Zoom Communications, Inc.

What they do

Zoom sells subscription access to an AI-first, open work platform that combines employee collaboration tools (Zoom Meetings, Zoom Phone, Zoom Team Chat, Zoom Docs, Zoom Whiteboard, Workvivo) with customer-facing products for sales, marketing and service teams (Zoom Contact Center, Zoom Virtual Agent, Zoom Revenue Accelerator, Zoom Events). AI Companion is embedded across the platform using a federated approach that dynamically selects among third-party LLMs (OpenAI, Anthropic, NVIDIA) and Zoom's own models. Revenue comes primarily from subscription agreements, split between Enterprise and Online customers, and the company operates 20 co-located data centers globally.

Revenue drivers

• Enterprise revenue — Largest and fastest-growing channel: $787.5 million in Q2 FY2027, up 7.8% year over year, which management called its strongest growth rate in three years.
• Online revenue — Direct and self-serve customers generated $489.7 million in Q2 FY2027, up 0.6% year over year; Online average monthly churn was 2.9%, and customers with 16+ months of continual service were 75.6% of Online MRR.
• Customer Experience (CX) portfolio — Zoom Contact Center and Zoom Virtual Agent delivered high-double-digit ARR expansion, with Zoom Virtual Agent customer count up 256% year over year.
• Large-customer base — 4,625 customers contributed more than $100,000 in trailing 12-month revenue, up 8.2% year over year; trailing 12-month Enterprise net dollar expansion rate was 99%, up from 98%.

Recent performance

For Q2 FY2027 (quarter ended July 31, 2026), total revenue was $1,277.2 million, up 4.9% year over year as reported and 4.7% in constant currency. GAAP operating margin was 24.6% and non-GAAP operating margin was 40.0%; GAAP net income was $1,542.4 million, or $5.15 per diluted share, versus $358.6 million, or $1.16, a year earlier. Non-GAAP net income was $464.0 million, or $1.55 per share, compared with $471.3 million, or $1.53. Net cash from operations was $494.8 million and free cash flow was $472.4 million, both down modestly year over year; the company repurchased about 3.7 million shares in the quarter and held $7.2 billion in cash, equivalents and marketable securities.

Strategy

Management frames Zoom as a "system of action" for modern work and is investing in three AI priorities: elevating Zoom Workplace with AI, growing new AI products, and scaling AI-first customer experience. Recent product introductions include ZoomMate, Zoom AI Productivity Suite, My Notes, ZVA Receptionist, and Workvivo HQ Agent, alongside acquisitions of Common Room and BrightHire to extend into sales and recruiting workflows. The company emphasizes a federated AI model strategy using third-party and open-source LLMs plus its own small language models, and states it does not use customer audio, video, chat, screen sharing, or attachments to train Zoom or third-party AI models.

Risks

• Subscription renewal and upsell dependence — Revenue depends on customers renewing, upgrading tiers, and buying additional products, and customers are not obligated to renew and may reduce subscription size.
• Competitive displacement — Renewals can decline if customers believe a competitor's product is better, more secure, or cheaper, or if they consolidate spending on a competitor's platform.
• Macroeconomic and FX pressure — Geopolitical uncertainty, elevated interest rates, energy market volatility, and foreign currency fluctuations have created and may continue to create uncertainty in subscription demand.
• IT budget tightening — Reductions in customer information technology spending budgets are more likely during periods of high inflation and can reduce renewals and expansion.

Outlook

Zoom updated its guidance for the third quarter of fiscal year 2027 and full fiscal year 2027 in its August 25, 2026 earnings release; the provided excerpt does not include the specific guidance figures. Management characterized FY27 as progressing well with Enterprise momentum and continued AI portfolio scaling.