Summary
Zoom Video Communications reported revenue of $1.16 billion for the second quarter of fiscal 2025, up 2.1% from the prior-year quarter. Business customers did the heavy lifting. Enterprise revenue rose 3.5%, while Online revenue was flat year over year. Year-to-date revenue of $2.30 billion was up 2.7%.
Profitability improved on a GAAP basis even as gross margin slipped. GAAP operating income of $202.4 million was up 13.9% from the prior-year quarter, and GAAP operating margin of 17.4% was up 1.8 percentage points. GAAP net income of $219.0 million rose 20.4%, and diluted EPS of $0.70 compared with $0.59. Year to date, GAAP operating income of $405.4 million was up 116.4% and GAAP net income of $435.3 million was up 120.5%. Diluted EPS was $1.38 versus $0.65.
Cost pressure showed up in gross margin, which fell to 75.5% from 76.6%. Cost of revenue rose 7.0%, with a $23.4 million increase in hosting and infrastructure costs. Management tied that spending to greater use of AI functionality and investments to upgrade the data center backbone. On a non-GAAP basis, income from operations of $455.5 million compared with $461.7 million a year earlier, and non-GAAP operating margin was 39.2% versus 40.5%.
Cash generation was the standout. Operating cash flow of $449.3 million rose 33.7% from the prior-year quarter, and free cash flow of $365.1 million rose 26.2%. Capital expenditures of $84.2 million were up 80.8%, reflecting the data center build. Year-to-date operating cash flow of $1.04 billion was up 37.5%. Cash, cash equivalents and marketable securities totaled $7.5 billion as of July 31, 2024. Current deferred revenue of $1.39 billion was up 3.1%, and remaining performance obligations of $3.78 billion were up 7.8%.
Customer metrics were mixed. Zoom ended the quarter with 3,933 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 7.1% and equal to 30.5% of total revenue. Total Enterprise customers fell to roughly 191,600 from 218,100 a year earlier, largely because the company moved about 26,800 lower-MRR customers to the Online segment during the first quarter. The trailing 12-month net dollar expansion rate for Enterprise customers was 98%, down from 109%. Online average monthly churn was 2.9%, down 30 bps, and 74.4% of Online MRR came from customers with a continual term of service of at least 16 months, up 160 bps.
Guidance for the third quarter of fiscal 2025 calls for non-GAAP income from operations of $438.0 million to $443.0 million and non-GAAP diluted EPS of $1.29 to $1.31 on approximately 314 million weighted average shares. For the full fiscal year 2025, the company guided to non-GAAP income from operations of $1.790 billion to $1.800 billion, non-GAAP diluted EPS of $5.29 to $5.32 on approximately 316 million shares, and free cash flow of $1.580 billion to $1.620 billion. Zoom repurchased approximately 4.8 million shares during the quarter, leaving $1.062 billion authorized for future repurchases.
Risks stay tied to the macro backdrop. Management flagged elongated sales cycles, reduced corporate spending, and tighter scrutiny of IT budgets. Competition among communications platform providers, the cost of AI features and data center upgrades, and a net dollar expansion rate below 100% all weigh on future growth. Foreign currency swings and geopolitical conditions add further uncertainty.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.16B | $1.14B | +1.9% | $1.14B | +2.1% |
| Gross profit | $877.4M | $867.9M | +1.1% | $872.1M | +0.6% |
| Gross margin | 75.5% | 76.0% | -0.6 pp | 76.6% | -1.1 pp |
| Research & development | $206.8M | $205.6M | +0.6% | $191.8M | +7.8% |
| Sales & marketing | $358.8M | $348.0M | +3.1% | $373.4M | -3.9% |
| General & administrative | $109.5M | $111.3M | -1.6% | $129.3M | -15.3% |
| Total operating expenses | $675.1M | $664.9M | +1.5% | $694.5M | -2.8% |
| Operating income (loss) | $202.4M | $203.0M | -0.3% | $177.6M | +13.9% |
| Operating margin | 17.4% | 17.8% | -0.4 pp | 15.6% | +1.8 pp |
| Net income (loss) | $219.0M | $216.3M | +1.3% | $182.0M | +20.4% |
| Net margin | 18.8% | 18.9% | -0.1 pp | 16.0% | +2.9 pp |
| Diluted EPS | $0.70 | $0.69 | +$0.01 | $0.59 | +$0.11 |
Risks
Macroeconomic conditions, including high inflation, high interest rates, and geopolitical conflicts, have impacted demand and may continue to pressure IT spending. MD&A notes elongated sales cycles and reduced corporate spending, with revenue up 2.1% in the quarter and 2.7% year to date.
Revenue growth has fluctuated and may continue to decline due to higher market penetration, increased competition, and slowing demand. MD&A reports revenue increased 2.1% in the quarter and 2.7% year to date and states many factors may contribute to declines in growth rate.
Sales to large organizations involve lengthy evaluation and negotiation processes, and MD&A reports elongated sales cycles along with deployment challenges for large customers. The company may spend substantial upfront costs without assurance of corresponding expansion.
Competition is intensifying from bundled productivity providers such as Microsoft Teams and Google G Suite and from AI-powered communication tools that could make Zoom's platform obsolete. MD&A cites continued investments in AI-first innovation, while gross margin decreased to 75.5% in the quarter from 76.6% due to increased AI functionality and data center backbone costs.
The business depends on renewals, upsells, and converting free users, and trailing 12-month net dollar expansion rate for Enterprise customers was 98% as of July 31, 2024 compared with 109% as of July 31, 2023. Revenue from Online customers remained flat year over year and post-pandemic mix has led to higher non-renewal rates than in the past.
Zoom's security measures have been compromised in the past and may be again; the filing cites researcher-reported vulnerabilities in Zoom Meeting in July 2019 and macOS in March 2020 and notes high or critical vulnerabilities have been identified. A large-scale compromise could simultaneously affect many customers and cause catastrophic liability.
Use of generative AI in products and services may lead to inaccurate or biased outputs, third-party provider disruptions, IP infringement claims, and disclosure of confidential data. The company relies on third parties for certain AI features and may not recover substantial AI investment if adoption is limited.
Competition for software developers, sales personnel, and executives is intense, and recent restructuring actions have caused and may continue to cause employee turnover. The filing notes difficulty hiring and retaining qualified security personnel, especially after restructuring.
Geopolitical tension between the United States and China may increase scrutiny of operations in China, where a sizable portion of R&D personnel is located. Revenue from APAC and EMEA was 28.2% of total revenue for the six months ended July 31, 2024 compared with 29.0% for the six months ended July 31, 2023.
Interruptions, delays, or outages from co-located data centers or third-party cloud providers could impair service delivery and require credits or penalties. The filing states Zoom has experienced partial outages affecting a subset of users for limited hours and faces potential shortages for server parts.
Changing privacy, data protection, app store, and network neutrality regulations could increase compliance costs or restrict operations. The filing notes the FCC's April 24, 2024 order reinstating network neutrality rules and ongoing appeals.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Online Average Monthly Churn
Enterprise Customers
Summary, forecast, risks and KPIs are extracted from Zoom Communications, Inc.'s SEC filings for Q2 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.