Zoom's Fiscal Q4 2025 Profits Top Estimates

Zoom Communications (NASDAQ:ZM), known for its video conferencing service and unified communication solutions, announced its fiscal fourth-quarter 2025 results on Feb. 24. The company reported earnings per share (EPS) of $1.41, beating analysts' consensus predictions of $1.30. Revenue rose 3.3% to $1.184 billion, exceeding projections of $1.178 billion. Overall, the quarter indicated solid operational performance but modest revenue growth due to competitive pressures.

Source: Analysts' estimates provided by FactSet.

Background and Business Focus

Zoom Communications has carved out a niche in the communications sector by providing video conferencing and voice call solutions across the globe. It's best known for its seamless communication platform that facilitates teleconferencing services for businesses, educational institutions, and individuals. Recently, it has been focused on artificial intelligence (AI) innovations such as its Zoom AI Companion.

The company's growth strategy also hinges on expanding its customer base among enterprise clients. This segment provided around 59% of its total revenue in the quarter, and the number of Zoom clients contributing over $100,000 in revenue over the past four quarters increased by 7.3%.

Quarterly Highlights

During the fiscal quarter, which ended Jan. 31, Zoom witnessed a 3.3% year-over-year rise in total revenue, driven largely by a 5.9% increase in enterprise revenue to $706.8 million.

Operating cash flow surged by 20.9% year over year to $424.6 million, while free cash flow jumped 25.1%.

Notably, Zoom's GAAP operating margin improved 430 basis points year over year to 19%. The improvements were likely tied to the company's completion of its restructuring moves.

Zoom is investing heavily in AI-driven initiatives to retain competitiveness in its market, and CEO Eric S. Yuan reiterated its commitment to evolving into an "AI-first company," expanding its capability range beyond standard video conferencing services.

Looking Ahead

For its fiscal 2026, Zoom is guiding for revenues of between $4.785 billion and $4.795 billion, which suggests moderate growth in the near term. Management anticipates maintaining its non-GAAP EPS in the range of $5.34 to $5.37, focusing on efficiency to sustain profitability despite competitive pressures.

Continued attention is being paid to customer retention. The company's net dollar expansion rate for enterprise clients remains just below 100%, reflecting mild challenges in customer upselling. Moving forward, Zoom plans to leverage AI integration across its services to enhance its competitive stance against players like Microsoft Teams. Investors should note Zoom's focus on AI-driven solutions, exploring hybrid work enhancements, and sustaining its enterprise segment growth as crucial elements for upcoming quarters.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Zoom Communications. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.