EPS of $1.16 increased by 22.5% from previous year
Gross margin of 75.7%
Net income of 367.87M
""We are excited about the differentiated agentic AI vision and the value it’s delivering to customers." - Eric Yuan" - Eric Yuan
Zoom Video Communications Inc (ZM) Q4 2025 Results: Steady Growth Amid AI Advancements
Executive Summary
Zoom Video Communications Inc. has reported Q4 revenues of $1.184 billion, marking a 3% increase year-over-year. This performance shows resilience as the company transitions towards an AI-first work platform amid a competitive technology landscape. The CEO, Eric Yuan, emphasized the rapid adoption of their AI Companion, which saw a 68% quarter-over-quarter growth, positioning the company favorably for future growth. Despite macroeconomic challenges, the company is optimistic about sustaining revenue growth and improving profitability over the coming year as AI capabilities begin to monetize fully.
Key Performance Indicators
Revenue
1.18B
QoQ: 0.56% | YoY:3.29%
Gross Profit
896.78M
75.73% margin
QoQ: 0.35% | YoY:3.06%
Operating Income
151.88M
QoQ: -16.93% | YoY:-9.88%
Net Income
367.87M
QoQ: 77.67% | YoY:23.10%
EPS
1.20
QoQ: 79.10% | YoY:22.45%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $1.184 billion (YoY: 3%, QoQ: 0.56%)
**Gross Profit**: $896.8 million (Gross Profit Margin: 75.7%)
**Operating Income**: $151.9 million (Operating Margin: 12.8%)
**Net Income**: $367.9 million (Net Income Margin: 31.1%, YoY increase of 23.1%)
**EPS**: $1.20 (Diluted EPS: $1.16, YoY increase of 22.5%)
Financial Highlights
Financial Metrics:
- Revenue: $1.184 billion (YoY: 3%, QoQ: 0.56%)
- Gross Profit: $896.8 million (Gross Profit Margin: 75.7%)
- Operating Income: $151.9 million (Operating Margin: 12.8%)
- Net Income: $367.9 million (Net Income Margin: 31.1%, YoY increase of 23.1%)
- EPS: $1.20 (Diluted EPS: $1.16, YoY increase of 22.5%)
- Cash Flow from Operations: $425 million (YoY increase of 21%)
- Free Cash Flow: $416 million (YoY increase of 25%)
Performance Trends:
- steady revenue growth in Enterprise business (6% YoY).
- reduction in churn rate to 2.8% represents operational stability.
Management cited efficiency gains from strategic investments in AI that aim to achieve an 80% gross margin over the long term, although current non-GAAP margins were slightly below that at 78.8%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.18B
3.29%
0.56%
Gross Profit
896.78M
3.06%
0.35%
Operating Income
151.88M
-9.88%
-16.93%
Net Income
367.87M
23.10%
77.67%
EPS
1.20
22.45%
79.10%
Key Financial Ratios
currentRatio
4.56
grossProfitMargin
75.7%
operatingProfitMargin
12.8%
netProfitMargin
31.1%
returnOnAssets
3.35%
returnOnEquity
4.12%
debtEquityRatio
0.01
operatingCashFlowPerShare
$1.39
freeCashFlowPerShare
$1.36
priceToBookRatio
2.98
priceEarningsRatio
18.11
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Themes:
1. AI Integration: Eric Yuan stated, "Zoom AI Companion has emerged as the driving force behind our transformation into an AI-first company."
2. Enterprise Growth: Michelle Chang reported, "Enterprise revenue grew approximately 6% year-over-year and now makes up 60% of our total revenue."
3. Churn Improvement: Chang highlighted, "In Q4, Average Monthly Churn was 2.8%, a 20 basis point improvement year-over-year."
4. Strategic Wins: Notable partnerships were mentioned, including a record deal with a Fortune 100 US tech company and traction with Amazon and Delta Air Lines as market validation of their products.
"We are excited about the differentiated agentic AI vision and the value it’s delivering to customers." - Eric Yuan
— Eric Yuan
"Non-GAAP income from operations grew by 5% year-over-year to $468 million, exceeding the high end of our guidance by $20 million." - Michelle Chang
— Michelle Chang
Forward Guidance
Management provided positive guidance for FY26, anticipating revenue growth of approximately 2.7% year-over-year, up to $4.795 billion. They anticipate further growth in the Enterprise segment and improved profitability. Notably, the implementation of the Custom AI Companion may provide a significant revenue boost in H2 FY26. Observations from the management suggest that with continual product innovation and strategy refinement, this outlook remains achievable amidst a stable macroeconomic improvement.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ZM Focus
75.73%
12.80%
4.12%
18.11%
AI
59.60%
-95.10%
-8.35%
-9.47%
SHOP
48.10%
16.50%
11.20%
26.62%
CRM
77.80%
18.20%
2.79%
47.96%
WDAY
75.60%
3.39%
1.04%
185.28%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment thesis for Zoom Video Communications remains robust, characterized by its expanding AI capabilities and solid financial health. Investors should monitor the performance of the AI Companion and its impact on customer retention and revenue growth. Despite facing competition and macroeconomic risks, Zoom's strategic focus on product innovation, coupled with significant cash reserves, presents a compelling case for long-term investment. Overall, the upcoming fiscal year presents a stable growth pattern substantiated by substantial advancements in their service portfolio.
Key Investment Factors
Growth Potential
Zoom's AI initiatives are set to enhance productivity and customer engagement, with an expected increase in customer stickiness and expansion opportunities in enterprise solutions, particularly with the Contact Center and Workvivo products.
Profitability Risk
Market competition, particularly among incumbents like Microsoft and Cisco, poses a risk given their established presence in unified communications and collaboration tools. Moreover, macroeconomic uncertainties could hamper spending by enterprises on tech infrastructure.
Financial Position
Zoom boasts a robust financial position with approximately $7.8 billion in cash and marketable securities, significantly outpacing its liabilities. The current ratio stands strong at 4.56, indicating ample liquidity to cover short-term obligations.
SWOT Analysis
Strengths
Strong cash position ($7.8 billion available)
Resilience in Enterprise revenue with 6% YoY growth
Continued investment in AI driving customer engagement and product innovation
Weaknesses
Dependence on the Enterprise business segment for growth
Churn improvement is marginal and may impact future growth rates
Opportunities
Expansion into AI-driven features creating new monetization pathways
Structural partnerships with major corporations (Amazon, Delta) enhancing market reach
Growth potential in international markets, especially APAC
Threats
Intense competition from established tech giants
Potential economic downturns leading to reduced IT spending