Zoom shares fall 3.8% after quarterly profit forecast misses analyst estimates
Key Facts
Zoom Communications shares fell 3.8% in extended trading following its August 2026 earnings announcement, after the company forecast adjusted profit for the next quarter below analyst estimates, according to Reuters. The shares declined despite fiscal 2027 second-quarter revenue and adjusted earnings per share beating market expectations. The company reported quarterly revenue of $1,277.2 million in its earnings release, up 4.9% from the same period a year earlier. Reuters compared the figure with an analyst consensus of $1.27 billion, according to London Stock Exchange Group data. Adjusted earnings per share were $1.55 for the quarter, compared with an average analyst estimate of $1.48. The quarterly revenue and profit beats thus coincided with a negative share-price reaction, as investors focused on profit guidance for the next quarter.
Across its businesses, enterprise revenue rose to $787.5 million in the second quarter of fiscal 2027, up 7.8% year on year, according to Zoom's official release. The segment grew faster than the company's overall revenue and its online services segment, where revenue rose 0.6% year on year. Average monthly churn among online customers was 2.9% during the quarter, unchanged from the same period a year earlier. The trailing twelve-month net dollar expansion rate for enterprise customers improved to 99% from 98% in the corresponding period, while remaining below breakeven. In artificial intelligence products, management said the number of Zoom Virtual Agent customers rose 256% year on year. Eric Yuan, the company's founder and chief executive, said in the earnings statement: "We are embedding AI into workflows." Management linked business momentum to enterprise growth and broader adoption of AI products.
On its financial position, quarterly free cash flow fell to $472.4 million from $508.0 million in the second quarter of fiscal 2026, according to the company's statement. Cash, cash equivalents and marketable securities, excluding restricted cash, stood at $7.2 billion at the end of July. The decline in free cash flow coincided with quarterly revenue growth, while the company raised its revenue and adjusted earnings per share forecasts for fiscal 2027. Zoom set its updated annual revenue range at $5.085 billion to $5.095 billion, compared with a previous range of $5.08 billion to $5.09 billion in May guidance reported by Reuters. It also raised its annual adjusted earnings per share range to $6.08 to $6.12, from $5.96 to $6. The revision thus lifted both the lower and upper ends of its annual revenue and profit forecasts.
For the third quarter of fiscal 2027, Zoom forecast revenue of $1.275 billion to $1.28 billion, according to Stocktwits, which cited the company's guidance. The company projected adjusted earnings per share for the quarter of $1.46 to $1.48, according to Reuters. That range compares with an analyst consensus of $1.50 per share, putting even the upper end of the company's guidance below market estimates. This gap in the quarterly profit outlook was the source of disappointment, despite the company raising its full-year forecasts. As part of its fiscal 2027 outlook, Zoom also forecast annual free cash flow of $1.780 billion to $1.820 billion, according to its earnings release.