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Zoom Video Communications, Inc. Class A (ZM)
NASDAQ:ZM
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Zoom Video Communications
(NASDAQ:ZM)
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Rating:70Outperform
Price Target:
$83.00
▲(12.25% Upside)
Action:ReiteratedDate:02/27/26
The score is driven primarily by strong financial quality (high margins, robust free cash flow, and very low leverage) and a constructive but tempered earnings outlook (modest growth with strong margins and backlog). These positives are partially offset by weak technicals (price below key moving averages with negative MACD) and only moderate growth, while valuation appears reasonable at a ~16.6 P/E with no dividend support.
Positive Factors
High and improving profitability
Zoom's net margin expanded materially to ~39% in 2026 alongside persistently high gross margins (~75–77%), reflecting durable software economics and operating leverage. Sustainable high margins provide cash generation, fund R&D and buybacks, and increase resilience to demand swings.
Strong cash generation and buybacks
Operating cash flow (~$2.0B) and FCF (~$1.9B) plus an active $3.7B buyback program demonstrate durable cash conversion. Reliable cash flow funds strategic investments, M&A and buybacks that offset dilution, improving per-share economics and financial flexibility over the medium term.
Enterprise upmarket and AI monetization traction
Enterprise revenue and AI features are driving durable displacement of legacy vendors: enterprise mix rose to 61% of revenue, sizable customer wins and fast AI monetization suggest product-led expansion into higher‑value accounts and stickier enterprise contracts over time.
Negative Factors
Muting top-line growth
Zoom's revenue growth is low-single-digit and has largely plateaued, constraining ARR scalability. With modest organic top-line momentum, durable per-share growth increasingly depends on margin expansion, upsells or buybacks rather than robust organic expansion of the core business.
Net dollar contraction and retention risk
A sub-100% net dollar expansion rate (98%) and a tick up in churn indicate existing customers are, on net, contracting. That structural pressure means Zoom must sustain higher new-account acquisition and large displacement wins to offset erosion and support durable revenue growth.
Cash-flow and recognition volatility
Although absolute cash generation is strong, FCF growth turned negative in 2026 and quarter-to-quarter cash flow fell, with management noting billing/recognition transitions and credits. This increases the risk that cash conversion and reported revenue will be more volatile over the medium term.
Zoom Video Communications (ZM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$21.89B
Dividend YieldN/A
Average Volume (3M)4.41M
Price to Earnings (P/E)11.9
Beta (1Y)0.98
Revenue Growth3.85%
EPS Growth72.42%
CountryUS
Employees7,412
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)1.44
Shares Outstanding265,569,700
10 Day Avg. Volume4,914,301
30 Day Avg. Volume4,407,285
Financial Highlights & Ratios
PEG Ratio0.16
Price to Book (P/B)2.82
Price to Sales (P/S)5.68
P/FCF Ratio14.38
Enterprise Value/Market Cap0.95
Enterprise Value/Revenue4.29
Enterprise Value/Gross Profit5.57
Enterprise Value/Ebitda11.17
Forecast
1Y Price Target
$99.72Price Target Upside34.87% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering20
EPS Forecast (FY)6.07
Revenue Forecast (FY)$5.03B
Zoom Video Communications Business Overview & Revenue Model
Company DescriptionZoom Communications, Inc. engages in the provision of a communications and collaboration platform. It operates through the following geographical segments: Americas, Asia Pacific, and Europe, Middle East, and Africa. The company was founded by Eric S. Yuan in 2011 and is headquartered in San Jose, CA.
How the Company Makes MoneyZoom generates revenue primarily through a subscription-based model, offering tiered pricing plans for its services that cater to different user needs, ranging from individual users to large enterprises. The key revenue streams include subscriptions for Zoom Meetings, Zoom Video Webinars, and Zoom Phone services. Furthermore, Zoom offers add-ons such as additional cloud storage and large meeting capabilities, which contribute to incremental revenue. The company has established significant partnerships with various organizations and platforms, further enhancing its reach and service offerings. Additionally, during peak periods of remote work, Zoom experienced a surge in demand, leading to increased customer acquisition and retention, which positively impacted its revenue growth.
Zoom Video Communications Key Performance Indicators (KPIs)
Any
Revenue by Geography
Breaks down revenue across different regions, revealing where Zoom is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Breaks down revenue across different regions, revealing where Zoom is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Data provided by:
The Fly
The FlyZoom Video Communications Earnings Call Summary
Earnings Call Date:Feb 25, 2026
(Q4-2026)
| % Change Since: |
Next Earnings Date:May 25, 2026
Earnings Call Sentiment Positive
The call conveyed meaningful progress: revenue acceleration versus the prior year, strong enterprise and AI monetization momentum (notably in Contact Center, ZVA Voice, Phone and AI Companion adoption), improved non-GAAP margins for the full year, a healthy cash balance and continued buybacks. Offsetting these positives were declines in quarterly operating and free cash flow, a net dollar expansion rate below 100% (98%), modest churn uptick, near-term billing/recognition dynamics tied to transition credits for competitive takeouts, and some tax and interest headwinds. Overall, execution on AI products and large competitive displacements were emphasized as drivers for durable growth, though several near-term financial and recognition headwinds temper the outlook.Q4-2026 Updates
Positive Updates
Q4 Revenue Above Guidance and Year-over-Year Growth
Q4 FY26 revenue grew 5.3% year-over-year to $1.25 billion (4.8% in constant currency) and was $12 million above the high end of guidance.
Full Year Revenue Acceleration
FY26 revenue grew 4.4% year-over-year, representing a 130 basis point acceleration vs. FY25 and management expects FY27 revenue to top $5.06 billion (midpoint ~4.1% YoY growth).
Enterprise Strength and Upmarket Momentum
Enterprise revenue grew 7.1% in Q4 and represented 61% of total revenue (up 1 point YoY). Customers with >$100k TTM revenue increased 9% YoY and now account for 33% of revenue (up 2 points YoY).
AI Product Adoption and Monetization Traction
AI Companion 3.0 launched; AI Companion MAUs more than tripled YoY, side-panel MAUs more than doubled QoQ, and Zoom Phone MAUs using AI features rose 35% sequentially. ZCX ARR grew in high double-digits and AI monetization contributed to competitive wins (every top-10 Q4 CX deal included paid AI).
Contact Center and Voice Momentum
Zoom Contact Center and ZVA Voice featured in multiple large competitive displacements: ZVA Voice included in 4 of top-10 CX deals, and Zoom signed a nearly seven-figure ARR ZVA Voice deal for a retailer across 1,100+ locations. Contact Center growth described as high double-digits, accelerating in Q4.
Phone Business Expansion and Large Displacements
Phone ARR continues to grow in the mid-teens. Significant wins include a Fortune 10 replacement (140,000 seats) and an expansion adding ~50,000 seats to bring a global bank to ~150,000 total seats; multiple large financial and enterprise displacements of legacy vendors were highlighted.
Improved Margins and Profitability
Q4 non-GAAP gross margin was 79.8% (up ~1 point YoY). Full FY26 non-GAAP gross margin reached 79.7% (up 80 bps YoY) and FY26 non-GAAP operating margin was 40.4% (up 100 bps YoY).
Non-GAAP Earnings and Operating Results
Q4 non-GAAP income from operations grew 4.6% YoY to $490 million (exceeding guidance by $8M). Q4 non-GAAP diluted EPS rose $0.03 YoY to $1.44 (includes an approximate $0.11 headwind from higher-than-expected taxes).
Strong RPO, Deferred Revenue and Cash Position
RPO increased over 10% YoY to approximately $4.2 billion; deferred revenue grew 5% YoY to $1.42 billion (above prior guidance range). Company ended Q4 with ~$7.8 billion in cash, equivalents and marketable securities.
Free Cash Flow Growth and Share Repurchases
FY26 free cash flow grew 6.4% to $1.9 billion. Under the $3.7 billion buyback plan, Zoom repurchased 3.8 million shares for ~$324 million in Q4 and 36.3 million shares for ~$2.7 billion year-to-date, and intends to use buybacks to at least offset dilution going forward.
Product and Go-to-Market Expansion
Closed BrightHire acquisition (adding recruiting AI), Revenue Accelerator customers grew 50% YoY, and investments in channel and international initiatives (e.g., U.K. data center) to support Phone and Contact Center expansion were highlighted.
Negative Updates
Quarterly Operating Cash Flow and Free Cash Flow Declines
Q4 operating cash flow fell to $355 million from $425 million a year earlier (down ~16.5%), and Q4 free cash flow fell to $338 million from $416 million (down ~18.8%), reducing QoQ cash generation.
Net Dollar Expansion Rate Below 100%
Trailing 12-month net dollar expansion rate for enterprise customers remained at 98% in Q4, indicating continued net contraction/downsell pressure (management expects a rebound over the longer term).
Slight Increase in Churn
Average monthly churn in Q4 was 2.9% compared with 2.8% in Q4 FY25, reflecting a small deterioration in online customer retention.
Near-Term Recognition and Billing Dynamics
RPO recognition profile: expected to recognize ~57% of total RPO over the next 12 months (down 2 points YoY). Deferred revenue guidance for Q1 factors in larger, longer competitive takeouts with transition credits (1–2% YoY expected growth), which can compress near-term billed revenue.
Tax and Interest Headwinds
Q4 non-GAAP EPS included a roughly $0.11 headwind from higher-than-expected taxes, and FY27 guidance includes an approximate $50 million interest income headwind due to lower yields in a declining rate environment.
Compensation Mix Pressure on Margins
FY27 margin guidance includes a ~70 basis point headwind from a continued shift from stock-based compensation to cash bonuses (offset partially by a 180 bps amortization accounting tailwind), reflecting ongoing comp cost pressure.
Competitive White-Label Churn Impact
Management cited a single large competitive white-label churn at the end of FY26 that creates roughly a 40 basis point headwind to guidance, and emphasized some billing dynamics (grace periods/credits) tied to competitive takeouts.
Moderate Overall Revenue Growth Rate
Top-line growth remains moderate (Q4 +5.3% YoY; FY26 +4.4% YoY), which, while an acceleration, still reflects relatively low single-digit growth requiring continued execution on AI monetization and product expansion to materially accelerate results.
Company Guidance
Zoom's guidance for Q1 FY‑27 calls for revenue of $1.22–$1.225 billion (midpoint ~4.1% YoY growth), non‑GAAP operating income of $487–$492 million (operating margin ~40% at the midpoint), and non‑GAAP EPS of $1.40–$1.42 based on ~304 million shares; deferred revenue is expected to be up 1–2% YoY. For full FY‑27 the company expects revenue of $5.065–$5.075 billion (midpoint +4.1% YoY), non‑GAAP operating income of $2.05–$2.06 billion (operating margin ~40.5% at the midpoint, reflecting a +180 bps amortization accounting tailwind partly offset by ~‑70 bps from the shift from stock‑based to cash bonuses), non‑GAAP EPS of $5.77–$5.81 on ~308 million shares (future repurchases not included), and free cash flow of $1.7–$1.74 billion (including ~ $75 million incremental CapEx); management also flagged an expected ~$50 million interest‑income headwind and noted RPO is up >10% YoY to ~ $4.2 billion with ~57% expected to be recognized over the next 12 months.Zoom Video Communications Financial Statement Overview
Summary
High-quality fundamentals: very strong and improving profitability (net margin rising to ~39% in 2026), consistently strong gross margins (~75–77%), minimal leverage (debt-to-equity ~0.3%), and robust free cash flow (~$1.9B in 2026). The main constraint is muted growth, with revenue largely plateauing and free cash flow growth turning negative in 2026.Income Statement
Revenue has been essentially flat in recent years (about 3% growth in 2024 and 2025, and ~1% in 2026), which limits the growth narrative. Profitability, however, improved meaningfully: net margin rose from ~2% (2023) to ~14% (2024), ~22% (2025), and ~39% (2026), alongside consistently strong gross margins (~75–77%). The main weakness is the lack of sustained top-line acceleration and some volatility in earnings power across the period (notably the low-profit 2023).78
Positive
Balance Sheet
The balance sheet is very conservatively levered, with debt-to-equity falling to ~0.3% in 2026 from already-low levels in prior years, indicating minimal balance-sheet risk from debt. Equity and assets have grown steadily over the period, and return on equity improved to ~19% in 2026 after being much lower in 2023–2024, signaling a stronger profitability profile on a still-strong capital base. The key watch-out is that returns have been somewhat volatile year-to-year.90
Very Positive
Cash Flow
Cash generation is strong and consistent: operating cash flow is ~$2.0B and free cash flow is ~$1.9B in 2026, with free cash flow closely tracking net income (roughly ~97% in 2026). Cash flow quality looks solid with operating cash flow roughly matching net income across most years (generally near 1x). The main weakness is that free cash flow growth turned negative in 2026 (after improving in 2024–2025), suggesting some near-term deceleration despite a high absolute level of cash generation.82
Very Positive
| Breakdown | Jan 2026 | Jan 2025 | Jan 2024 | Jan 2023 | Jan 2022 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.87B | 4.67B | 4.53B | 4.39B | 4.10B |
| Gross Profit | 3.75B | 3.54B | 3.45B | 3.29B | 3.05B |
| EBITDA | 2.56B | 935.93M | 629.73M | 327.75M | 1.11B |
| Net Income | 1.90B | 1.01B | 637.46M | 103.71M | 1.38B |
Balance Sheet | |||||
| Total Assets | 11.96B | 10.99B | 9.93B | 8.13B | 7.55B |
| Cash, Cash Equivalents and Short-Term Investments | 7.82B | 7.79B | 6.96B | 5.41B | 5.42B |
| Total Debt | 30.71M | 64.43M | 72.95M | 96.48M | 105.72M |
| Total Liabilities | 2.15B | 2.05B | 1.91B | 1.92B | 1.77B |
| Stockholders Equity | 9.81B | 8.94B | 8.02B | 6.21B | 5.78B |
Cash Flow | |||||
| Free Cash Flow | 1.92B | 1.81B | 1.47B | 1.18B | 1.46B |
| Operating Cash Flow | 1.99B | 1.95B | 1.60B | 1.29B | 1.61B |
| Investing Cash Flow | -278.90M | -1.11B | -1.18B | -318.32M | -2.86B |
| Financing Cash Flow | -1.81B | -1.03B | 60.19M | -936.94M | 34.07M |
Zoom Video Communications Technical Analysis
Negative
73.94
Price Trends
87.81
Negative
85.65
Negative
82.19
Negative
Market Momentum
-2.20
Positive
28.72
Positive
14.46
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZM, the sentiment is Negative. The current price of 73.94 is below the 20-day moving average (MA) of 89.13, below the 50-day MA of 87.81, and below the 200-day MA of 82.19, indicating a bearish trend. The MACD of -2.20 indicates Positive momentum. The RSI at 28.72 is Positive, neither overbought nor oversold. The STOCH value of 14.46 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ZM.
Zoom Video Communications Risk Analysis
Zoom Video Communications disclosed 61 risk factors in its most recent earnings report. Zoom Video Communications reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Zoom Video Communications Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | $21.89B | 11.91 | 20.28% | ― | 3.85% | 72.42% | |
66 Neutral | $3.12B | 75.64 | ― | ― | 5.45% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
53 Neutral | $2.10B | 91.23 | 6.29% | ― | 7.36% | -40.62% | |
52 Neutral | $356.09M | -294.05 | 0.25% | ― | -24.05% | 96.90% | |
46 Neutral | $205.82M | -4.51 | -41.00% | ― | 6.33% | -66.34% |
* Technology Sector Average
ZM
Zoom Video Communications
73.94
-0.37
-0.50%
RNG
RingCentral
36.45
8.48
30.32%
BL
BlackLine
35.25
-12.78
-26.61%
CRNC
Cerence
7.91
-2.42
-23.43%
LAW
CS Disco
3.25
-1.39
-29.96%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.