Explore an unedited Zoom report with expandable sections, source links, and the research structure customers see inside ValScreen.
ZM — AI Insights
Zoom Video Communications Inc - Class A
Standing snapshot
Current ValScreen standing
All 4 available category scores for ZM are above the Technology average. 16 of 17 modeled ratios were available, with complete data quality.
Composite score
75
out of 100
- Data quality
- Complete
- Coverage
- 16 of 17 ratios available
- Peer set
- 177 Technology peers
- Score date
- 2026-07-24
Factor comparison
Actual averages from 685 scored companies in Technology
Composite
Stock 75 · Sector average 49
Valuation
Stock 74 · Sector average 51
Profitability
Stock 86 · Sector average 48
Financial strength
Stock 80 · Sector average 51
Cash flow
Stock 71 · Sector average 46
Executive summary
Zoom Communications is a profitable subscription-software company expanding beyond video meetings into an AI-assisted suite covering workplace collaboration, business telephone service, customer support, sales, events, recruiting, and employee communications. The latest quarter showed improving enterprise momentum: total revenue rose 4.9%, enterprise revenue rose 7.8%, and the number of customers producing more than $100,000 of trailing-12-month revenue increased 8.2%. Growth nevertheless remained modest, online revenue was nearly flat, and existing enterprise customers collectively remained slightly below net expansion. Financial quality is supported by a 77.2% gross margin, substantial operating cash generation, and $7.2 billion of cash and marketable securities. Reported net income was not representative of the underlying software operation because it included a $1.61 billion unrealized gain from revaluing Zoom’s Anthropic investment. Zoom’s competitive case rests more on product usability, brand, integrations, technical infrastructure, and its installed customer workflows than on a single protected technology. Major challenges include bundled competition from Microsoft and Google, rapid AI product change, higher AI hosting costs, privacy and cybersecurity obligations, and dependence on outside cloud providers, telecommunications networks, operating systems, and AI models. The ValScreen snapshot screened strongly against the technology sector, particularly for profitability and financial strength, but it predates the quarter ended July 31, 2026 and contains an internal coverage conflict concerning interest coverage.
Business model
Summary
Zoom sells recurring access to a broad cloud communications and workflow platform, serving both self-service customers and large organizations. Its economics depend on retaining subscriptions, selling additional products into enterprise accounts, and controlling the computing, telecommunications, development, and sales costs required to operate and expand the platform.
Findings
Zoom earns primarily subscription revenue—repeating fees for continued access to cloud software—from Zoom Workplace and Zoom Business Services. Workplace combines Meetings, Phone, Team Chat, Docs, Whiteboard, and AI Companion, while Business Services includes Contact Center, Revenue Accelerator, and Events. Professional services, consulting, and online-event hosting are separate but comparatively small activities.
Customers range from individuals and self-employed users to small businesses, governments, healthcare and education organizations, and Fortune 50 companies. Zoom reaches them through a self-service online channel, direct sales teams organized by account size, geography, and industry, and partners including resellers, systems integrators, telecommunications providers, and independent software vendors.
Subscriptions may be monthly, annual, or multiyear and can be billed monthly, quarterly, annually, or in advance. Remaining performance obligations—contracted revenue not yet recognized because Zoom still owes future service—were $4.536 billion at July 31, 2026; 57% was expected to become revenue within 12 months. This contracted base provides visibility, although customers can still reduce seats, decline renewals, or cancel where contract terms permit.
The main direct cost drivers are co-located data centers, third-party cloud hosting, public telephone network services, support personnel, software amortization, acquired technology amortization, and royalties. Major operating expenses include product development, sales staff and commissions, marketing, legal and finance functions, security, and regulatory compliance. AI increases both development spending and the computing consumed when customers use the platform.
Industry & competition
Summary
Zoom operates in a highly competitive, rapidly changing software market where large suite vendors can bundle communications products with tools customers already use. Enterprise demand is improving, but the business remains exposed to corporate spending cycles, extensive regulation, and powerful infrastructure and technology suppliers.
Findings
Competition spans several categories rather than one direct peer group. Zoom Meetings competes with Cisco Webex and GoTo; Zoom Workplace faces productivity suites such as Microsoft 365 with Teams and Google Workspace with Meet; Zoom Phone competes with RingCentral, 8x8, Avaya, and other unified-communications providers; and Zoom Contact Center faces Five9, Genesys, and NICE. Microsoft and Google can bundle communications into software packages customers already buy, creating pricing pressure and reducing the need to approve a separate vendor.
The revenue mix is shifting toward larger organizations. Enterprise customers supplied 61.7% of second-quarter revenue, up from 60.0% a year earlier, while enterprise revenue grew 7.8% and online revenue grew only 0.6%. This shift can improve contract duration and cross-selling opportunities, but enterprise purchasing involves longer sales processes, security reviews, integrations, procurement negotiations, and exposure to corporate technology budgets.
Regulation materially shapes product design and sales. Zoom handles communications and personal information across many countries and regulated sectors, making it subject to privacy, cybersecurity, data-location, telecommunications, artificial-intelligence, trade, tax, and government-procurement rules. Its FedRAMP authorization—a U.S. federal security approval for cloud services—permits government opportunities, but government contracts can require costly compliance and may be terminated for the customer’s convenience.
Supplier and technology dependencies are significant. Zoom uses co-located data centers plus Amazon Web Services, Oracle Cloud, and limited Microsoft Azure services; its federated AI system can use proprietary models and models from providers such as OpenAI and Anthropic. These relationships speed product development and provide flexible capacity, but suppliers control pricing, service availability, model terms, and technical changes. Second-quarter third-party hosting costs increased by $24.4 million as platform usage and AI consumption rose.
Competitive advantages
Summary
Zoom has meaningful advantages in brand recognition, ease of deployment, communications engineering, multi-channel distribution, integrations, and a growing base of large customers. The evidence supports a defensible market position but not a dominant moat, because switching friction is incomplete and major competitors possess larger bundled ecosystems.
Findings
Enterprise adoption provides the clearest evidence of commercial strength: enterprise revenue grew 7.8%, large customers grew 8.2%, and customers producing more than $100,000 annually supplied 33.4% of second-quarter revenue. These results suggest Zoom can expand beyond meetings into larger, more complex deployments, although the 99% enterprise net dollar expansion rate shows that switching costs are not yet strong enough to prevent all reductions.
Zoom’s distribution combines self-service online purchasing, direct enterprise sales, resellers, global systems integrators, service providers, and independent software vendors. This permits low-touch acquisition of individuals and small businesses while supporting negotiated deployments for global organizations and regulated industries. No individual customer represented more than 10% of fiscal 2026 revenue, reducing dependence on any single buyer.
The developer platform and broad integrations can create workflow-based switching friction—the effort and disruption involved in replacing software connected to other systems. Zoom supplies application programming interfaces, software-development kits, webhooks, an app marketplace, and private-app tools, and integrates with products from Microsoft, Google, Salesforce, Slack, Atlassian, and others. These connections can deepen usage, but competing platforms also have large developer ecosystems, so this is an advantage rather than proof of an unassailable network effect.
Zoom’s technical architecture and brand support differentiation in real-time communications. Its software directs processing across user devices and globally distributed multimedia-routing infrastructure to manage variable bandwidth and device performance. The company identifies ease of use, reliability, scalability, interoperability, brand awareness, and low total cost of ownership as competitive factors. Intellectual property is supportive rather than decisive because Zoom states that it is not materially dependent on any single patent, trademark, copyright, or trade secret.
Management & execution
Summary
Zoom retains unusually concentrated founder leadership, supported by a comparatively new finance chief and a long-tenured product-and-engineering president. Execution has combined internal AI development, targeted acquisitions, and large share repurchases, while the 2026 departure of the chief operating officer reduced the number of disclosed senior operating leaders.
Leadership
Eric S. Yuan, founder, President, Chief Executive Officer, and Board Chair, has held these roles since June 2011, giving him roughly 15 years in charge as of September 2026. Before founding Zoom, he was Corporate Vice President of Engineering at Cisco and previously held engineering leadership roles at WebEx. He holds a bachelor’s degree in applied mathematics from Shandong University of Science & Technology and a master’s degree in engineering from China University of Mining & Technology.
Michelle Chang, Chief Financial Officer, entered the role in October 2024 and has served for nearly two years as of September 2026. She previously spent more than 20 years at Microsoft, including as Chief Financial Officer and Corporate Vice President of its Commercial Sales and Partner Organization from August 2022 to October 2024 and Chief Financial Officer of Modern Workplace and Security from November 2017 to August 2022.
Velchamy Sankarlingam, President of Product and Engineering, has served in that role since June 2020, a tenure of just over six years as of September 2026. He previously spent a decade at VMware, most recently as Senior Vice President of Cloud Services Development and Operations, after holding positions at Cisco WebEx from 2003 to 2010.
Findings
Zoom acquired Common Room on July 17, 2026 for $266.8 million in cash. Common Room supplies buyer intelligence—the identification and organization of signals showing which people or companies may be preparing to buy—and AI agents for sales teams. Zoom intends to combine these capabilities with Zoom Revenue Accelerator’s conversation data, extending the product from analyzing sales calls to identifying and engaging potential customers before a call occurs. Common Room’s results were not material to Zoom’s reported results through July 31, so evidence of revenue contribution or successful integration was not yet available.
Capital allocation—the way management deploys cash among operations, acquisitions, investments, and shareholder distributions—has emphasized share repurchases. Zoom repurchased and retired 7.9 million shares for $713.5 million during the six months ended July 31, 2026, including 3.7 million shares for $351.9 million in the second quarter; $1.3 billion remained authorized. Retiring shares reduces the number outstanding and can offset dilution from employee equity awards, but it also uses cash that could otherwise fund product development or acquisitions.
Zoom changed short-term executive incentives beginning in fiscal 2027 by replacing performance-vesting equity grants with an annual cash bonus tied to financial and operating goals. Performance-vesting equity is stock compensation earned only if specified results are achieved. The company said the change was intended to align with market practice and reduce stock-based compensation expense; it may limit new equity issuance, although cash bonuses consume operating cash when paid.
Aparna Bawa resigned as Chief Operating Officer effective May 8, 2026 after serving in that role since May 2020 and previously leading Zoom’s legal function. The reviewed filings did not identify a successor, leaving the founder-CEO, finance chief, and product-and-engineering president as the principal active executives for whom current detailed biographies were available.
Earnings & financial quality
Summary
The underlying subscription operation is profitable and highly cash-generative, with slow but improving enterprise-led revenue growth and a debt-light balance sheet. However, headline net income was dominated by a non-operating investment gain, and some reported expense improvement came from an accounting-estimate change rather than a matching reduction in cash spending.
Findings
Second-quarter revenue was $1.277 billion, up 4.9% year over year. Enterprise revenue rose 7.8% to $787.5 million, while online revenue rose 0.6% to $489.7 million. The number of customers generating more than $100,000 over the preceding 12 months reached 4,625, up 8.2%, showing that larger accounts—not the self-service online business—were the main source of growth.
GAAP operating margin—the percentage of revenue remaining after direct service costs and normal operating expenses under required accounting rules—was 24.6%, down from 26.4% a year earlier. Gross margin was 77.2%, down from 77.6%, because higher third-party hosting expense, including AI consumption, more than offset data-center savings and lower stock-based compensation.
Operating cash flow—the cash generated by normal business activities—was $494.8 million in the quarter, or 38.7% of revenue. Free cash flow—operating cash flow less purchases of property and equipment—was $472.4 million, or 37.0% of revenue, down from $508.0 million and 41.7% a year earlier. Cash generation remained substantial, but it grew more slowly than revenue because quarterly operating cash flow declined.
Liquidity—the readily available resources used to pay obligations and fund operations—was strong, with $7.2 billion of cash, cash equivalents, and marketable securities at July 31, 2026. The ValScreen snapshot separately reported a 4.22 current ratio, meaning current assets were more than four times current liabilities, debt-to-equity of 0.0032, and negative net debt to EBITDA because cash exceeded debt. These snapshot ratios predate the latest quarter but are directionally consistent with the current filing’s large liquid balance.
Key risks & threats
Summary
The principal threats are intense bundled competition, weak expansion within the existing enterprise base, uncertain returns from rising AI spending, and the operational and regulatory consequences of outages or data-security failures.
Findings
Bundled competition is the central commercial threat. Microsoft and Google can include meetings, messaging, and AI functions within broader productivity contracts, while specialized companies compete in telephone service, contact centers, events, and sales software. Zoom must therefore persuade customers that its usability, reliability, interoperability, or specialized functions justify a separate product and expense.
Existing enterprise-account expansion remains weak even as new enterprise sales improve. Net dollar expansion was 99%, meaning the same group of enterprise customers produced about 1% less recurring revenue than a year earlier after upgrades, reductions, and customer losses. If this measure does not move above 100%, Zoom must rely more heavily on new customers and acquisitions to sustain growth.
AI creates both cost and execution risk. Research and development expense rose 17.5% year over year in the second quarter, including higher headcount and $5.4 million more AI-related expense, while third-party hosting costs increased by $24.4 million. If AI products do not generate additional subscriptions, higher-priced add-ons, or better retention, these costs can reduce gross and operating margins.
Service reliability, cybersecurity, and privacy failures could directly damage revenue. Zoom depends on globally distributed data centers, cloud vendors, public networks, device operating systems, and third-party integrations. Outages can trigger service credits, penalties, cancellations, and litigation, while unauthorized access to meeting, chat, voice, or customer-service data could bring regulatory penalties and lasting loss of trust.
Upcoming checkpoints6 items
Upcoming results and events that should clarify the company's most important open questions.
- The third-quarter fiscal 2027 earnings report, covering the quarter ending October 31, 2026, should show whether revenue reaches management’s current $1.275 billion to $1.280 billion guidance. Results above that range, particularly from enterprise customers, would indicate that growth is accelerating; a shortfall would suggest that competitive or budget pressure remains stronger than expected.
- The next quarterly filing should show whether enterprise net dollar expansion—the current revenue from an existing customer group divided by its revenue one year earlier—moves above the second-quarter baseline of 99%. A result above 100% would mean upgrades and additional products are finally outweighing cancellations and reductions; a decline would show continuing contraction within existing enterprise accounts.
- The next earnings update should show whether gross margin—the percentage of revenue left after hosting, telecommunications, support, and other direct service costs—recovers from 77.2%. Improvement would indicate that data-center savings are offsetting rising AI and cloud usage; further decline would show that new AI workloads are consuming more of each revenue dollar.
- The fiscal 2027 annual report should show whether free cash flow—operating cash remaining after purchases of property and equipment—lands within management’s $1.780 billion to $1.820 billion outlook. A higher result would demonstrate that accounting profit is translating into cash despite AI investment and acquisition integration; a lower result could indicate weaker collections, higher operating spending, or greater infrastructure needs.
- The next filings should provide the first meaningful operating evidence from the $266.8 million Common Room acquisition. Customer additions, product adoption, or disclosed revenue contribution would support Zoom’s plan to expand Revenue Accelerator into buyer identification; continued immaterial contribution would mean the acquisition had not yet changed consolidated growth.
- The 2027 proxy statement should clarify the operating-leadership structure following Aparna Bawa’s May 8, 2026 departure and report the first outcomes from the shift to annual cash bonuses. Naming a successor or clearly reallocating duties would reduce succession ambiguity; continued limited disclosure would indicate sustained leadership concentration around the founder-CEO.
Limitations
The ValScreen score and $87.99 current-price field are dated July 24, 2026, before Zoom reported the quarter ended July 31, 2026 on August 25, 2026; they were not silently updated or used as current market data.
The snapshot labels data quality as complete and lists no missing ratios, but interest coverage—the amount of operating profit available to meet interest expense—is null and has no provenance. This internal coverage conflict makes that ratio unusable.
The snapshot’s trailing-period inputs end with the period released April 30, 2026 and therefore do not incorporate the latest reported quarter. Its valuation and trailing profitability ratios may differ materially after the $1.61 billion Anthropic revaluation gain.
The snapshot uses the former name Zoom Video Communications Inc.; the legal company name has been Zoom Communications, Inc. since November 2024.
Zoom does not disclose revenue or profit by individual product, limiting assessment of the stand-alone economics of Contact Center, Phone, Workvivo, Revenue Accelerator, AI Companion, and recently acquired businesses.
Sources
- Zoom Communications, Inc. Quarterly Report on Form 10-Q for the quarter ended July 31, 2026
U.S. Securities and Exchange Commission · 2026-08-26
- Zoom Communications Reports Financial Results for the Second Quarter of Fiscal Year 2027
Zoom Communications, Inc. · 2026-08-25
- Zoom Communications, Inc. Annual Report on Form 10-K for the fiscal year ended January 31, 2026
U.S. Securities and Exchange Commission · 2026-02-27
- Zoom Communications, Inc. 2026 Definitive Proxy Statement
U.S. Securities and Exchange Commission · 2026-04-30
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