Zoom Communications (NASDAQ: ZM) shares dropped 2.92% in after-hours trading to $97.97 on Tuesday, as weaker-than-expected third-quarter guidance overshadowed a second-quarter earnings beat. The communications giant reported Q2 results that exceeded analyst estimates for both revenue and adjusted earnings, yet the market reacted negatively to the conservative outlook for the upcoming quarter.

Total revenue for Q2 FY27 reached $1,277.2 million, beating the consensus estimate of $1.269 billion by 0.64%. This represents a 4.9% increase year over year from $1,217.2 million. Non-GAAP diluted EPS came in at $1.55, surpassing the estimate of $1.48 by 4.73%, while rising 1.31% from $1.53 in the prior year period.

Financial Performance

Enterprise revenue reached $787.5 million, rising 7.8% year over year and marking the strongest growth rate in three years for the segment. Online revenue grew 0.6% year over year to $489.7 million. Adjusting for foreign currency impacts, total revenue grew 4.7% in constant currency.

GAAP income from operations was $314.3 million, compared to $321.7 million in the same quarter last fiscal year. Non-GAAP operating margin stood at 40.0%. The company generated $494.8 million in operating cash flow and $472.4 million in free cash flow during the quarter.

What the Numbers Show

The divergence between GAAP and non-GAAP profitability is notable this quarter. GAAP net income surged to $1,542.4 million from $358.6 million year earlier, while non-GAAP net income dipped slightly from $471.3 million to $464.0 million. This variance is attributable to $1,614.2 million in gains on strategic investments included in the GAAP figure, which were excluded from non-GAAP results. Consequently, GAAP diluted EPS rose sharply to $5.15 from $1.16, whereas non-GAAP diluted EPS remained relatively flat at $1.55 versus $1.53.

Customer Metrics and Balance Sheet

The number of customers contributing more than $100,000 in trailing 12-month revenue increased 8.2% to 4,625. The trailing 12-month net dollar expansion rate for Enterprise customers improved to 99% from 98%. Online monthly average churn was 2.9% in the quarter.

As of July 31, 2026, Zoom held $7.2 billion in cash, cash equivalents, and marketable securities. The company repurchased approximately 3.7 million shares in the quarter, bringing total repurchases under the current plan to 44.2 million shares.

Outlook

For the third quarter of fiscal year 2027, Zoom expects total revenue between $1.275 billion and $1.280 billion, missing the analyst estimate of $1.282 billion. The company anticipates third-quarter adjusted earnings of $1.46 to $1.48 per share, versus estimates of $1.50 per share.

Despite the soft Q3 outlook, Zoom raised its full-year fiscal 2027 adjusted earnings per share (EPS) guidance to $6.08 to $6.12, up from the previous range of $5.96 to $6.00. The company also increased its FY27 sales outlook to $5.085 billion to $5.095 billion, from $5.080 billion to $5.090 billion. These full-year updates align with analyst estimates of $6.08 for EPS and $5.090 billion for revenue.

Zoom Communications (NASDAQ: ZM) projected third-quarter adjusted earnings per share between $1.46 and $1.48, missing the consensus estimate of $1.50. The video conferencing firm also forecast sales of $1.275 billion to $1.280 billion, slightly below the expected $1.282 billion.

Financial Outlook

The company’s guidance indicates a cautious stance on near-term profitability and top-line growth. Analysts had anticipated higher earnings power, with the upper bound of Zoom’s EPS range falling 2 cents short of the market expectation.

What the Numbers Show

The divergence between the forecasted revenue ceiling ($1.280 billion) and the analyst estimate ($1.282 billion) is narrow, suggesting stable demand visibility. However, the wider gap in earnings per share implies potential pressure on operating margins or higher-than-expected costs during the quarter, as revenue did not decline proportionally to the miss in profitability metrics.