Zoom Communications Eyes Steady Growth Amid Earnings Report

Zoom Communications anticipates promising revenues and EPS as it gears up for its Q1 2026 results. The news suggests ongoing enterprise growth and AI investments may mitigate margin pressures.

Date: 20-05-2025

AI Rating: 6

Analysis of Zoom Communications Earnings Preview

Zoom Communications is set to report its fiscal 2026 first-quarter results on May 21, with revenue expectations between $1.162 billion and $1.167 billion and non-GAAP EPS ranging from $1.29 to $1.31. The Zacks Consensus Estimate for revenue aligns at $1.16 billion, reflecting a 2.03% year-over-year growth, while the earnings consensus of $1.30 suggests a 3.70% decline from the previous year.

Notably, Zoom has a track record of surpassing earnings estimates, which could provide a supportive backdrop for investor sentiment. The company's push into AI, particularly with the launch of AI Companion 2.0, is likely enhancing customer retention and engagement, positively impacting revenue growth.

**Earnings Per Share (EPS)**: The consensus for EPS at $1.30 suggests a slight decrease compared to last year, but the company’s history of exceeding expectations might mitigate any initial negative impressions. The positive EPS surprise trend (10.33% on average over the past four quarters) is vital for investor confidence.

**Revenue Growth**: The anticipated revenue growth driven by the Enterprise segment continues to show promise, particularly with an expected growth rate of 6% year-over-year in the fourth quarter of fiscal 2025, which likely set the stage for sustained growth in Q1 2026. Churn rates remain low, indicating customer satisfaction and loyalty.

**Profit Margins & Free Cash Flow (FCF)**: Strategic investment in AI may impact gross margins negatively in the short term, yet the stabilization of operating margins near 39% suggests some resilience. Free cash flow might experience fluctuations due to various macroeconomic factors. This variability in FCF could be an area of concern for investors, as instability can indicate underlying operational stresses.

In summary, while overall guidance presents moderate growth expectations, ongoing AI-driven innovations and strong enterprise performance may offset pressures on EPS and FCF, making Zoom a cautious consideration for professional investors looking for stability amidst a volatile market.

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