Zoom Reports Strong Q2: Cash Flow Jumps 39% Amid AI Push

Zoom Exceeds Expectations in Q2 FY2026

Zoom Video Communications (NASDAQ: ZM), known for its video conferencing software and now expanding into unified communications, released its second quarter fiscal 2026 results on August 21, 2025. The company reported higher revenue, stronger non-GAAP earnings, and sharply improved non-GAAP margins compared to both its own past guidance and Wall Street expectations.

Key Highlights:

• Revenue rose 4.7% year over year to $1,217.2 million in Q2 FY2026, outpacing both company guidance and analyst estimates (non-GAAP).
• Non-GAAP earnings per share were $1.53, beating expectations by $0.14 and up 10.0% year over year.
• Operating margin expanded by 9 percentage points year over year on a GAAP basis, and Free cash flow (non-GAAP) jumped 39.1% year over year compared to Q2 FY2025.

Revenue came in at $1,217.2 million, above both the $1,211.12 million analyst consensus (non-GAAP) and the company’s forecasted range. Non-GAAP earnings per share (EPS) registered at $1.53, ahead of the $1.39 estimate. Free cash flow (non-GAAP) grew 39.1% year over year compared to Q2 FY2025. Overall, the quarter reflected significant progress in profitability, ongoing cash generation, and continued momentum in its core Enterprise segment.

Financial Performance Analysis

Zoom's financial performance in Q2 FY2026 reflects the company's ability to adapt to the changing market environment and focus on innovation and expanding its offerings. The growth in the Enterprise segment highlights the importance of the solutions Zoom provides to large companies, while the stability of the Online segment indicates continued customer loyalty. In addition, the significant increase in free cash flow strengthens the company's financial position and provides flexibility to invest in future growth.

Focus on AI and Innovation

Zoom's initiatives in the field of artificial intelligence, especially AI Companion, are a strategic step towards enhancing the value of its platform and providing an enhanced user experience. By integrating AI into collaboration tools, Zoom seeks to increase productivity and reduce costs for its customers. However, it is important to note that revenue from these initiatives may not be material until later periods.

Challenges and Future Opportunities

Despite the strong performance in Q2, Zoom faces some challenges, including strong competition from companies that offer bundled communications solutions as part of broader productivity suites. In addition, stock-based compensation continues to represent a significant expense for the company. However, the continued focus on innovation, international expansion, and maintaining strong security standards provides significant opportunities for future growth.

Future Company Expectations

For Q3 FY2026, management guided GAAP revenue in the range of $1,210 to $1,215 million. Full-year guidance was raised: management now expects revenue of $4,825 to $4,835 million and free cash flow (non-GAAP) of $1.74 to $1.78 billion. This forecast illustrates management's confidence in the company's ability to maintain its strong performance and achieve sustainable growth in the future.