Zoom Beat Every Estimate and Fell Anyway. Citizens Says That’s Exactly the Point

Zoom Beat Every Estimate and Fell Anyway. Citizens Says That’s Exactly the Point

Ghazal Ahmed

Thu, August 27, 2026 at 4:00 PM GMT+3 3 min read

• ZM +2.88%

Zoom Communications Inc. (NASDAQ:ZM) delivered a clean Q2 2027 print. Total revenue grew 4.9% year over year to $1.28 billion, beating estimates of $1.27 billion, while EPS of $1.55 beat the $1.48 consensus. Revenue growth was backed by 7.8% growth in Enterprise revenue, its strongest growth rate in three years. Remaining performance obligations also grew 14% year-over-year, but the stock fell anyway.

On August 26, Citizens analyst Patrick Walravens reiterated a Market Perform rating on Zoom Communications Inc. (NASDAQ: ZM), building on the view that the stock is already fairly valued and that the market has stopped rewarding the stock for beating a number it usually beats.

Photo by Chris Montgomery on Unsplash

Enterprise Growth: The Strongest Part of Zoom's Thesis

Zoom's enterprise revenue witnessed its strongest growth in years. Enterprise sales increased 7.8% year-over-year to $787.5 million backed by multi-product deals and AI-driven offerings. The segment now accounts for an estimated 62% of total revenue.

Zoom's remaining performance obligations also grew to $4.5 billion, beating the consensus estimate of $4.3 billion. The company's AI strategy is also strengthening. Its AI-first Customer Experience Portfolio produced high-double-digit ARR growth, licensed monthly active users for AI features in the Workplace product grew 125% year on year, while customer numbers for Zoom Virtual Agent, its automated system handling inbound customer queries, rose 256%.

A valuable hidden stake in Anthropic also formed part of Zoom's bull thesis. The company made a venture investment in the AI startup back in 2023, which delivered a $1.6 billion unrealized gain alone this quarter. This pushed its GAAP Net income to $1.54 billion.

Finally, the company ended the quarter with a $7.2 billion in cash and marketable securities as well as $472 million of free cash flow.

Bear Thesis for Zoom

Zoom's stock plunge post earnings is a reflection that investors obviously expected more.

While the company's enterprise growth was the fastest in three years, its online growth has showed signs of a slowdown. The company guided online revenue to roughly flat growth, signaling pressure in a key part of the business.

The online segment grew just 0.6% to $489.7 million, almost flat. While enterprise is carrying the growth story, the key question for Zoom is what happens if this growth normalizes while the online segment stays stuck.

Its third-quarter profit guidance also came in below Wall Street expectations, implying that competition is growing tough even as the company ramps up AI features. Moreover, AI usage costs have also been increasing, which led to a gross margin slip to 79.1%.

Bottomline

Institutional interest is strengthening in Zoom. According to Insider Monkey's database, 71 hedge funds held positions in Zoom stock, up from 60 in the prior quarter. The stock has a short interest of approximately 7.21 million shares, representing about 2.70% of its public float. The number reflects limited bearish skepticism against the stock.

Overall, it is true that Zoom's enterprise growth is a turnaround story. However, Wall Street's caution shouldn't be ignored either. While the enterprise growth rate is encouraging, online growth has stalled and Zoom is still growing at a total revenue growth rate of less than 5%.

While we acknowledge the potential of ZM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.

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