Zoom Communications Inc Earnings - Q3 2025 Analysis & Highlights
Zoom Communications Inc's Q3 2026 earnings call, held on 2025-11-24, highlighted strong financial results, AI-driven growth strategies, and a focus on customer experience. The company is transitioning into an AI-first platform, emphasizing innovation and disciplined financial management.
Key Financial Results
Total revenue grew by 4.4% year-over-year to $1.23 billion, or 4.2% in constant currency, exceeding guidance by $15 million.
Non-GAAP gross margin was 80%, up 117 basis points from the previous year, driven by cost optimization.
Non-GAAP income from operations increased by 11% year-over-year to $507 million, surpassing guidance by $37 million.
Non-GAAP operating margin was 41.2%, up 234 basis points from the prior year.
Non-GAAP diluted net income per share increased to $1.52, based on approximately 305 million non-GAAP diluted weighted average shares outstanding, $0.08 above guidance and $0.14 higher than the previous year.
Operating cash flow grew 30% year-over-year to $629 million, representing a 51.2% operating cash flow margin.
Free cash flow grew 34% year-over-year to $614 million, representing a 50% free cash flow margin, up 11 points year-over-year.
The company ended the quarter with $7.9 billion in cash, cash equivalents, and marketable securities, excluding restricted cash.
Business Segment Results
Enterprise revenue grew 6.1% year-over-year, representing 60% of total revenue, up 1 point year-over-year.
The Online business showed signs of stabilizing, with average monthly churn at 2.7%, an all-time low.
Customer Experience delivered a phenomenal quarter with ARR continuing to grow in the high double digits.
Capital Allocation
The company repurchased 5.1 million shares for $414 million in Q3.
As of the end of Q3, the company repurchased 32.5 million shares for $2.4 billion.
The board authorized an incremental $1 billion share repurchase program.
Industry Trends and Dynamics
The company is focused on AI-led innovation and platform expansion.
There is a growing demand for smarter, more seamless ways to work, reflected in the surge in AI Companion adoption.
Customers are seeking unified, AI-first platforms to replace fragmented legacy systems.
Competitive Landscape
Zoom Phone surpassed 10 million paid seats, reinforcing its leadership in unified communications.
Zoom was included in the 2025 Gartner Magic Quadrant for Contact Center as a Service, three years after launching Zoom Contact Center.
Growth Opportunities and Strategies
Elevating core products with AI, including the unveiling of AI Companion 3.0.
Driving growth of new AI products, such as Custom AI Companion.
Scaling AI-first Customer Experience, with AI becoming a clear differentiator.
Acquiring BrightHire, an AI-powered hiring intelligence platform, to enhance the hiring process.
Focusing on integrations with other productivity software apps.
Leveraging channel partners for go-to-market strategy, especially for Contact Center solutions.
Financial Guidance and Outlook
For Q4 2026, revenue is expected to be in the range of $1.23 billion to $1.235 billion, representing approximately 4.1% year-over-year growth at the midpoint.
Non-GAAP operating income for Q4 is expected to be in the range of $477 million to $482 million, representing an operating margin of 38.9% at the midpoint.
Non-GAAP earnings per share for Q4 are projected to be $1.48 to $1.49, based on approximately 305 million shares outstanding.
For the full year 2026, revenue is expected to be in the range of $4.852 billion to $4.857 billion, representing approximately 4.1% year-over-year growth at the midpoint.
Full year non-GAAP operating income is projected to be $1.955 billion to $1.96 billion, representing an operating margin of 40.3% at the midpoint.
Full year non-GAAP earnings per share are expected to increase to $5.95 to $5.97, based on approximately 308 million shares outstanding.
Free cash flow for the full year is expected to be in the range of $1.86 billion to $1.88 billion, representing approximately 3.4% year-over-year growth at the midpoint.
