Zoom’s Numbers Look Better Than the Stock

Hey there, bargain hunter. Zoom just handed you a beat-and-raise quarter, and the market’s response was to sell the stock down about 4% after hours. Welcome to one of the more reliable patterns in value investing: a company that is genuinely cheap gets punished for not being exciting enough.

Scoreboard

Q2 fiscal 2027 total revenue came in at $1,277.2 million, up 4.9% year over year, with enterprise revenue of $787.5 million rising 7.8%. That enterprise figure is the fastest growth rate in three years. Non-GAAP EPS of $1.55 beat consensus estimates around $1.48. Zoom also raised its full-year outlook.

What Actually Happened

The street wanted monster AI revenue lines and a re-acceleration toward 8%+ total growth. What it got was steady, disciplined execution: enterprise accelerating, online stable, margins holding, and guidance going up. Full-year revenue guidance was raised to $5.085 to $5.095 billion, and adjusted EPS guidance was raised to $6.08 to $6.12. Management also lifted free cash flow guidance for the full year to $1.780 to $1.820 billion. That trifecta, revenue, EPS, and free cash flow all raised, is not a mediocre result. It is a quiet raise cycle that compound-investors recognize immediately.

What the Business Actually Is

Most people still picture pandemic-era Zoom: consumer video calls, a product that Microsoft Teams could replace for free. That picture is stale. In its Q2 FY27 release, Zoom positioned itself as a “system of action” spanning meetings, phone, and customer experience, and highlighted AI-driven products plus acquisitions including Common Room and BrightHire. Zoom also said Zoom Virtual Agent’s customer count increased 256% year over year. The Contact Center business, not the meeting tool, is where real incremental dollars are showing up.

The Numbers That Matter

• Operating cash flow: $494.8 million for the quarter; cash, equivalents, and marketable securities: $7.2 billion as of July 31, 2026.
• Free cash flow: $472.4 million for Q2; full-year free cash flow guidance: $1.780 to $1.820 billion.
• Non-GAAP operating margin: 40.0%; GAAP operating margin: 24.6%.
• Customers contributing more than $100,000 in trailing 12-month revenue grew 8.2% year over year.
• Enterprise trailing 12-month net dollar expansion rate improved to 99%, up from 98% a year earlier.
• Approximately $1.3 billion in share repurchase authorization remained unused as of July 31, 2026.

Is It Cheap?

ZM traded around $100.92 on August 26. Against full-year EPS guidance of $6.08 to $6.12, that puts the stock at approximately 16.5x forward non-GAAP earnings. The average 12-month analyst price target is about $116.80. For context, Microsoft trades north of 30x. Zoom’s guided free cash flow range implies roughly $1.8 billion this year, and it ended the quarter with $7.2 billion in cash and marketable securities. The market cap is roughly in the low $30 billions. You are being asked to pay mid-teens earnings for a company with a large cash cushion and meaningful buybacks still authorized. That is the Cheap Investor’s version of a gift receipt.

Bull / Base / Bear

Bull: Enterprise net dollar expansion crosses 100%, Zoom Contact Center ARR accelerates into high double digits, and the AI Companion upsell converts into measurable ARPU expansion. The stock closes the gap toward $120.

Base: Total revenue growth stays anchored around 5%, enterprise continues at high single digits, free cash flow compounds at 5 to 8% annually, and buybacks reduce the share count enough to push EPS toward $7 by FY29. Stock trades in the $105 to $120 range.

Bear: Microsoft Teams and Google Meet, both bundled into existing enterprise agreements at no incremental cost, undercut Zoom’s AI add-on pricing as they ship comparable agentic features. Online churn worsens meaningfully from the current level around 2.9%, and enterprise NDR stalls below 99%. Revenue growth decelerates back toward 3%.

Action Plan

At $100 to $103, ZM offers a reasonable entry for a conservative buyer. With about $1.3 billion in buyback authorization still available, the company is shrinking its float while generating substantial free cash flow. Scale into a full position in two tranches: half now, half if the stock revisits the $93 to $96 range on any broader market pullback. Trim only if enterprise NDR falls back to 98% or the free cash flow guidance gets cut.

Cheap Investor Checklist

• Enterprise revenue growth above 7% year over year: PASS (7.8%)
• Non-GAAP operating margin above 38%: PASS (40.0%)
• Free cash flow positive: PASS
• Large cash cushion: PASS ($7.2B cash and marketable securities)
• Active buyback authorization remaining: PASS (~$1.3B remaining)
• EPS beat: PASS ($1.55 vs. roughly $1.48 expected)
• Full-year guidance raised: PASS (revenue, EPS, and free cash flow lifted)
• Enterprise net dollar expansion at or above 99%: PASS (99%, up from 98%)
• $100K+ customer count growing: PASS (up 8.2% year over year)
• Forward P/E below 20x: PASS (~16.5x on guided non-GAAP EPS)

Bottom Line

If enterprise net dollar expansion crosses 100% and the Contact Center keeps compounding, this stock is cheap at $100. If Microsoft accelerates its bundled AI push and online churn worsens, $100 is fair value, not a discount. The balance sheet makes the downside more manageable. You own a company with $7.2 billion in cash and marketable securities that is actively buying back stock and growing profits. That is a floor most growth stocks cannot offer. Watch the Q3 enterprise NDR number in November. That is the tell.