Video communications platform Zoom (NASDAQ: ZM) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 4.9% year on year to $1.28 billion. The company expects next quarter’s revenue to be around $1.28 billion, close to analysts’ estimates. Its non-GAAP profit of $1.55 per share was 5% above analysts’ consensus estimates.

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“FY27 continues to progress well, reflecting focused execution against our three priorities and clear Enterprise business momentum. Total revenue grew 4.9% year over year, anchored by 7.8% growth in Enterprise revenue, its strongest growth rate in three years,” said Eric S. Yuan, Zoom’s founder and CEO. “Our AI-first Customer Experience portfolio continues to scale, delivering high-double-digit ARR expansion, driven in part by strong adoption of Zoom Virtual Agent, whose customer count increased 256% year over year. With innovations including ZoomMate, My Notes, AI Productivity Suite, ZVA Receptionist, and Workvivo HQ Agent, and acquisitions like Common Room and BrightHire, we are embedding AI into the flow of work across collaboration, customer experience, revenue orchestration, recruiting, and employee experience. The breadth of that AI adoption reflects how Zoom is differentiating as a system of action for modern work, moving enterprise operations from conversation to completion.”

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

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Zoom’s sales grew at a weak 6.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the software sector and is a poor baseline 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 4.3% 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 modest year-on-year revenue growth of 4.9% but beat Wall Street’s estimates by 0.7%. Company management is currently guiding for a 3.9% 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 implies its newer products and services will not lead to 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 $1.34 billion in Q2, and over the last four quarters, its growth was underwhelming as it averaged 5% 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 99% in Q2. This means Zoom’s revenue would’ve decreased by 1% over the last 12 months if it didn’t win any new customers (remember that net revenue retention can be well over 100%).

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 Q2 Results

We enjoyed seeing Zoom accelerate its new large contract wins this quarter. We were also glad its billings outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed and its revenue guidance for next quarter was in line with Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 4.5% to $96.70 immediately after reporting.

Is Zoom an attractive investment opportunity right now? 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).