A soft third-quarter profit outlook is overshadowing an otherwise clean beat at Zoom Communications (NASDAQ:ZM | ZM Price Prediction), sending the video collaboration name lower even as the broader software tape barely moves. Zoom stock is down 6% to $95.08 Wednesday morning after the company delivered a Q2 FY2027 double beat, raised its full-year outlook, and then guided Q3 profit below the Street.
Meanwhile, the iShares Expanded Tech-Software Sector ETF (CBOE:IGV) is up 0.1% to $101.97, barely budging against Zoom’s slide. This is a Zoom-specific reset, not a sector selloff. Shares of the video collaboration company were up 17% year to date through Tuesday’s close.
Soft Q3 Profit Guide Overshadows a Double Beat
Zoom’s Q2 FY2027 revenue came in at $1.28 billion, up 4.9% year over year, against a $1.27 billion consensus. Adjusted EPS of $1.55 topped a $1.48 estimate. Full-year FY2027 guidance was raised to revenue of $5.085 billion to $5.095 billion, adjusted EPS of $6.08 to $6.12, and free cash flow of $1.78 billion to $1.82 billion.
The catalyst is the Q3 line. Zoom guided Q3 adjusted EPS to $1.46 to $1.48 against a $1.50 estimate, with revenue of $1.275 billion to $1.28 billion versus a $1.282 billion consensus. That EPS step-down from Q2’s $1.55 print, paired with a Q2 non-GAAP operating margin of 40%, compared with 41.3% a year earlier, is what has investors trimming their exposure.
Enterprise Momentum, Online Stagnation
Zoom’s Enterprise revenue rose 7.8% to $787.5 million, its strongest growth rate in three years, and accounted for 62% of total revenue. Online revenue, sold directly through Zoom’s website, rose just 0.6% to $489.7 million. Customers generating more than $100,000 in trailing 12-month revenue climbed 8.2% to 4,625, and net dollar expansion ticked up to 99% from 98%.
CEO Eric S. Yuan stated, “Total revenue grew 4.9% year over year, anchored by 7.8% growth in Enterprise revenue, its strongest growth rate in three years.” Remaining performance obligations rose 14% to $4.5 billion, and Zoom repurchased 3.7 million shares for $352 million during the quarter. The company ended Q2 with $7.2 billion in cash, equivalents and marketable securities.
The muted peer tape reinforces the single-company read for Zoom. Atlassian (NASDAQ:TEAM) stock is up 0.6% to $167.47, while HubSpot (NYSE:HUBS) stock is down 1% to $235.24 and Monday.com (NASDAQ:MNDY) stock is down 2% to $91.56. None of those moves look like sector-wide selling.
What to Watch
Investors can watch for whether Zoom’s Enterprise acceleration extends into Q4 and whether management optimizes AI infrastructure costs in the second half, after higher usage-related expenses pressured Q2 margins. The $250 million Common Room deal and Workvivo, which surpassed $100 million in annual recurring revenue, add optionality even as Online growth stays essentially flat.
Position sizing in Zoom stock should stay modest. The Enterprise engine looks durable and the buyback backdrop is supportive, with approximately $1.3 billion of authorized share repurchase remaining. However, margin pressure from AI compute and flat Online growth argue against outsized bets on Zoom shares until the Q3 profit guide is proved conservative.
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