EPS of $0.81 increased by 19.3% from previous year
Gross margin of 76.3%
Net income of 254.60M
"N/A" -
Zoom Video Communications Inc (5ZM.F) QQ1 2026 Results: Resilient Revenue, Expanded Margin and Strong Free Cash Flow
Executive Summary
Zoom Video Communications reported QQ1 2026 revenue of $1.1747 billion, up 2.93% year over year despite a modest sequential decline of 0.80%. The company posted a robust gross margin of 76.3% ($896.3 million gross profit), reflecting a high-value SaaS mix and favorable product economics. Operating income reached $241.6 million with an operating margin of 20.6%, illustrating disciplined cost management even as Zoom continues to invest in product development and go-to-market initiatives. Net income of $254.6 million yielded a net margin of 21.7%, supported by a pre-tax income of $315.8 million and a tax expense of $61.2 million, resulting in an EPS of $0.835 (diluted $0.814).
Free cash flow remained a meaningful strength, with $463.4 million of free cash flow and $489.3 million of operating cash flow, underscoring Zoom’s ability to convert earnings into cash while funding investments. The balance sheet remains exceptionally liquid: cash and short-term investments total $7.811 billion, cash and cash equivalents stand at $1.247 billion, and net debt is a net cash position of approximately -$1.185 billion. Total assets are $10.952 billion against total liabilities of $2.050 billion and stockholders’ equity of $8.902 billion. These metrics provide a solid runway for growth initiatives, potential acquisitions, and continued shareholder capital return if pursued.
Overall, Zoom’s QQ1 2026 results demonstrate profitability expansion on a levered base, strong cash generation, and a strategic posture geared toward enterprise growth, AI-enabled enhancements, and an elevated product mix that supports durable margins. Investors should monitor ARR evolution, renewal/retention trends, competitive dynamics with Teams and Webex, and the cadence of R&D and GTM investments that will shape line-of-sight to longer-term sustainable growth.
Key Performance Indicators
Revenue
1.17B
QoQ: -0.80% | YoY:2.93%
Gross Profit
896.31M
76.30% margin
QoQ: -0.05% | YoY:11.08%
Operating Income
241.59M
QoQ: 59.06% | YoY:-12.53%
Net Income
254.60M
QoQ: -30.79% | YoY:17.70%
EPS
0.84
QoQ: -30.42% | YoY:19.29%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $1,174.7 million in QQ1 2026, up 2.93% YoY; QoQ change -0.80%.
Operating Income: $241.592 million; operating margin 20.56%; YoY margin change -12.53%; QoQ increase +59.06% as expense discipline compounds with scale.
EBITDA: $351.081 million; EBITDA margin ≈ 29.99% of revenue.
Net Income: $254.603 million; net margin 21.67%; YoY net margin +17.70%; QoQ change -30.79% (reflecting seasonality and non-operating items).
Financial Highlights
Revenue and Margin Trends:
- Revenue: $1,174.7 million in QQ1 2026, up 2.93% YoY; QoQ change -0.80%.
- Gross Profit: $896.313 million; gross margin 76.30%; YoY margin expansion +11.08%; QoQ margin flat (-0.05%).
- Operating Income: $241.592 million; operating margin 20.56%; YoY margin change -12.53%; QoQ increase +59.06% as expense discipline compounds with scale.
- EBITDA: $351.081 million; EBITDA margin ≈ 29.99% of revenue.
- Net Income: $254.603 million; net margin 21.67%; YoY net margin +17.70%; QoQ change -30.79% (reflecting seasonality and non-operating items).
- Earnings Per Share (EPS): GAAP EPS $0.835; Diluted EPS $0.814; YoY EPS growth +19.29%; QoQ EPS -30.42%.
Profitability and Cash Flow:
- Pre-tax income: $315.765 million; tax expense $61.162 million; effective tax flow aligns with a mid-single-digit to low-20s percentage range given geographic mix.
- Operating cash flow: $489.261 million; capital expenditures: $25.91 million; Free cash flow: $463.351 million.
- Balance sheet liquidity: Cash and short-term investments total $7.811 billion; cash and cash equivalents $1.247 billion; net debt is negative by approximately $1.185 billion (net cash).
Liquidity and Capital Allocation:
- Net cash provided by operating activities funded capital expenditures, stock-based compensation (non-cash, not disclosed), and investing activities, contributing to a healthy free cash flow profile.
- Financing activities contributed to net cash outflow, with modest stock activity and other financing movements; FX movements added ~$11.854 million to cash.
- Total assets: $10.952 billion; total liabilities: $2.050 billion; total stockholders’ equity: $8.902 billion. High liquidity supports continued product investment and potential strategic moves.
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%
59.06%
Net Income
254.60M
17.70%
-30.79%
EPS
0.84
19.29%
-30.42%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management focus themes (as described or implied in earnings discussions):
- Strategy and growth trajectory: Emphasis on expanding product breadth (Meetings, Zoom Phone, Zoom Chat, Zoom Rooms) and leveraging an enterprise-first GTM strategy to grow ARR and cross-sell across product bundles. The company highlighted continued investment in AI-enabled features to enhance meeting productivity and collaboration workflows.
- Operational efficiency and profitability: Emphasis on cost discipline and scale benefits; ongoing optimization of R&D and SG&A spend to maximize margin expansion while sustaining product development.
- Market conditions and adoption: Ongoing demand for hybrid work solutions and secure, scalable cloud communications in global enterprises, with durable pricing power and higher retention across large accounts.
- Financial cadence and capital allocation: Strong FCF generation supports a prudent approach to investments in growth initiatives while maintaining a robust balance sheet and ample liquidity for strategic flexibility.
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Forward Guidance
No explicit numeric guidance was provided in the input materials for QQ1 2026. Qualitative outlook suggests Zoom remains focused on expanding ARR and improving monetization through a diversified product suite (Meetings, Phone, Chat, Rooms, Events, and AI-enhanced capabilities), with continued emphasis on enterprise-scale deployments and international expansion. Key factors that could influence the trajectory include: (1) ARR growth and renewal rates from large global customers, (2) success in upselling/cross-selling across Zoom’s product portfolio, (3) continued margin discipline to sustain or improve operating margin in the low- to mid-20% range, and (4) capital allocation efficiency (R&D intensity vs. revenue growth) and potential strategic acquisitions or investments funded by strong free cash flow. Investors should monitor: bookings pace, customer concentration risk, competitive actions by Teams and Webex, and macro conditions that could impact IT spend.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
5ZM.F Focus
76.30%
N/A
N/A
N/A
307.F
49.50%
8.60%
-6.17%
-45.18%
22UA.F
54.20%
-2.92%
-2.20%
-11.91%
SQ3.F
39.70%
5.71%
0.88%
43.87%
5CV.F
-2.37%
-5.93%
-15.80%
-2.10%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Positive structural economics for Zoom in a cloud collaboration market that remains large and investable. The QQ1 2026 results show a healthy balance between revenue performance and profitability, with sizable free cash flow and a strengthened balance sheet that supports continued investment in product innovation and growth initiatives. The primary upside hinges on successful ARR expansion and cross-sell of the broader Zoom product suite, while the main near-term risks relate to competitive dynamics and macro IT spending trends. Given current liquidity and profitability, the stock presents a compelling risk-adjusted opportunity for investors who favor SaaS entities with durable margins and strong cash generation, recognizing that execution on enterprise expansion and AI-driven product differentiation will be key to sustaining higher growth trajectories over time.
Key Investment Factors
Growth Potential
Zoom aspires to deepen penetration in enterprise collaboration by expanding from Meetings into a broader suite (Phone, Chat, Rooms, Events, and OnZoom) and continuously enhancing AI-driven features to improve productivity. A high gross margin profile (~76%) and sustained FCF generation support ongoing product development and expansion into addressable markets (enterprise, education, healthcare, and public sector). The ability to monetize cross-sell opportunities and expand international footprint represents a meaningful growth lever.
Profitability Risk
Competitive intensity from Microsoft Teams, Cisco Webex, and other collaboration platforms; potential macro headwinds affecting enterprise IT budgets; dependency on cloud infrastructure partners; currency and cross-border tax dynamics; potential gross margin pressure if product mix shifts toward lower-margin offerings or if pricing competition intensifies; execution risk around international expansion and large-account retention.
Financial Position
Very strong liquidity posture with $7.81B in cash and short-term investments and a net cash position (~$1.19B). The balance sheet supports aggressive R&D and GTM investment while preserving downside protection. A large cash cushion enables potential strategic acquisitions or shareholder-friendly actions if pursued.
SWOT Analysis
Strengths
Market-leading video communications platform with a diversified product portfolio (Meetings, Zoom Phone, Chat, Rooms, Events, OnZoom, Webinars).
High gross margins (~76%) and strong free cash flow generation supporting sustainable profitability.
Robust liquidity with a net cash position and substantial cash reserves to fund growth and strategic moves.
Global footprint and multi-market exposure reduce geographic risk and support cross-sell opportunities.
Weaknesses
Revenue growth in QQ1 2026 was modest (YoY +2.93%), indicating slower top-line momentum relative to some peers.
Intense competition from established platforms (Teams, Webex) may pressure price realization and feature differentiation.
Reliance on large enterprise contracts may expose Zoom to macroeconomic sensitivity in IT budgets.
Opportunities
Cross-sell across a broader product suite to existing customers, increasing ARPU and retention.
AI-enabled enhancements to meetings and workflows could boost user productivity and stickiness.
Global expansion and additional vertical solutions (education, healthcare, government) can broaden addressable markets.
Threats
Intensifying competition leading to pricing pressure or aggressive feature parity with rivals.
Security concerns and platform risk in cloud-based communications; regulatory changes could impact usage in certain regions.
Macro headwinds impacting enterprise IT spending and onboarding velocity.
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