Net margin was 120.8%. That is the single oddest number in Zoom’s latest filing: the company recorded $1.5 billion of net income on $1.3 billion of revenue for the six months ended July 31.
The stock closed at $93.79 on August 26, down 7.1% for the day. The operating business offers a much less theatrical picture. Revenue rose 4.9% to $1.3 billion, gross profit grew 4.4% to $985.5 million, and operating income fell 2.3% to $314.3 million.
That pushed operating margin down to 24.6% from 26.4% a year earlier. Zoom sold a little more and kept a little less of each dollar before the financial and accounting items below operating income. The company does not say in the supplied discussion what produced the extraordinary net-income increase.
Management does identify one clear pressure point: the cost of running more of the platform, including its newer AI products.
"The increase was primarily due to a $34.4 million increase in third-party hosting costs, primarily driven by increased platform usage, including growth in AI-related consumption from the launch of new products, partially offset by a $14.7 million decrease in co-located data center costs primarily driven by data center optimization and cost reduction efforts, and a $10.4 million decrease in stock-based compensation resulting from changes in our equity program."
10-Q, August 26, 2026
The plain-English version is that AI consumption is showing up in hosting costs alongside a decline in operating margin. Data-center optimization and lower stock compensation offset part of the increase, but not enough to prevent the operating margin decline.
Research and development tells a similar, if more intentional, story. Six-month R&D expense rose 14.2% to $470.4 million, which Zoom attributed to continued investment in AI innovation. Revenue growth was still measured in the low single digits.
Cash generation held near $1.0 billion, and Zoom says collections tied to revenue growth were the main help. Vendor payments, primarily from higher cost of revenue, absorbed some of that benefit.
"The increase in operating cash flow was mainly due to higher collections driven by revenue growth, partially offset by higher vendor payments, primarily driven by an increase in cost of revenue."
10-Q, August 26, 2026
Cash, meanwhile, fell to $932.0 million. The company spent $441.1 million on strategic investments, including an additional $300.9 million investment in Anthropic, paid $248.7 million for acquisitions, and spent $43.5 million on property and equipment. Those are uses of cash, not a footnote to the net-income figure.
Zoom’s annual history supplies some context without resolving the near-term mismatch. Operating margin improved from 17.4% in fiscal 2025 to 23.1% in fiscal 2026, while annual revenue growth was 4.4%. The company has been expanding profitability over time, but this six-month filing shows that the latest incremental growth is arriving alongside heavier AI investment and a lower current operating margin.
Zoom’s next report needs to provide the bridge behind the $1.5 billion net-income figure, alongside the next update on hosting costs and operating margin. What exactly turned a modestly growing operating business into a company with net income larger than its revenue?
Source: Zoom Communications’ Form 10-Q filed August 26, 2026, covering the six months ended July 31, 2026.