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Zoom Communications (ZM) is trading lower despite exceeding Q2 expectations as investors focus on softer Q3 guidance and continued weakness in the Online business rather than the quarter’s Enterprise-led upside. Q3 adjusted EPS guidance of $1.46-$1.48 fell below the $1.50 FactSet consensus, while revenue guidance of $1.275-$1.280 bln was slightly below the $1.282 bln consensus, overshadowing raised FY27 revenue, EPS, and free-cash-flow forecasts.

• Enterprise revenue reached $787.5 mln, up 7.8% yr/yr -- its strongest growth in three years -- and materially outpaced total revenue growth of 4.9%. Customers contributing more than $100,000 in trailing revenue increased 8.2% and accounted for 33% of total revenue, demonstrating progress with larger, multi-product relationships.
• Non-GAAP gross margin declined 70 bps to 79.1%, while non-GAAP operating margin contracted to 40.0% from 41.3%. ZM remains highly profitable, but increased AI usage and investment are creating compute costs before emerging products contribute enough revenue to preserve prior-year margins.
• Licensed monthly active users of Workplace AI features increased 125%, Zoom Virtual Agent customers grew 256%, and paid AI appeared in nine of the ten largest Zoom CX deals. Zoom CX ARR continued growing at a high-double-digit rate, providing evidence that AI is beginning to generate revenue rather than serving only as a product narrative.
• RPO increased 14% to approximately $4.5 bln, led by 25% growth in non-current RPO, while deferred revenue rose 6%, well above Zoom’s prior 2-3% expectation. However, Enterprise net dollar expansion remained at 99%, indicating slight contraction within the existing customer base, and management reduced its FY27 Online assumption from slight growth to flat following weaker top-of-funnel activity.
• ZM raised FY27 adjusted EPS guidance to $6.08-$6.12 from $5.96-$6.00 and nudged revenue guidance higher to $5.085-$5.095 bln. It also lifted free-cash-flow guidance to $1.78-$1.82 bln, reflecting first-half performance and reduced capital-spending expectations, although Q2 free cash flow declined yr/yr to $472 mln.

Briefing.com Analyst Insight

The central tension is that ZM’s enterprise transformation is producing credible operating progress, but not yet enough consolidated acceleration to satisfy investors. Faster Enterprise growth, robust RPO, larger platform deals, and paid AI adoption support the strategy, while the recent Common Room acquisition contributes only a de minimis amount of revenue and therefore does not meaningfully inflate the outlook. The challenge is that Online revenue grew just 0.6%, Enterprise net expansion remains below 100%, and rising AI usage is pressuring gross margin before monetization reaches greater scale. Consequently, the stronger full-year outlook offers less reassurance when the immediate Q3 forecast suggests growth will decelerate to approximately 3.9%. The next checkpoints are whether Enterprise net expansion rises above 100%, Online customer acquisition stabilizes, AI revenue scales faster than compute costs, and strong RPO converts into sustained revenue growth.