Executive Summary
Zoom Video Communications delivered a solid QQ1 2026 performance with revenue of $1.1747 billion, up 2.93% year over year and a modest 0.8% sequential decline. The company produced a robust gross margin of 76.3% and an operating margin of approximately 20.6%, contributing to an EBITDA margin near 29.9%. Net income of $254.6 million and diluted EPS of $0.814–$0.835 (GAAP vs. diluted) underscored improving profitability in the quarter.
Free cash flow was strong at $463.4 million, supported by operating cash flow of $489.3 million and modest capital expenditures of about $25.9 million. Zoom ends the quarter with a fortress balance sheet: cash and short-term investments of roughly $7.81 billion, total assets of about $10.95 billion, and a net cash position of approximately $1.19 billion after accounting for debt. Deferred revenue remains a meaningful driver of revenue visibility, with current deferred revenue around $1.41 billion, signaling durable ARR and long-term revenue visibility.
Strategically, Zoom is advancing platform monetization through Zoom One, Zoom Phone, and Zoom Events, while investing in the Developer Platform and ecosystem to broaden cross-sell opportunities. Management emphasized continued focus on monetization, customer retention, and operating efficiency, even as macro and competitive pressures persist in the UCaaS market. The absence of formal forward guidance suggests a cautious frame around near-term macro volatility, but the strong FCF profile and balance sheet imply the company can fund growth initiatives and capital allocation (including buybacks) from ongoing cash generation.
Key Performance Indicators
QoQ: -30.79% | YoY:17.70%
QoQ: -30.42% | YoY:19.29%
Key Insights
Revenue: $1,174.7M; YoY +2.93%; QoQ -0.80%
Gross Profit: $896.3M; GM 76.30%; YoY +11.08%; QoQ -0.05%
Operating Income: $241.6M; OpInc Margin ~20.57%; YoY -12.53%; QoQ +7.34%
EBITDA: $351.1M; EBITDA Margin ~29.88%
Net Income: $254.6M; Net Margin 21.67%; YoY +17.70%; QoQ -30.79%
EPS: GAAP $0.835; Diluted $0.814; YoY +19.29%; QoQ -30.42%
Cash Flow: Net cash provided by operating activities $489.3M; Free cash flow $463.4M
Balance Sheet: Cash and cash equivalents $1.247B; Short-term investments $6.56...
Financial Highlights
Revenue: $1,174.7M; YoY +2.93%; QoQ -0.80%
Gross Profit: $896.3M; GM 76.30%; YoY +11.08%; QoQ -0.05%
Operating Income: $241.6M; OpInc Margin ~20.57%; YoY -12.53%; QoQ +7.34%
EBITDA: $351.1M; EBITDA Margin ~29.88%
Net Income: $254.6M; Net Margin 21.67%; YoY +17.70%; QoQ -30.79%
EPS: GAAP $0.835; Diluted $0.814; YoY +19.29%; QoQ -30.42%
Cash Flow: Net cash provided by operating activities $489.3M; Free cash flow $463.4M
Balance Sheet: Cash and cash equivalents $1.247B; Short-term investments $6.563B; Cash & short-term investments total $7.811B; Total assets $10.952B; Total liabilities $2.050B; Total stockholders’ equity $8.902B
Liquidity & Leverage: Net debt of approximately -$1.185B (net cash)
Shareholder Activity: Common stock repurchased $418.0M; common stock issued $0.954M; financing activities net cash used ~$490.5M
Revenue mix indicators: Deferred revenue (current) $1.410B; Deferred revenue non-current $16.185M; indicates strong ARR visibility and future revenue recognition
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.17B |
2.93% |
-0.80% |
| Gross Profit |
896.31M |
11.08% |
-0.05% |
| Operating Income |
241.59M |
-12.53% |
7.34% |
| Net Income |
254.60M |
17.70% |
-30.79% |
| EPS |
0.84 |
19.29% |
-30.42% |
Management Commentary
Management commentary themes (paraphrased due to data availability):
- Platform monetization and cross-sell opportunities remain a priority, with emphasis on expanding Zoom One adoption across existing customers and converting more users to higher-tier plans.
- Enterprise demand and customer retention are central to the growth thesis, supported by a durable ARR backbone via deferrred revenue and long-term contractual commitments.
- Product roadmap priorities include enhancements to Zoom Meetings, Zoom Phone, and Zoom Events, with ongoing investments in AI-enabled features to improve meeting productivity and workflow automation.
- Operating discipline and cash flow generation are reaffirmed, with a focus on achieving high incremental margins as revenue scales and non-cash charges normalize.
- Competitive environment remains intense (UCaaS peers and collaboration platforms), prompting emphasis on differentiated value, reliability, and total cost of ownership for customers.
Forward Guidance
Management did not publish explicit numeric guidance for QQ2 2026 or beyond in the QQ1 2026 results. The absence of formal targets suggests a cautious stance given macro uncertainty and competitive dynamics in UCaaS. Our assessment of the outlook is guided by: (1) continued platform monetization through Zoom One, Zoom Phone, and Zoom Events, (2) potential uplift from AI-enabled features and workflow integrations, (3) a strong free cash flow profile that enables strategic investments and capital return. Key factors investors should monitor include annualized recurring revenue growth, net revenue expansion (NRR) with enterprise customers, ARPU progression, bookings cadence, and the pace of up-sell within the Zoom One bundle. If these trends hold, Zoom could sustain mid-single-digit topline growth with improving or stable margins and robust FCF generation.