Why Zoom Communications Stock Zoomed Today

Key Points

• Zoom beat on earnings and (barely) on revenue last night.

• Zoom grew reported earnings an incredible 66% year over year.

• Free cash flow is stacking up strongly, and Zoom stock is cheap.

• 10 stocks we like better than Zoom Communications ›

Pandemic communications star Zoom Communications (NASDAQ: ZM) stock, um (I'm trying not to say "zoomed"), moved ahead quickly Friday morning, rising 8% through 9:50 a.m. ET after beating soundly on its fiscal Q2 2026 earnings report last night.

Analysts forecast Zoom would earn $1.38 per share, adjusted for one-time items, on sales of $1.2 billion. Zoom earned $1.53 instead, and sales were a bit ahead of $1.2 billion.

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Image source: Getty Images.

Zoom Q2 earnings

The report wasn't quite as good as that makes it sound. Sales grew less than 5% year over year, and Zoom's earnings as calculated according to generally accepted accounting principles (GAAP) weren't quite as robust as the "adjusted" figure. GAAP profits were actually only $1.16 per share.

Still -- and here I'm going to say it -- those earnings zoomed 66% higher in comparison to last year's Q2.

(For what it's worth, the rise in adjusted earnings was only 10%).

Is Zoom stock a buy?

Commenting on the results, CEO Eric Yuan said "Zoom is at the forefront [of how] AI is transforming the way we work together," essentially arguing that Zoom is an artificial intelligence stock -- and the numbers back him up.

Zoom generated an incredible $508 million in Q2 free cash flow (FCF), up 39% year over year, and the company's generated nearly $1 billion ($971.3 million, to be precise) in FCF so far this year. If Zoom can keep going at that rate, the company could conceivably rack up nearly $2 billion in cash profits this year, and at a market cap of only $24 billion, this would value the stock at barely 12 times FCF.

Whether Zoom's growing at 66%, 39%, or even only 10%, that probably makes it a great growth stock buy.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zoom Communications. The Motley Fool has a disclosure policy.