Summary
Zoom closed the third quarter of fiscal 2026 with steady top-line growth and much wider GAAP profitability. Total revenue was $1,229.8 million for the quarter, up 4.4% from the prior-year quarter. The mix kept tilting toward larger accounts. Enterprise customers supplied 60.3% of total revenue, up from 59.4% a year earlier.
Gross margin reached 77.9%, up 2.0 percentage points from 75.9%. GAAP operating income of $310.4 million rose 69.8%, and GAAP operating margin of 25.2% was up 9.7 percentage points from the prior-year quarter. GAAP net income of $612.9 million rose 196.0%, and diluted EPS of $2.01 rose from $0.66 a year earlier. Those numbers lean on a large gain on strategic investments. Non-GAAP net income, which excludes that gain along with stock-based compensation and related payroll taxes and other adjustments, was $462.8 million, or $1.52 per diluted share. Non-GAAP operating margin was 41.2%.
Every operating expense line declined. Management tied the drop mostly to lower stock-based compensation after changes to the equity program, plus a prior-year accrual tied to an SEC investigation in general and administrative. Cost of revenue also fell, helped by cloud optimizations and lower hosting costs. This is genuine margin expansion, though part of it reflects a lighter equity program rather than pricing power.
Cash generation was the standout. Operating cash flow of $629.3 million rose 30.2% from the prior-year quarter, with an operating cash flow margin of 51.2%. Free cash flow, which the company defines as operating cash flow less purchases of property and equipment, was $614.3 million, a free cash flow margin of 50.0%. Capital expenditures of $15.0 million fell 41.1%, which flattered that comparison. For the nine months, operating cash flow of $1.63 billion was up 7.5% and capital expenditures of $48.9 million were down 61.9%. Current deferred revenue was $1.43 billion, up 5.0%, and remaining performance obligations were $4.02 billion, up 7.5%. Cash, cash equivalents and marketable securities totaled $7.9 billion.
Customer metrics were mixed. Zoom ended the quarter with 4,363 customers contributing more than $100,000 in trailing 12 months revenue, up 9.2%, and those accounts generated 32.4% of total revenue, up from 30.8%. The trailing 12-month net dollar expansion rate for Enterprise customers was 98%, unchanged from a year earlier, and Online average monthly churn of 2.7% was flat year over year. The installed base is stable, but it is not expanding much on its own.
Guidance for the fourth quarter of fiscal 2026 calls for revenue of $1.230 billion to $1.235 billion, non-GAAP income from operations of $477.0 million to $482.0 million, and non-GAAP diluted EPS of $1.48 to $1.49 on roughly 305 million weighted average shares. For the full fiscal year 2026, management guides revenue to $4.852 billion to $4.857 billion, non-GAAP income from operations to $1.955 billion to $1.960 billion, non-GAAP diluted EPS to $5.95 to $5.97 on about 308 million shares, and free cash flow to $1.860 billion to $1.880 billion.
Capital return stayed aggressive. Zoom repurchased approximately 5.1 million shares in the quarter, bringing total repurchases under the current plan to 32.5 million. In November 2025 the board authorized another $1.0 billion, on top of $310.4 million left under the prior authorization as of October 31, 2025. The buyback is funded from working capital.
Risks look familiar. Management points to macroeconomic uncertainty, geopolitical conflicts, tariffs and escalating trade tensions, interest rate and foreign currency volatility, and government shutdowns, all of which have elongated sales cycles and made enterprises more cautious. An expansion rate below 100% means existing Enterprise customers are not adding enough seats to offset downsells. Competition across communications platforms, the pace of AI adoption, outages at co-located data centers and compromised security measures are also named. The bet for a reacceleration is AI Companion 3.0, which the company expects to be generally available in December 2025 for all paid Zoom Workplace users at no additional cost.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2026 | Q2 FY2026 | QoQ | Q3 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.23B | $1.22B | +1.0% | $1.18B | +4.4% |
| Gross profit | $958.1M | $944.1M | +1.5% | $893.7M | +7.2% |
| Gross margin | 77.9% | 77.6% | +0.3 pp | 75.9% | +2.0 pp |
| Research & development | $210.1M | $206.4M | +1.8% | $223.0M | -5.8% |
| Sales & marketing | $342.8M | $339.0M | +1.1% | $361.7M | -5.2% |
| General & administrative | $94.7M | $76.9M | +23.2% | $126.1M | -24.9% |
| Total operating expenses | $647.7M | $622.3M | +4.1% | $710.8M | -8.9% |
| Operating income (loss) | $310.4M | $321.7M | -3.5% | $182.8M | +69.8% |
| Operating margin | 25.2% | 26.4% | -1.2 pp | 15.5% | +9.7 pp |
| Net income (loss) | $612.9M | $358.6M | +70.9% | $207.1M | +196.0% |
| Net margin | 49.8% | 29.5% | +20.4 pp | 17.6% | +32.3 pp |
| Diluted EPS | $2.01 | $1.16 | +$0.85 | $0.66 | +$1.35 |
Risks
Macroeconomic uncertainty, including geopolitical conflicts, inflationary pressures, government shutdowns, tariffs, and foreign currency volatility, has led to elongated sales cycles and increased caution in enterprise spending. MD&A notes these factors may further impact customer upsell or downsell activity.
Competition is intensifying from hyperscalers and new market entrants, including AI-powered communication and collaboration tools. Zoom invests heavily in AI but offers features like AI Companion 3.0 at no additional cost, which could negatively impact margins if the expected benefits are not realized.
Trailing 12-month net dollar expansion rate for Enterprise customers was 98% as of October 31, 2025 and 2024, below 100%, due to macroeconomic headwinds, slower hiring, and higher seat count downsells. MD&A states this has impacted the rate of expansion.
Zoom has experienced security incidents and vulnerabilities in the past and faces evolving threats including ransomware, nation-state attacks, and attacks enhanced by AI. Reliance on third parties for critical systems and data introduces supply-chain risks that could lead to large-scale customer impact.
A significant portion of Zoom's research and development organization resides in China, exposing it to government interference, regulatory scrutiny, and geopolitical tensions including US-China trade disputes and tariffs. Any restrictions on R&D operations could impair product development timelines.
Competition for skilled personnel is intense, and recent restructuring actions have exacerbated difficulties in hiring and retaining employees, particularly security personnel. Risk Factors note that new hires may not become as productive as expected and that equity compensation may be less attractive due to stock price volatility.
Zoom holds strategic investments in publicly traded and privately held companies, and recorded gains on strategic investments, net of $406.1 million for the quarter ended October 31, 2025, primarily from fair value changes in privately held securities. These fair value adjustments flow through the income statement and can cause significant volatility.
Revenue growth rate has fluctuated and may continue to decline. For the quarter ended October 31, 2025, revenue grew 4.4% year-over-year to $1.23 billion, and year-to-date revenue grew 4.0%. MD&A and Risk Factors cite factors such as higher market penetration, increased competition, and macroeconomic conditions.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Online Average Monthly Churn
Free cash flow margin
Customers Contributing More Than $100,000 in TTM Revenue
Summary, forecast, risks and KPIs are extracted from Zoom Communications, Inc.'s SEC filings for Q3 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.