Zoom Q1 FY26 slides reveal 3% revenue growth, raised outlook on AI momentum

Zoom (ZM) reported Q1 FY26 revenue of $1.175 billion, a 3% year-over-year increase, driven by a 6% rise in enterprise revenue to $705 million, now 60% of total revenue. The company highlighted a 40% increase in monthly active users for its AI features and strong growth in department-specific solutions like Contact Center (up 65%). Zoom raised its FY26 revenue outlook to $4.8-$4.81 billion and expects non-GAAP EPS of $5.56-$5.59, reflecting confidence in continued momentum; the company also repurchased $418 million in shares during the quarter.

Analysis

Zoom Video Communications Inc. (NASDAQ:ZM) reported Q1 FY26 results demonstrating resilience and strategic progress, with total revenue increasing 3% year-over-year to $1,175 million. The enterprise segment was a key driver, with revenue climbing 6% YoY to $705 million, now constituting 60% of total revenue. This shift underscores Zoom's successful pivot towards higher-value enterprise clients, evidenced by an 8% YoY increase in customers contributing over $100,000 in trailing twelve-month revenue, who now account for 32% of total TTM revenue. Additionally, online average monthly churn improved to 2.8% from 3.2% in the prior year, indicating enhanced customer retention. Geographically, Americas revenue grew 4% to $848 million, while EMEA and APAC saw modest increases of 1% and 2% respectively. A core element of Zoom's strategy is AI innovation; the company reported a 40% rise in monthly active users for its AI features and launched new monetized AI products like Custom AI Companion. Department-specific solutions also showed significant traction: Contact Center customers grew 65% YoY, Revenue Accelerator licenses increased 72% YoY, and Workvivo customers more than doubled with 106% YoY growth. Notable new partnerships include Meta as a migration partner and Bell for channel expansion. Financially, Zoom showcased strong profitability with a GAAP operating margin of 20.6% and a non-GAAP operating margin of 39.8%. GAAP diluted EPS rose 17% YoY to $0.81, and non-GAAP diluted EPS increased 6% to $1.43. The company generated $463 million in free cash flow (39.4% margin) and repurchased $418 million of shares. Reflecting this performance, Zoom raised its FY26 revenue guidance to $4,800-$4,810 million (approx. 3% growth) and non-GAAP EPS to $5.56-$5.59. Total RPO grew 6% YoY to $3,877 million, with current RPO up 8%, suggesting solid near-term revenue visibility despite the modest overall top-line growth.

Key Decisions for Investors

• Investors should note the positive signals from accelerating enterprise segment growth, significant AI adoption, and robust profitability, which offset the modest overall revenue increase.
• Monitor the continued monetization of AI features and the growth trajectory of department-specific solutions, as these are key to sustaining momentum and margin expansion.
• Consider the impact of the ongoing share repurchase program, supported by strong free cash flow generation, which is likely to provide support to the stock and enhance shareholder returns.
• Evaluate Zoom's ability to maintain its raised full-year guidance, particularly given the challenging post-pandemic normalization and the competitive landscape for integrated workplace platforms.