Zoom's Q3 Performance Exceeds Forecasts, Driving Stock Surge
Zoom Communications Inc. (NASDAQ: ZM) recently unveiled its third-quarter financial outcomes, which have notably outpaced analysts' projections for both its top and bottom lines. This robust performance has led to an enthusiastic response from the market, with the company's stock price showing a marked increase during after-hours trading. The strong financial indicators are largely driven by a healthy expansion in its enterprise segment and the growing integration and adoption of its innovative AI-enhanced functionalities.
During the third fiscal quarter, Zoom recorded a total revenue of $1.23 billion, comfortably exceeding the consensus estimate of $1.21 billion. The company's adjusted earnings per share reached $1.52, surpassing the analyst forecast of $1.44 per share. This represents a 4.4% increase in total revenue year-over-year, with enterprise revenue climbing by 6.1% to $741.4 million and online revenue seeing a 2% rise to $488.4 million.
Further details from the report highlight Zoom's operational efficiency and customer retention. The online monthly average churn rate stood at a low 2.7%. By the end of the quarter, the company boasted 4,363 customers contributing over $100,000 in trailing 12-month revenue, marking a 9.2% year-over-year increase. Zoom's financial health is also underscored by its net cash provided by operating activities, which was $629.3 million, and free cash flow of $614.3 million. The company concluded the period with a substantial $7.0 billion in cash, cash equivalents, and marketable securities.
Eric Yuan, Zoom's founder and CEO, emphasized the company's commitment to evolving into an AI-first platform. He noted the success of AI Companion 3.0 and the significant growth in its adoption, along with strong momentum in Custom AI Companion and the AI-first Customer Experience suite. These advancements have contributed to one of Zoom's most successful CX quarters, characterized by widespread AI integration across major deals, reinforcing the company's strategic direction towards leveraging artificial intelligence for enhanced connectivity and collaboration.
Looking ahead, Zoom has issued optimistic guidance for the fourth quarter, projecting revenue between $1.23 billion and $1.235 billion, slightly above the estimated $1.228 billion. Adjusted earnings for the fourth quarter are anticipated to be in the range of $1.48 to $1.49 per share, exceeding analyst estimates of $1.45 per share. The company has also raised its full fiscal year 2026 revenue guidance to between $4.852 billion and $4.857 billion, up from previous projections, and adjusted its full-year earnings outlook to $5.95 to $5.97 per share, surpassing the $5.88 per share estimate. These updated forecasts reflect Zoom's confidence in its continued growth trajectory and strategic initiatives.
The company's robust quarterly results and optimistic future projections have been well-received by investors, leading to a noticeable increase in its stock value during after-hours trading. This upward movement signifies strong market confidence in Zoom's financial stability, its strategic focus on AI innovation, and its ability to consistently deliver performance that exceeds Wall Street's expectations, positioning it favorably within the competitive communications industry.