Zoom Communications Inc (NASDAQ:ZM) Reports Q3 FY2026 Earnings Beat, Mixed Revenue, and Cautious Guidance

Zoom Communications Inc (NASDAQ:ZM) announced financial results for its third fiscal quarter of 2026, delivering a performance that presented a nuanced picture for investors. The company surpassed bottom-line expectations but reported revenue that fell short of analyst forecasts, leading to a mixed interpretation of its current trajectory.

Earnings and Revenue Versus Estimates

The video communications provider reported non-GAAP earnings per share (EPS) of $1.52, which exceeded the analyst consensus estimate of $1.48. This represents a 10.1% increase from the $1.38 EPS reported in the same quarter last year. On the top line, the company posted revenue of $1.23 billion, a 4.4% year-over-year increase. However, this figure came in slightly below the market's expectation of $1.25 billion.

The company's performance highlights include:

• Non-GAAP EPS: $1.52 (Actual) vs. $1.48 (Estimate) - a beat of $0.04 per share.
• Total Revenue: $1.23 billion (Actual) vs. $1.25 billion (Estimate) - a slight miss.
• Enterprise Revenue: Showed stronger growth, increasing 6.1% year-over-year to $741.4 million.

Market Reaction and Price Action

Following the earnings release, Zoom's stock experienced a positive after-market reaction, climbing approximately 3.7%. This immediate response suggests that investors may be focusing more on the earnings beat and the company's profitability metrics rather than the slight revenue miss. The positive after-hours movement stands in contrast to the stock's performance over the past month, which had seen a decline of over 7%.

Financial Outlook and Guidance

Zoom provided its financial outlook for the fourth quarter and updated its full-year fiscal 2026 guidance. The company's projections for the upcoming quarter appear cautious relative to analyst expectations.

• Q4 FY2026 Revenue Guidance: $1.230 - $1.235 billion.
• Analyst Q4 Revenue Estimate: $1.266 billion.
• Full-Year FY2026 Revenue Guidance: $4.852 - $4.857 billion.
• Analyst Full-Year Revenue Estimate: $4.978 billion.

The company's guidance for the next quarter and full year is notably below current analyst consensus, which likely tempered investor enthusiasm and provides context for the stock's recent weakness leading up to the earnings report.

Key Highlights from the Quarter

Beyond the headline EPS and revenue figures, Zoom demonstrated significant strength in profitability and cash flow generation. The company's operational discipline was evident in several key areas:

• Operating Cash Flow: Surged 30.2% year-over-year to $629.3 million.
• Free Cash Flow Margin: Reached 50.0%, highlighting highly efficient operations.
• GAAP Operating Margin: Stood at a robust 25.2%.
• Large Customer Growth: The number of customers contributing more than $100,000 in trailing 12-month revenue grew 9.2% year-over-year.
• Capital Return: The Board authorized an additional $1.0 billion for stock repurchases, underscoring confidence in the company's financial health and commitment to returning value to shareholders.

CEO Eric Yuan emphasized the company's progress in becoming an "AI-first platform," citing meaningful adoption growth of AI Companion 3.0 and strong momentum in the AI-powered Customer Experience suite.

Conclusion

Zoom's third-quarter results paint a picture of a company that is expertly managing for profitability and cash flow, even as its revenue growth moderates. The significant beats on EPS and cash flow metrics, coupled with substantial shareholder returns through buybacks, provided enough positive catalysts to drive the stock higher after hours. However, the conservative forward guidance indicates that management anticipates continued headwinds or a slower pace of growth in the near term. Investors will be watching closely to see if the company's AI innovations can eventually reaccelerate top-line expansion to match its impressive bottom-line performance.

For a detailed look at upcoming earnings dates and analyst estimates, you can review Zoom's earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial advice, or trading advice. It should not be relied upon to make investment decisions.