Zoom Boasts 11-Quarter Growth Streak, Raises 2026 Guidance

Zoom (ZM) reported strong fiscal Q2 results, with revenue of $1.217 billion and non-GAAP EPS of $1.53, both exceeding consensus estimates and driving a 10.45% share rally. The company also raised its FY26 revenue guidance to $4.825-$4.835 billion and non-GAAP EPS to $5.81-$5.84, surpassing Street expectations. This positive performance, attributed to accelerating enterprise demand, AI adoption, and Contact Center momentum, signals a re-acceleration in revenue growth and improved profitability, leading to mostly positive analyst reactions and increased price targets.

Analysis

Zoom Communications reported a strong fiscal second quarter, with revenue of $1.22 billion, a 4.7% year-over-year increase marking the most significant growth in 11 quarters, and a non-GAAP EPS of $1.53, both surpassing consensus estimates. This performance was driven by accelerating demand in the Enterprise segment, which saw a 1% sequential increase in customers to 184,000, and significant momentum in newer offerings like the Contact Center, where customers with over $100,000 in annual recurring revenue grew 94% year-on-year. Profitability also improved, with non-GAAP gross margin expanding to 79.8%, nearing the company's 80% target, partially attributed to AI integration. Management raised its full-year fiscal 2026 guidance for revenue to $4.825-$4.835 billion and non-GAAP EPS to $5.81-$5.84, exceeding prior Street expectations. Despite the overwhelmingly positive results, which spurred a 10.45% share price increase, some analysts noted points of caution: the implied Q3 billings guidance is slightly below consensus, and the full-year guidance was raised by less than the Q2 revenue beat, which some interpret as prudent conservatism while others see it as a potential risk.

Key Decisions for Investors

• Given the reaccelerating enterprise growth and margin expansion, these results may validate the company's post-pandemic strategic pivot, suggesting potential for a sustained turnaround.
• Investors should closely monitor future billings growth, as the fiscal third-quarter guidance was slightly below consensus, which could be a leading indicator of future revenue trends.
• The conservative full-year guidance raise relative to the Q2 beat presents a key debate; this could be a prudent setup for future outperformance or a sign of underlying caution from management about the second half of the year.
• With most analysts raising price targets into the $100-$110 range, investors should evaluate the remaining upside from the current price level following the significant post-earnings rally.