Zoom’s stock is down roughly 4% this morning after the company posted its cleanest earnings report in years. That reaction tells you most of what you need to know about where investor expectations have drifted.
The company earned $1.55 per share on an adjusted basis on revenue of $1.277 billion for its fiscal Q2 2027, against analyst expectations of $1.48 per share on revenue of $1.27 billion. Enterprise revenue ticked up 7.8% year over year to $787.5 million, the strongest growth rate in three years. The selloff came from the Q3 guide: the revenue guidance range of $1.275 billion to $1.280 billion came in just below what Wall Street was looking for, and adjusted EPS guidance of $1.46 to $1.48 trailed the $1.50 consensus.
So the quarter itself was legitimately strong. The question the assignment asks is whether AI Companion attach or plain enterprise contract timing deserves the credit. Both explanations have supporting evidence, and the answer matters for whether this acceleration is durable.
The AI Companion Argument
Zoom did point to rapid AI-driven product adoption, including strong momentum in its AI-first Customer Experience portfolio. One concrete datapoint: Zoom said Zoom Virtual Agent’s customer count increased 256% year over year, and that helped drive high-double-digit annual recurring revenue growth in Customer Experience. Remaining performance obligations increased 14% year over year to approximately $4.5 billion, which management attributed to larger, longer-term multi-product platform deals. That RPO figure is the strongest forward indicator in the whole release. Multi-year deals at scale do not happen because a company had a favorable contract renewal quarter.
The Contract Timing Argument
The bear case on enterprise acceleration is simpler. Enterprise net dollar expansion was 99%, which is better than last year but still not expansion. A company that tightened contract discipline over several quarters will eventually see that effort show up as accelerating revenue in a single quarter. That is not a criticism; it is a distinction between AI-led and operational improvement-led growth, because only one of those two compounds on its own.
The Cash Flow and Buyback Case
For fiscal 2027, Zoom now expects revenue of $5.085 to $5.095 billion and free cash flow of $1.780 to $1.820 billion. The company repurchased approximately 3.7 million shares in Q2, bringing the total to 44.2 million under the current plan, with about $1.3 billion of authorized capacity remaining as of July 31, 2026. At a roughly $31 billion market cap, a company generating nearly $1.8 billion in annual free cash flow and aggressively retiring shares at these prices is doing something real regardless of what is driving enterprise growth.
The Risks
While the user base for new AI features is expanding rapidly, that adoption has not yet translated into proportional revenue growth. Online remains the soft spot: online revenue rose just 0.6%. Net dollar expansion stayed at 99%, meaning enterprise customers are spending slightly more on net but haven’t crossed the threshold into genuine expansion territory. Microsoft Teams continues to bundle aggressively, and every AI feature Zoom adds is one Microsoft can replicate inside the tools enterprises already pay for.
What to Watch Next
The RPO growth is the single most important number to track going forward. If the RPO growth converts into accelerating recognized revenue over the next four quarters, the AI attach argument wins. If recognized revenue flattens back toward 4% while RPO stays elevated, the contract timing explanation was probably right and investors will have to wait longer for AI to move the income statement. Zoom also recorded a $1.614 billion gain on strategic investments, net, which is worth monitoring as a balance sheet asset separate from the operating business.
The stock trading at roughly 17 times forward earnings with $1.3 billion in buyback capacity and the fastest enterprise growth in three years is not an obvious short. The selloff on mild Q3 guidance suggests the market still views this as a show-me situation. That skepticism is the opportunity, if the RPO data keeps converting.
