Video communications platform Zoom (NASDAQ: ZM) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 4.4% year on year to $1.23 billion. The company expects next quarter’s revenue to be around $1.23 billion, close to analysts’ estimates. Its non-GAAP profit of $1.52 per share was 5.8% above analysts’ consensus estimates.
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Zoom (ZM) Q3 CY2025 Highlights:
- Revenue: $1.23 billion vs analyst estimates of $1.21 billion (4.4% year-on-year growth, 1.3% beat)
- Adjusted EPS: $1.52 vs analyst estimates of $1.44 (5.8% beat)
- Adjusted Operating Income: $507 million vs analyst estimates of $471.8 million (41.2% margin, 7.5% beat)
- Revenue Guidance for Q4 CY2025 is $1.23 billion at the midpoint, roughly in line with what analysts were expecting
- Management raised its full-year Adjusted EPS guidance to $5.96 at the midpoint, a 2.3% increase
- Operating Margin: 25.2%, up from 15.5% in the same quarter last year
- Free Cash Flow Margin: 50%, up from 41.7% in the previous quarter
- Customers: 4,363 customers paying more than $100,000 annually
- Net Revenue Retention Rate: 98%, in line with the previous quarter
- Market Capitalization: $23.53 billion
Company Overview
Once the verb that defined remote work during the pandemic ("let's Zoom later"), Zoom (NASDAQ: ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Zoom’s sales grew at a decent 19.7% compounded annual growth rate over the last five years. Its growth was slightly above the average software company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Zoom’s recent performance shows its demand has slowed as its annualized revenue growth of 3.4% over the last two years was below its five-year trend. 
This quarter, Zoom reported modest year-on-year revenue growth of 4.4% but beat Wall Street’s estimates by 1.3%. Company management is currently guiding for a 4.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not lead to better top-line performance yet.
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Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Zoom’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 98% in Q3. This means Zoom’s revenue would’ve decreased by 2% over the last 12 months if it didn’t win any new customers.
Zoom has a weak net retention rate, signaling that some customers aren’t satisfied with its products, leading to lost contracts and revenue streams.
Key Takeaways from Zoom’s Q3 Results
It was great to see Zoom’s EPS guidance for next quarter top analysts’ expectations. We were also glad its full-year EPS guidance slightly exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 1.8% to $80.12 immediately after reporting.
Indeed, Zoom had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
