Zoom Video Communications(NASDAQ:ZM) reported results for the fiscal second quarter ended July 31, 2025, with revenue up 4.7% year over year to $1.22 billion and non-GAAP diluted EPS of $1.53, both exceeding non-GAAP guidance. Free cash flow rose 39% year over year to $508 million (41.7% margin); the company ended the quarter with $7.8 billion in cash and marketable securities and repurchased 6 million shares for $463 million. The company also accelerated share buybacks and raised full-year revenue and profitability outlooks for fiscal 2026 while highlighting rapid AI adoption and strong enterprise traction.
AI companion adoption drives platform engagement at Zoom Video Communications
Monthly active users of AI Companion, Zoom Video Communications’ integrated artificial intelligence (AI) suite, increased over fourfold year over year, now in the millions, with usage broadening to meeting preparation, post-meeting task management, and new AI-supported features for Zoom Phone and Zoom Docs. AI-driven tools contributed to large-scale enterprise wins, such as a deployment of nearly 60,000 seats at a Fortune 200 U.S. technology company and measurable cost reductions for customers like SecureONE through Virtual Agent 2.0.
“Reflecting this impact, AI Companion Monthly active users have grown over four times year over year, with millions using our AI to boost business value throughout the meeting life cycle and beyond. AI adoption now extends well beyond meeting summaries, with strong momentum in meeting prep and post-meeting task management, call summaries for Zoom Phone, and AI-first meeting integration in content generation capabilities for Zoom Docs. This progress is just the beginning, and we look forward to sharing more AI innovations at Zoomtopia next month.”
Accelerating user adoption of AI features strengthens customer stickiness, increases cross-sell opportunities, and positions Zoom Video Communications to lead future enterprise collaboration software innovation.
Zoom Video Communications delivers best-in-class profitability and robust free cash flow
Non-GAAP gross margin reached 79.8%, up 128 basis points year over year, while non-GAAP operating income of $503 million (41.3% margin) topped guidance by $38 million, and free cash flow rose 39% year over year to $508 million (41.7% margin). The company ended the quarter with $7.8 billion in cash and marketable securities and repurchased 6 million shares for $463 million. These financial achievements were driven by sustained enterprise growth, low churn, and careful management of AI infrastructure costs, including migration from cloud to colocation data centers.
“Non-GAAP operating margin was 41.3%, up 216 basis points from Q2 of last year. The non-GAAP operating margin improvement was driven by ongoing cost management and timing of spend. Non-GAAP diluted net income per share was $1.53 on approximately 308 million non-GAAP diluted weighted average shares outstanding. This result was 16¢ above the high end of our non-GAAP guidance and 14¢ higher than ’25. The non-GAAP EPS growth reflects strong business performance, effective cost management, and less dilution, driven by our buyback program and disciplined stock compensation management. Turning to the balance sheet, deferred revenue at the end of the quarter grew 5% year over year to $1.48 billion, slightly ahead of the high end of our previously provided range. In the fiscal third quarter ending October 31, 2025, we expect deferred revenue to be up 4% to 5% year over year. … We expect to recognize just under 61% of the total RPO as revenue over the next 12 months (from the fiscal second quarter ended July 31, 2025), slightly up from 60% in fiscal 2025.”
Zoom Video Communications’ ability to expand margins and generate strong free cash flow, even while investing in AI, demonstrates operational discipline and supports ongoing shareholder returns.
The number of Zoom Video Communications Contact Center customers with over $100,000 annual recurring revenue (ARR) grew 94% year over year to 229, and Zoom Phone maintained mid-teens ARR growth despite already-large scale. Among the top 10 contact center deals, nine replaced the leading contact center provider, and seven were explicitly AI-driven, with cross-selling expanding penetration in upmarket accounts. The growth highlights Zoom’s ability to win with large accounts in high-stakes deployments and migrate them into the high-end AI products.
“Our top 10 contact center deals were all of leading competitors, and all but one were cloud displacements. Inland Real Estate Group, whose member companies employ more than 1,200 people, faced challenges for years managing disparate systems. … We have also made progress in building additional routes to market. We are excited about our newly established collaboration with PwC, which expands our Zoom contact center and AI opportunity and ability to meet the needs of global enterprise customers. Together, we have already co-sold several large deals, including a Fortune 50 technology firm for which PwC will provide advisory and implementation services. Our employee experience offering continued to shine with WorkVivo reaching 168 customers with over $100,000 ARR, up 142% year over year.”
This rapid upmarket expansion in contact center and phone demonstrates effective execution against leading competitors and highlights the company’s ability to win large, complex enterprise deals.
Looking ahead
Management raised fiscal 2026 guidance: revenue is now projected at $4.83 billion to $4.84 billion (midpoint 3.5% year-over-year growth), non-GAAP operating income is projected at $1.91 billion to $1.92 billion (39.5% margin), non-GAAP EPS is forecast at $5.81 to $5.84, and free cash flow is expected to reach $1.74 billion to $1.78 billion. Fiscal third-quarter revenue guidance implies 3% year-over-year growth at the midpoint, with underlying momentum driven by continued expansion in enterprise and AI-driven workloads. No explicit quantification was provided for Custom AI Companion monetization; management expects material AI revenue uplift primarily from fiscal 2027 onward.
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