligned with long-term strategic objectives.
Continue to scale and improve processes and procedures to support indirect sales channels.
Monitor macroeconomic conditions and geopolitical landscape for potential impacts on business and financial results.
Evaluate the impact of new accounting pronouncements (ASU 2024-03 and ASU 2025-06) on consolidated financial statements.
Continue to monitor and account for the enactment of Pillar Two rules in countries of operation.

Key Dates

Date	Description
2011-04-01	Company incorporated in Delaware as Saasbee, Inc.
2012-02-01	Company changed name to Zoom Communications, Inc.
2012-05-01	Company changed name to Zoom Video Communications, Inc.
2018-11-01	Dual class common stock structure implemented.
2018-12-18	Confirmatory Offer Letter between Registrant and Eric S. Yuan.
2018-12-18	Confirmatory Offer Letter between Registrant and Aparna Bawa.
2019-04-01	2019 Equity Incentive Plan and 2019 ESPP adopted, effective with IPO.
2019-04-18	First offering period for 2019 ESPP began.
2019-07-01	Security researcher published blog highlighting concerns with Zoom Meeting platform.
2020-06-01	Grand jury subpoena received from DOJ's U.S. Attorney's Office for EDNY.
2020-07-01	Subpoenas received from DOJ's U.S. Attorney's Office for NDCA and the SEC.
2020-09-25	Shareholder derivative cases consolidated.
2021-01-19	FTC settlement agreement finalized regarding privacy and security representations.
2022-02-01	Russia's military invasion of Ukraine began, leading to sanctions and export restrictions.
2022-03-01	Voluntary self-disclosure submitted to BIS regarding U.S. export control laws.
2023-02-01	Restructuring actions commenced to reduce operating costs.
2023-09-01	Zoom AI Companion launched.
2024-02-01	Board of Directors authorized a $1.5 billion stock repurchase program.
2024-07-01	U.S. Supreme Court issued decision returning Florida and Texas network neutrality cases to trial courts.
2024-08-27	U.S. Court of Appeals for the Third Circuit issued decision limiting Section 230 protections for curated content.
2024-08-29	District court in Texas issued decision staying some portions of Texas network neutrality law.
2024-11-01	Board of Directors authorized an additional $1.2 billion stock repurchase program.
2024-11-01	Company changed name back to Zoom Communications, Inc.
2024-11-18	Fifth Circuit issued order setting parameters for district court's consideration of Texas network neutrality issues.
2024-12-15	ASU 2023-09 (Income Tax Disclosures) effective for fiscal years beginning after this date (early adopted by Zoom for FY2026).
2025-01-05	OECD issued administrative guidance on global minimum tax rules (Pillar Two).
2025-01-14	Stipulation of Settlement executed for shareholder derivative lawsuit.
2025-01-31	Fiscal year ended January 31, 2025.
2025-02-06	Hearing on motion for preliminary approval of shareholder derivative settlement.
2025-03-11	Petition for rehearing of Sixth Circuit decision on network neutrality denied.
2025-04-16	Court preliminarily approved shareholder derivative settlement.
2025-05-22	District court in Florida denied motion to dismiss state network neutrality suit.
2025-05-27	FCC released notice of proposed rulemaking on foreign adversary ownership certification for licensees.
2025-05-28	Court preliminarily approved securities class action settlement.
2025-06-01	Supreme Court rejected challenge to USF contribution rules.
2025-06-24	Plaintiff filed motion for final approval of shareholder derivative settlement.
2025-06-28	G7 released joint statement on modifying Pillar Two approach.
2025-07-18	Lead plaintiff filed motion for final approval of securities class action settlement.
2025-07-30	SEC informed company its investigation concluded with no enforcement action.
2025-07-31	Court approved shareholder derivative settlement and awarded fees.
2025-08-08	Proponents of network neutrality announced they would not seek Supreme Court review of Sixth Circuit decision.
2025-09-01	Zoomtopia 2025 annual user conference held.
2025-09-01	ASU 2025-06 (Internal-Use Software) issued, effective for fiscal years beginning after December 15, 2026.
2025-10-01	New lawsuit filed challenging USF contribution rules in Fifth Circuit.
2025-10-09	Court conducted fairness hearing for securities class action settlement.
2025-10-29	FCC released notice of proposed rulemaking on interconnection among voice service providers.
2025-11-01	Board of Directors authorized an additional $1.0 billion stock repurchase program.
2025-11-10	Court entered final approval order for securities class action settlement.
2025-11-01	ASU 2024-03 (Expense Disaggregation Disclosures) issued, effective for fiscal years beginning after December 15, 2026.
2025-12-01	Acquisition of BrightHire, Inc. completed.
2025-12-01	AI Companion 3.0 launched for all paid Zoom Workplace users.
2025-12-13	FCC adopted revised rules on reporting breaches of private customer information (CPNI).
2026-01-02	U.S. Court of Appeals for the Sixth Circuit issued decision overturning FCC order on network neutrality.
2026-01-13	Santiago Subotovsky, Director, adopted Rule 10b5-1 trading arrangement.
2026-01-31	Fiscal year ended January 31, 2026.
2026-02-18	U.S. Department of the Treasury and IRS released guidance on CAMT adjustments for R&D expenditures.
2026-02-27	Date of Annual Report on Form 10-K filing.
2027-01-31	Estimated reduction in sales and marketing expenses of $90.0 million to $95.0 million due to change in amortization period for deferred contract acquisition costs.

Recommendation

hold

The company demonstrates strong profitability and cash generation, driven by strategic AI investments and operational efficiencies. However, the moderating revenue growth rate and persistent macroeconomic headwinds impacting Enterprise net dollar expansion suggest a 'hold' position. While the company is actively returning capital to shareholders through repurchases and resolving legal matters, the competitive landscape and inherent risks associated with rapid technological change and international operations warrant a cautious approach. Investors should monitor the effectiveness of AI product adoption and sustained revenue acceleration.

Keywords

AI-first platform, Unified Communications as a Service, UCaaS, Video Conferencing, Collaboration Software, Zoom Workplace, Zoom AI Companion, Zoom Phone, Zoom Contact Center, Enterprise Software, Cloud Communications, Financial Results, SEC Filing, 10-K, Stock Repurchase, Corporate Governance, Cybersecurity, Data Privacy, Generative AI, Software as a Service, SaaS

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