Zoom Communications, Inc. (NASDAQ:ZM) shares are trading lower premarket on Wednesday. The company reported second-quarter results and issued third-quarter profit guidance below street estimates.

Earnings Snapshot

The company reported revenue of $1.28 billion for the second quarter, beating the consensus estimate of $1.27 billion.

The communications company posted second-quarter adjusted earnings of $1.55 per share, beating analyst estimates of $1.48 per share, according to Benzinga Pro.

Adjusted gross margin was 79.1%, versus 79.8% a year earlier, as it expanded its AI portfolio and customer adoption.

Adjusted operating income rose 1% year over year to $510 million, while operating margin declined to 40.0% from 41.3% a year ago.

Deferred revenue grew 6% YoY to $1.56 billion, above the expected 2%-3% growth, while RPO rose 14% to about $4.5 billion, driven by 25% growth in non-current RPO.

Operating cash flow reached $495 million with a 38.7% margin, while free cash flow was $472 million in the quarter.

Zoom ended the quarter with $7.2 billion in cash, equivalents and marketable securities and repurchased 3.7 million shares for $352 million. Under its $4.7 billion buyback plan, it has repurchased 44.2 million shares for $3.4 billion.

Key Metrics

Revenue rose 4.9% year over year (Y/Y) to $1.28 billion, $7 million above the high end of guidance, while Enterprise revenue grew 7.8% to 62% of total revenue.

Enterprise customers generating over $100,000 in trailing-12-month revenue increased 8%, with Net Dollar Expansion at 99%. International revenue grew 6% in the Americas, 2% in EMEA and 4% in APAC.

Workplace AI Monthly Active Users jumped 125% Y/Y, while Zoom Phone ARR grew in the teens.

Workvivo surpassed $100 million in ARR and secured a major insurer deal. Zoom CX ARR grew at a high-double-digit rate, with paid AI included in nine of its top 10 deals.

Virtual Agent customers surged over 250%, Revenue Accelerator paid customers rose 41%, and Zoom completed its Common Room acquisition in July.

Outlook

Zoom expects third-quarter revenue to be in the range of $1.275 billion to $1.28 billion, versus estimates 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. 

The company raised its fiscal 2027 guidance. The company now expects full-year revenue of $5.085 billion to $5.095 billion, versus estimates of $5.09 billion. This reflects stronger-than-expected Enterprise growth partly offset by flat Online revenue.

Zoom now sees full-year adjusted earnings of $6.08 to $6.12 per share versus estimates of $6.08 per share.

Free cash flow guidance was also raised to $1.78 billion-$1.82 billion on strong first-half FCF and lower planned capex. The EPS outlook excludes future share repurchases.

Management expects revenue to exceed $5 billion while maintaining its focus on profitability, cash flow and shareholder returns.

ZM Price Action: Zoom Communications shares were down 7.10% at $93.75 during premarket trading on Wednesday, according to Benzinga Pro data.

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