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ZV

Zoom Video Communications, Inc. (ZM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue was $1.1775B (+3.6% YoY) and non-GAAP diluted EPS was $1.38; management said the quarter beat top-line and profitability guidance, with enterprise revenue up 5.8% YoY and Online churn at an all-time low of 2.7% .
  • Gross margin dipped modestly (non-GAAP 78.9% vs. 79.7% YoY) due to AI investments, while non-GAAP operating margin remained strong at 38.9% .
  • FY2025 guidance was raised: revenue to $4.656–$4.661B, non-GAAP operating income to $1.813–$1.818B, and non-GAAP EPS to $5.41–$5.43; Q4 FY2025 guidance calls for $1.175–$1.180B revenue and $1.29–$1.30 non-GAAP EPS .
  • Capital allocation and buyback are catalysts: board approved an additional $1.2B repurchase (≈$2.0B total remaining), and the company rebranded to “Zoom Communications, Inc.” reflecting its AI-first platform vision; cash and marketable securities total ≈$7.7B .

What Went Well and What Went Wrong

What Went Well

  • Enterprise mix and upmarket traction: Enterprise revenue rose to $698.9M (+5.8% YoY), customers >$100K TTM grew to 3,995 (+7.1% YoY), and Online churn improved to 2.7%, the lowest reported .
  • AI and product momentum: AI Companion monthly active users grew 59% QoQ; Contact Center customers surpassed 1,250 (+82% YoY) and Workvivo landed three >$1M ARR deals including its largest with a Fortune 10 company .
  • Landmark CCaaS win and channel leverage: a record >20,000-seat Zoom Contact Center deal in EMEA (Agencia Tributaria), with top 4 CCaaS deals via channel, evidencing competitiveness at scale; “largest-ever” CCaaS customer secured .

What Went Wrong

  • Gross margin compression: non-GAAP gross margin fell to 78.9% (vs. 79.7% YoY) as AI GPU and cloud costs ramped; management expects ~79% for FY25 .
  • APAC weakness and EMEA mixed: APAC was flat YoY (2% on constant currency), EMEA +5% YoY (3% constant currency); FX and macro remain headwinds across regions .
  • Operating cash flow down slightly: OCF was $483.2M (-2.0% YoY), with FCF up modestly to $457.7M (+1.0% YoY), reflecting timing and investment mix .

Financial Results

Headline Financials (sequential comparison within FY2025)

MetricQ1 FY2025Q2 FY2025Q3 FY2025
Revenue ($USD Billions)$1.1410 $1.1625 $1.1775
GAAP Diluted EPS ($)$1.04? (not disclosed in Q1 table; use GAAP diluted EPS not available here)$0.70 $0.66
Non-GAAP Diluted EPS ($)$1.35 $1.39 $1.38
GAAP Operating Margin (%)40.0? (Q1 non-GAAP margin disclosed; GAAP OM not separately in Q1 transcript)17.4 15.5
Non-GAAP Operating Margin (%)40.0 39.2 38.9
Gross Margin (non-GAAP, %)~79.3 78.6 78.9

Note: Q1 GAAP diluted EPS is not specified in the Q1 transcript table above; Q1 non-GAAP EPS is provided . All other figures per cited documents.

Year-over-Year Reference (Q3 comparison)

MetricQ3 FY2024Q3 FY2025
Revenue ($USD Billions)$1.1367 $1.1775
GAAP Income from Operations ($USD Millions)$169.4 $182.8
GAAP Net Income ($USD Millions)$141.2 $207.1
GAAP Diluted EPS ($)$0.45 $0.66
Non-GAAP Income from Operations ($USD Millions)$447.1 $457.8
Non-GAAP Diluted EPS ($)$1.29 $1.38

Segment Breakdown

Segment Revenue ($USD Millions)Q2 FY2025Q3 FY2025
Enterprise$682.8 $698.9
Online$479.7 $478.7

KPIs and Cash

KPI / MetricQ3 FY2025
Customers >$100K TTM (count)3,995
Enterprise customers (approx.)192,400
TTM Net Dollar Expansion (Enterprise)98%
Online avg monthly churn2.7%
% Online MRR with ≥16 months continual term74.1%
Deferred revenue (current, $USD Millions)$1,363.4
RPO (Total, $USD Billions)≈$3.74; 61% to be recognized in 12 months
Operating Cash Flow ($USD Millions)$483.2
Free Cash Flow ($USD Millions)$457.7
Cash & Marketable Securities ($USD Billions)≈$7.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)Q4 FY2025N/A (not previously guided)$1.175–$1.180 New
Non-GAAP Operating Income ($USD Millions)Q4 FY2025N/A$443–$448 New
Non-GAAP Diluted EPS ($)Q4 FY2025N/A$1.29–$1.30 New
Revenue ($USD Billions)FY2025$4.630–$4.640 $4.656–$4.661 Raised
Non-GAAP Operating Income ($USD Billions)FY2025$1.790–$1.800 $1.813–$1.818 Raised
Non-GAAP Diluted EPS ($)FY2025$5.29–$5.32 $5.41–$5.43 Raised
Free Cash Flow ($USD Billions)FY2025$1.58–$1.62 $1.58–$1.62; expect high end Maintained; Bias High End
Share Repurchase Authorization ($USD Billions remaining)Multi-period$1.062 remaining as of Q2 ≈$2.0 remaining (new $1.2 add) Raised

Earnings Call Themes & Trends

TopicQ1 FY2025 (Prior-2)Q2 FY2025 (Prior-1)Q3 FY2025 (Current)Trend
AI initiativesLaunch of Zoom Workplace; AI Companion embedded; AI-first vision; Workvivo integration AI Companion enabled on 1.2M accounts; plan AI 2.0 at Zoomtopia; gross margin investment in AI AI Companion MAUs +59% QoQ; AI Companion 2.0 announced; custom paid add-ons and vertical solutions roadmap Accelerating productization and adoption
Contact CenterPCI, FedRAMP, social channels; upmarket deals; >90 customers >$100K ARR (+246% YoY) Largest CCaaS deal to-date; top 10 wins all displacements; ASPs doubled with premium tiers Record >20,000-seat EMEA win; customers >1,250 (+82% YoY); channel driving top deals Scaling wins; stronger channel motion
Online/macroOnline churn seasonality; grace period tightening impacted Q1 churn Online churn record low 2.9%; SMB softness; macro mixed Online churn 2.7% (record low); macro assumed similar to Q3 in forecasts Stabilizing churn; cautious macro
Regional trendsAmericas +4%, EMEA +2%, APAC -2% (FX headwinds) Americas +3%; EMEA flat; APAC -2% (const-currency APAC +1, EMEA -1) Americas +4%, EMEA +5% (const +3), APAC flat (const +2) Slight improvement ex-APAC
Regulatory/legalResponsible AI stance; minimal impact from AI regulation so far Continued emphasis on responsible AI Continued; no new regulatory constraints discussed Stable
R&D executionBackbone upgrades to data centers planned; AI investments press margins Data center upgrades; AI costs press GM Continuing AI investments; expect ~79% GM FY25 Ongoing investment; margin discipline
Health features/verticalsWorkvivo named Meta preferred migration partner; healthcare examples Vertical traction; CCaaS external use cases Industry-tailored AI add-ons (healthcare, education) and frontline offering Expanding vertical productization

Management Commentary

  • “We were pleased to see revenue and enterprise revenue growth improve to approximately 4% and 6% year over year, respectively, and Online monthly average churn reach an all-time low of 2.7%. Additionally, Zoom Contact Center set a record with an over 20,000-seat deal in EMEA, and Workvivo secured its largest deal ever with a Fortune 10 company...” — Eric S. Yuan, CEO .
  • “We beat our top line and profitability guidance in Q3... Non-GAAP gross margin in Q3 was 78.9%... Non-GAAP income from operations came in at $458 million... We ended the quarter with approximately $7.7 billion in cash, cash equivalents and marketable securities...” — Michelle Chang, CFO .
  • “Earlier today, we announced our new corporate name, Zoom Communications, Inc. This change reflects our evolution into an AI-first work platform for human connection...” — Eric S. Yuan, CEO .
  • “In Q3, ServiceNow adopted Workvivo and expanded its Zoom Phone footprint... we are deepening the integration of ServiceNow’s Now Assist with Zoom AI Companion...” — Eric S. Yuan .

Q&A Highlights

  • AI monetization and cost: Workplace AI Companion remains at no additional cost to strengthen platform stickiness; monetization will come via Custom AI Companion add-ons and CCaaS/Business Services; AI investments (GPUs/cloud) are shared across Workplace and CCaaS infrastructure .
  • Contact Center competitive edge: wins driven by scalable architecture, rapid innovation (PCI, FedRAMP, WFM/QM, social), and stability; a >20,000-seat public-sector deployment evidenced ability to compete at the high-end; pricing remains competitive on TCO .
  • Demand signals and billing terms: Deferred revenue and cRPO growth supported by lengthening billing terms and coterminous expansions; expect deferred revenue up 5–6% YoY in Q4 .
  • Buyback and capital allocation: Added $1.2B authorization to be executed by end of FY2026; strong cash position enables continued shareholder returns alongside AI/platform investments .
  • Macro/tone: Forecasts assume similar macro to Q3; management is focused on accelerating top-line while maintaining expense discipline .

Estimates Context

  • S&P Global consensus estimates could not be retrieved at time of writing due to API limits; therefore, a formal comparison vs Wall Street consensus is unavailable. Management stated the quarter “beat our top line and profitability guidance” .
  • Note: We will update vs-consensus comparisons once S&P Global data access is restored.

Key Takeaways for Investors

  • Enterprise-led reacceleration and churn improvement support durable revenue trajectory; momentum in CCaaS and Workvivo enlarges TAM and upsell vectors .
  • AI-first platform strategy is resonating; free AI Companion in Workplace drives engagement, while paid Custom AI add-ons and CCaaS AI modules create monetization optionality .
  • Margins remain strong despite AI investment; management expects ~79% non-GAAP GM for FY25 and maintains disciplined cost optimization over time .
  • Raised FY25 guidance and $2.0B remaining buyback (after +$1.2B authorization) provide near-term support and capital return visibility .
  • Regional performance improving ex-APAC; channel is increasingly material for CCaaS scaling, evidenced by top deals via partners .
  • Watch Q4 execution on CCaaS deployments and Custom AI monetization timing; monitor OCF/FCF trends and billings/DR growth for demand confirmation .
  • Name change to Zoom Communications underscores evolution beyond video to a unified AI-first work and customer experience platform .