Summary
Zoom Communications reported second quarter fiscal 2026 revenue of $1,217.2 million, up 4.7% from the prior-year quarter, and revenue of $2,391.9 million for the six months ended July 31, 2025, up 3.8%. Management described the period as the highest year-over-year revenue growth in 11 quarters. Enterprise revenue grew 7.0% and Online revenue grew 1.4%. GAAP net income was $358.6 million for the quarter, up 63.7%, and $613.2 million for the six months, up 40.9%.
Profitability improved faster than the top line. Gross profit was $944.06 million for the quarter, up 7.6%, and gross margin rose to 77.6% from 75.5%. GAAP operating income was $321.7 million, up 59.0%, lifting the GAAP operating margin to 26.4% from 17.4%. Non-GAAP operating margin was 41.3% and non-GAAP income from operations was $503.2 million. Diluted EPS was $1.16, up 65.7%, and non-GAAP diluted EPS was $1.53, up 10.0%. For the six months, diluted EPS was $1.97, up 42.8%.
Much of the margin gain came from lower stock-based compensation and cost discipline rather than from revenue growth alone. Cost of revenue, research and development, sales and marketing, and general and administrative expense all fell or held roughly flat. General and administrative expense dropped sharply, helped by the reversal of an $18.0 million accrual tied to an SEC investigation and a $16.6 million decrease in personnel-related expenses. Hosting costs also came down, which the company credits to cloud optimizations and operational efficiencies. Non-GAAP income from operations was $970.6 million for the six months, up from $912.1 million.
Cash flow was mixed. Operating cash flow was $515.9 million for the quarter, up 14.8%, but $1,005.2 million for the six months, down 3.1%, which the company attributed to payment timing differences in working capital accounts. Free cash flow, defined as operating cash flow less purchases of property and equipment, was $508.0 million for the quarter, compared with $365.1 million a year earlier. Capital expenditures were $7.97 million for the quarter, down 90.5%, and $33.9 million for the six months, down 67.0%. Cash, cash equivalents, and marketable securities, excluding restricted cash, totaled $7.8 billion at July 31, 2025.
Customer metrics were steady. Zoom ended the quarter with 4,274 customers contributing more than $100,000 in trailing 12 months revenue, up 8.7% year over year, and these customers produced 32.2% of total revenue, up from 30.5%. The trailing 12-month net dollar expansion rate for Enterprise customers was 98%, unchanged from a year earlier. Online average monthly churn was 2.9%, flat year over year. Deferred revenue, current portion, was $1.47 billion, up 5.3%, and remaining performance obligations were $3.98 billion, up 5.2%.
Guidance for the third quarter of fiscal 2026 covers non-GAAP income from operations of $465.0 million to $470.0 million and non-GAAP diluted EPS of $1.42 to $1.44 on roughly 307 million weighted average shares. For the full fiscal year 2026, the company guided non-GAAP income from operations to $1.905 billion to $1.915 billion, non-GAAP diluted EPS to $5.81 to $5.84 on roughly 308 million shares, and free cash flow to $1.740 billion to $1.780 billion. Management said it raised the full-year outlook for revenue, non-GAAP operating income and free cash flow. The company repurchased about 6.0 million shares in the quarter, and $724.7 million of authorization remained at July 31, 2025.
The risk list is mostly macro. Management cited geopolitical conflicts, tariffs and escalating trade tensions, inflation, interest rate and currency volatility, longer sales cycles with large organizations, and closer scrutiny of IT budgets. It also pointed to higher market penetration, intensifying competition, and the maturation of the business as drags on growth. Enterprise net dollar expansion of 98% means existing Enterprise customers are not adding enough seats and products to offset downsells. The One Big Beautiful Bill Act, enacted on July 4, 2025, had no material impact on the quarter. Outages at co-located data centers and security compromises also rank among the stated risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.22B | $1.17B | +3.6% | $1.16B | +4.7% |
| Gross profit | $944.1M | $896.3M | +5.3% | $877.4M | +7.6% |
| Gross margin | 77.6% | 76.3% | +1.3 pp | 75.5% | +2.1 pp |
| Research & development | $206.4M | $205.4M | +0.5% | $206.8M | -0.1% |
| Sales & marketing | $339.0M | $347.0M | -2.3% | $358.8M | -5.5% |
| General & administrative | $76.9M | $102.3M | -24.9% | $109.5M | -29.8% |
| Total operating expenses | $622.3M | $654.7M | -4.9% | $675.1M | -7.8% |
| Operating income (loss) | $321.7M | $241.6M | +33.2% | $202.4M | +59.0% |
| Operating margin | 26.4% | 20.6% | +5.9 pp | 17.4% | +9.0 pp |
| Net income (loss) | $358.6M | $254.6M | +40.8% | $219.0M | +63.7% |
| Net margin | 29.5% | 21.7% | +7.8 pp | 18.8% | +10.6 pp |
| Diluted EPS | $1.16 | $0.81 | +$0.35 | $0.70 | +$0.46 |
Risks
The MD&A states that geopolitical conflicts, tariffs, trade tensions, inflationary pressures, interest rate fluctuations, and foreign currency volatility continue to create uncertainty in demand, leading to elongated sales cycles and increased scrutiny of IT budgets. Despite quarter revenue up 4.7% and YTD revenue up 3.8%, these conditions could further pressure subscription demand.
The risk factors highlight competition from bundled productivity suites such as Microsoft 365 with Teams and Google Workspace with Meet, and state that AI-powered communication and collaboration tools could make Zoom's platform obsolete. MD&A notes AI is core to product innovation, requiring significant investment to keep pace.
The filing states that revenue growth rate may continue to remain flat or decline due to higher market penetration, increased competition, and maturation of the business. Revenue grew 4.7% in FY2026 Q2 and 3.8% in the six months ended July 31, 2025, but the company cautions that prior growth is not indicative of future performance.
MD&A reports the trailing 12-month net dollar expansion rate for Enterprise customers was 98% as of both July 31, 2025 and 2024, below 100%, due to slower hiring and seat count downsells. Online monthly average churn was 2.9% per month for the three months ended July 31, 2025 and 2024, indicating ongoing retention pressure.
Risk factors disclose past security incidents and vulnerabilities and state that limited budgetary and human resources for detecting and remediating vulnerabilities, along with difficulties hiring qualified security personnel especially after recent restructuring actions, increase exposure. A large-scale compromise could affect many customers simultaneously and cause catastrophic liability.
The risk factors state that sales to large organizations have lengthened and may continue to lengthen the sales cycle, with greater deployment challenges and higher up-front sales costs. MD&A also cites elongated sales cycles and increased scrutiny of IT budgets among existing and potential customers.
The filing states that competition for software developers, sales personnel, and key employees is intense and that recent restructuring actions have caused and may continue to cause employee turnover. Difficulty hiring and retaining talent, including in security and sales, could impair execution of the business strategy.
Risk factors state that a significant portion of the research and development organization resides in China and that geopolitical tension between the United States and China may intensify and lead to increased scrutiny of operations. Government interference or restrictions on the China R&D operations could impair product development and service delivery.
The company is subject to global laws on privacy, data protection, telecommunications, and anti-corruption, and customers may impose obligations under the EU's Digital Operational Resilience Act and similar UK rules. MD&A notes an $18.0 million reversal of a previous accrual related to an SEC investigation, showing regulatory exposure can affect expenses.
MD&A reports gains on strategic investments, net of $45.1 million for FY2026 Q2, up 1,350.1%, and $31.4 million for the six months ended July 31, 2025, driven by fair value changes. The filing warns that fair value adjustments are recorded through the statement of operations and could cause volatility or partial or total loss of invested capital.
The company uses generative AI in products and currently offers AI features at no additional cost, and the filing states that investment costs to bring AI features to market may be significant and cannot be recovered if adoption or retention benefits are not realized. This could negatively impact margins.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Online Average Monthly Churn
Customers Contributing More Than $100,000 in Trailing 12 Months Revenue
Free Cash Flow Margin (Non-GAAP)
Summary, forecast, risks and KPIs are extracted from Zoom Communications, Inc.'s SEC filings for Q2 FY2026 (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.