Summary
Zoom Communications reported $1,177.5 million of revenue for the third quarter of fiscal 2025, up 3.6% from the prior-year quarter. Revenue for the first nine months of fiscal 2025 was $3,481.3 million, up 3.0%. The company changed its name from Zoom Video Communications to Zoom Communications on November 25, 2024. Growth came mainly from enterprise accounts, with revenue from existing and new customers both contributing, while revenue from Online customers stayed flat. Management tied the quarter to progress on an AI-first work platform rather than to any single product line.
Profitability improved on the operating line, but the gross margin kept slipping. GAAP income from operations was $182.8 million, up 7.9% from a year earlier, and GAAP operating margin was 15.5%, up 0.6 percentage points. Gross margin fell to 75.9%, down 0.3 percentage points, as cost of revenue rose 4.8% on higher hosting and infrastructure costs tied to more AI usage and data center upgrades. Research and development expense rose 13.3% on AI-first hiring, while sales and marketing expense fell 3.4%. GAAP net income rose 46.6% to $207.1 million, and diluted EPS was $0.66, up 46.7% from the prior-year quarter. On a non-GAAP basis, operating margin was 38.9%, net income was $435.1 million, and diluted EPS was $1.38.
Cash generation remains the strongest part of the story. Operating cash flow was $483.2 million in the quarter, down 2.0% year over year. Free cash flow, which subtracts purchases of property and equipment, was $457.7 million, up 1.0%. Capital expenditures fell 36.3% to $25.5 million. Over the first nine months, operating cash flow was $1,520.7 million, up 21.9%, and GAAP net income was $642.4 million, up 89.7%. Cash, cash equivalents, and marketable securities totaled $7.7 billion at October 31, 2024. Deferred revenue, current portion, was $1,363.4 million, up 5.1%, and remaining performance obligations were $3,740.7 million, up 4.7%.
Customer metrics were mixed. The number of customers contributing more than $100,000 in trailing 12 months revenue rose 7.1% to 3,995, and those accounts made up a larger share of revenue than a year earlier. Enterprise customers totaled roughly 192,400, down from 219,700 a year earlier, after Zoom moved about 26,800 smaller accounts into the Online channel. The trailing 12-month net dollar expansion rate for Enterprise customers was 98%, against 105% a year ago. Online average monthly churn improved to 2.7%, down 30 basis points, and 74.1% of Online MRR came from customers with at least 16 months of continuous service, up 90 basis points.
Product news centered on AI. At Zoomtopia the company announced AI Companion 2.0 and paid add-ons as part of a push to sell AI companion features alongside Zoom Workplace. Management pointed to a record Contact Center deal of more than 20,000 seats in EMEA and the largest Workvivo deal ever, signed with a Fortune 10 company. Zoom repurchased about 4.4 million shares for $301.6 million during the quarter and added $1.2 billion to its repurchase authorization, leaving roughly $2.0 billion available.
Guidance for the fourth quarter of fiscal 2025 calls for non-GAAP diluted EPS of $1.29 to $1.30 on roughly 315 million weighted-average shares. For the full fiscal year 2025, management guided non-GAAP income from operations to $1.813 billion to $1.818 billion and non-GAAP diluted EPS to $5.41 to $5.43. Full-year free cash flow guidance is $1.580 billion to $1.620 billion. The main risks are elongated sales cycles, softer corporate spending, and closer scrutiny of IT budgets, which management says have held back expansion and may keep weighing on demand. Macroeconomic pressure, including high inflation, high interest rates, and foreign currency swings, sits in the background as well.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.18B | $1.16B | +1.3% | $1.14B | +3.6% |
| Gross profit | $893.7M | $877.4M | +1.8% | $865.7M | +3.2% |
| Gross margin | 75.9% | 75.5% | +0.4 pp | 76.2% | -0.3 pp |
| Research & development | $223.0M | $206.8M | +7.8% | $196.8M | +13.3% |
| Sales & marketing | $361.7M | $358.8M | +0.8% | $374.4M | -3.4% |
| General & administrative | $126.1M | $109.5M | +15.2% | $125.1M | +0.8% |
| Total operating expenses | $710.8M | $675.1M | +5.3% | $696.4M | +2.1% |
| Operating income (loss) | $182.8M | $202.4M | -9.7% | $169.4M | +7.9% |
| Operating margin | 15.5% | 17.4% | -1.9 pp | 14.9% | +0.6 pp |
| Net income (loss) | $207.1M | $219.0M | -5.5% | $141.2M | +46.6% |
| Net margin | 17.6% | 18.8% | -1.3 pp | 12.4% | +5.2 pp |
| Diluted EPS | $0.66 | $0.70 | -$0.04 | $0.45 | +$0.21 |
Risks
MD&A states macroeconomic factors including high inflation, high interest rates, geopolitical conflicts and foreign currency fluctuations have introduced uncertainty, and Zoom has experienced elongated sales cycles, decreased corporate spending and increased scrutiny on IT spending. The company also cites higher market penetration and increased competition as factors that may contribute to declines in its growth rate.
MD&A discloses that Zoom's trailing 12-month net dollar expansion rate for Enterprise customers was 98% as of October 31, 2024, down from 105% as of October 31, 2023, dropping below 100%. Risk Factors state the revenue growth rate has fluctuated and may continue to decline, and that prior growth should not be relied upon as an indication of future performance.
MD&A notes elongated sales cycles and increased scrutiny on IT spending from existing and potential customers, particularly large organizations. Risk Factors state sales cycles have lengthened as Zoom increases sales to large organizations, leading to higher up-front sales costs and greater unpredictability in results.
Risk Factors state competition may intensify from new entrants and established companies using AI, and that Zoom offers AI features at no additional cost while the investment and costs to provide them may be significant and could negatively impact margins. MD&A reports research and development expense increased 13.3% in the quarter due to AI-first innovation and gross margin decreased to 75.9% from 76.2% partly from increased use of AI functionality and data center backbone investments.
Risk Factors disclose that Zoom has identified high or critical vulnerabilities in its products, services and information systems in the past and expects to continue doing so, including past security researcher reports. The filing states limited budgetary and human resources for detecting and remediating vulnerabilities and difficulties hiring qualified security personnel, especially after recent restructuring actions, while a platform compromise could simultaneously affect many customers.
Risk Factors state competition for software developers, sales personnel and other key employees is intense, and stock price volatility may make equity compensation less attractive and contribute to increased turnover. Recent restructuring actions have also caused employee turnover and may exacerbate difficulty filling positions in a timely manner.
MD&A reports general and administrative expense increased 0.8% in the quarter compared to the prior-year quarter, primarily due to an $18.3 million increase in litigation settlements. Risk Factors also note past securities class action and derivative lawsuits alleging violations of federal securities laws regarding data privacy and security statements, and the possibility of additional litigation.
Risk Factors state a significant portion of Zoom's research and development organization resides in China, and local or national Chinese government interference or restrictions could impair its ability to design new products or deliver services. International operations also face privacy, data protection, telecommunications, anti-corruption, trade and economic sanctions regulations, with potential enforcement actions and fines.
Risk Factors state Zoom has experienced partial outages and other interruptions, relies on co-located data centers and third-party cloud providers, and may be unable to bring additional data centers online in a timely manner, including due to shortages for parts such as servers. Interruptions can reduce revenue, require credits or penalties, and cause customers to terminate subscriptions.
MD&A reports gains on strategic investments, net, of $6.3 million in the quarter compared to losses of $25.5 million in the prior-year quarter. Risk Factors state fair value adjustments for publicly and privately held securities flow through the statement of operations and all investments are subject to partial or total loss of capital, which can add volatility to financial results.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Online Average Monthly Churn
Enterprise Customers
Customers Contributing More Than $100,000 in Trailing 12 Months Revenue
Percentage of total Online MRR from Online customers with continual term of service of at least 16 months
Free Cash Flow Margin (Non-GAAP)
Summary, forecast, risks and KPIs are extracted from Zoom Communications, Inc.'s SEC filings for Q3 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.