Video communications platform Zoom (NASDAQ: ZM) announced better-than-expected revenue in Q1 CY2026, with sales up 5.5% year on year to $1.24 billion. The company expects next quarter’s revenue to be around $1.27 billion, close to analysts’ estimates. Its non-GAAP profit of $1.55 per share was 9.5% above analysts’ consensus estimates.
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Zoom (ZM) Q1 CY2026 Highlights:
- Revenue: $1.24 billion vs analyst estimates of $1.22 billion (5.5% year-on-year growth, 1.3% beat)
- Adjusted EPS: $1.55 vs analyst estimates of $1.42 (9.5% beat)
- Adjusted Operating Income: $508.7 million vs analyst estimates of $490.5 million (41.1% margin, 3.7% beat)
- The company slightly lifted its revenue guidance for the full year to $5.09 billion at the midpoint from $5.07 billion
- Management raised its full-year Adjusted EPS guidance to $5.98 at the midpoint, a 3.3% increase
- Operating Margin: 25.1%, up from 20.6% in the same quarter last year
- Free Cash Flow Margin: 40.4%, up from 27.1% in the previous quarter
- Customers: 4,534 customers paying more than $100,000 annually
- Net Revenue Retention Rate: 99%, up from 98% in the previous quarter
- Billings: $1.31 billion at quarter end, up 5% year on year
- Market Capitalization: $29.3 billion
Company Overview
Once the verb that defined remote work during the pandemic ("let's Zoom later"), Zoom (NASDAQ: ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Zoom’s sales grew at a sluggish 8.5% compounded annual growth rate over the last five years. This was below our standard for the software sector and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Zoom’s recent performance shows its demand has slowed as its annualized revenue growth of 4% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Zoom reported year-on-year revenue growth of 5.5%, and its $1.24 billion of revenue exceeded Wall Street’s estimates by 1.3%. Company management is currently guiding for a 4.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.9% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not catalyze better top-line performance yet.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Zoom’s billings came in at $1.31 billion in Q1, and over the last four quarters, its growth was underwhelming as it averaged 4.8% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Zoom’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 98.3% in Q1. This means Zoom’s revenue would’ve decreased by 1.7% over the last 12 months if it didn’t win any new customers.
Zoom has a weak net retention rate, signaling that some customers aren’t satisfied with its products, leading to lost contracts and revenue streams.
Key Takeaways from Zoom’s Q1 Results
We enjoyed seeing Zoom beat analysts’ billings expectations this quarter. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. On the other hand, its new large contract wins slowed and its EPS guidance for next quarter fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock traded up 7.1% to $103.63 immediately after reporting.
So do we think Zoom is an attractive buy at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
