Zoom's recent financial disclosures for its fourth quarter and the entirety of fiscal year 2026 have sent ripples through the market, with share prices experiencing a notable decline of over 11%. The company announced earnings per share that fell short of analyst projections, coupled with a more conservative profit outlook for the forthcoming fiscal periods. Although total revenue managed to slightly exceed expectations, the earnings shortfall and cautious guidance have prompted investors to re-evaluate the video conferencing giant's immediate prospects.
For the fourth quarter, Zoom reported non-GAAP earnings per share of $1.44, which was $0.05 below the consensus estimate of $1.49. However, revenue for the same period stood at $1.25 billion, marginally surpassing the anticipated $1.23 billion, demonstrating a 5.3% year-over-year increase. The enterprise segment showed particular strength, contributing $757.3 million in revenue, a 7.1% rise from the previous year. Additionally, the number of large customers, those generating over $100,000 in trailing 12-month revenue, saw a healthy 9.3% increase.
Analyzing profitability, Zoom achieved a GAAP operating margin of 20%, an improvement of 100 basis points compared to the prior year. The non-GAAP operating margin, however, saw a slight dip of 20 basis points to 39.3%. GAAP EPS surged by 91.4% to $2.22, while non-GAAP EPS experienced a modest 2.1% increase, reaching $1.44.
Reflecting on the full fiscal year 2026, Zoom's total revenue reached $4.87 billion, marking a 4.4% increase from the previous year. Non-GAAP EPS for the full year grew by 6.9% to $5.92. Eric Yuan, Zoom's CEO, emphasized the acceleration in revenue growth and the increasing adoption of Zoom as a critical tool for contemporary work environments, particularly in converting conversations into completed workflows through its platform.
Looking ahead to the first quarter of fiscal year 2027, Zoom anticipates non-GAAP EPS to be in the range of $1.40 to $1.42, which falls below the analyst consensus of $1.45. Revenue for this period is projected to be between $1.22 billion and $1.225 billion, slightly above the $1.221 billion consensus. For the entire fiscal year 2027, the company forecasts revenue to range from $5.065 billion to $5.075 billion, with non-GAAP EPS expected to be between $5.77 and $5.81. Furthermore, Zoom projects a free cash flow of $1.7 billion to $1.74 billion for the full year.
Following these announcements, Wedbush analysts maintained an 'Outperform' rating on Zoom, setting a 12-month price target of $110. They acknowledged the company's revenue beat and earnings miss, along with the mixed guidance for 2027, while highlighting Zoom's continued efforts in advancing its AI-focused platform strategy. The analysts pointed to robust demand for AI-driven innovations, such as AI Companion 3.0 and ZM ZCX, which have seen significant growth in annual recurring revenue. User engagement with AI products also showed substantial increases, with monthly active users for AI Companion tripling and Zoom Phone AI feature usage growing by 35% quarter-over-quarter. Despite some headwinds from interest income and ongoing AI investments impacting the non-GAAP EPS guidance for fiscal 2027, the underlying strength in enterprise segment growth and AI integration positions Zoom for continued relevance in the evolving digital workspace.