Zoom Q4 Revenue Mediocre, But Profit Surprises! AI Strategic Transformation Unleashes Unlimited Potential!

TradingKey - Zoom's revenue performance for the fourth quarter was mediocre, but its profits exceeded expectations, and its AI-focused strategy is set to unlock significant potential!

Key Financial Highlights 

Revenue: Q4 total revenue was up 3.3% YoY to $1.18 billion, which was in line with the analysts' expectations, driven largely by a 6% increase in enterprise revenue to $707 million. 

EPS: The EPS was $1.41 with a decline of 0.7% YoY, beating the analysts' estimation of $1.30, reflecting its advantage of cost management and operational optimization.     

Operating Margin: Zoom's GAAP operating margin improved 430 basis points YoY to 19%, and its non-GAAP operating margin up 80 basis points YoY to 39.5%. The improvements were likely tied to the company's completion of its restructuring moves, from a pure video communications provider to an AI-first company.  

Customer Metrics

Enterprise Customers: Zoom had approximately 192,600 Enterprise customers at the end of Q4 FY25 and the Net Dollar Expansion Rate for Enterprise customers was 98%, reflecting mild challenges in customer upselling.  

High-Value Customers: Zoom had 4,088 customers who contributed more than $100,000 in trailing 12-month revenue, marking a 7.3% increase YoY.  

Online Revenue Metrics: Online average monthly churn for Q4 was 2.8%, a slight improvement of 0.2% from the same quarter last year. 

Remaining Performance Obligations (RPO): Total RPO grew by 6% YoY, indicating a solid pipeline of future revenue. 

Investment Outlook 

While the next quarter’s revenue guidance of $1.16 billion was less impressive, marking 0.8% below analysts’ estimates, its non-GAAP EPS of $1.41 was 4.6% above analysts’ consensus estimates.  For FY2026, Zoom projects total revenue between $4.785 billion and $4.795 billion and the company expects continued strong profitability, with non-GAAP operating income of $1.85 billion to $1.86 billion and non-GAAP EPS between $5.34 and $5.37. Moreover, Zoom has significantly increased its R&D spending by $11.8 million in Q4 FY25 compared to Q4 FY24, reflecting a 5.8% increase and its commitment to long-term growth and transformation. 

Zoom's strategic focus on AI Companion and agentic AI capabilities positions it for sustained growth, despite potential demand challenges in upselling existing customers. Moreover, the $7.8B cash position provides significant strategic flexibility for M&A, product development, or capital returns.  Overall, the company's robust cash generation, strategic AI investments and margin expansion, along with a $1.6 billion share repurchase authorization reflects confidence in its long-term prospects. 

Besides, Zoom's strategic shift to an AI-first enterprise, supported by consistent financial growth and increased R&D investments, presents a compelling long-term investment opportunity, though investors should monitor Enterprise growth rates and customer expansion metrics as key indicators of long-term success.