Zoom Video Communications (ZM) AI Stock Analysis

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Zoom Video Communications

(NASDAQ:ZM)

Rating:83Outperform

Price Target:

$96.00

▲(21.67%Upside)

Zoom's strong financial performance, impressive earnings call highlights, and positive technical indicators contribute to a high overall score. The company's focus on AI and enterprise growth, coupled with robust financials, outweighs concerns about valuation and macroeconomic challenges.

Positive Factors

AI Capabilities

Zoom's AI capabilities are enhancing customer value, contributing to an 8% increase in significant revenue segments.

Financial Performance

Zoom reported solid financial results, with revenue and non-GAAP operating income exceeding expectations.

Stock Buyback

Zoom repurchased $418 million of stock, with a substantial amount remaining for future buybacks, demonstrating confidence in its financial stability.

Negative Factors

Enterprise Sales

Enterprise sales forecasts have been slightly reduced due to a more challenging and uncertain macroeconomic environment.

Enterprise Segment Challenges

The Enterprise segment experienced a slight decrease, impacted by increased scrutiny of larger U.S. deals.

Sales Cycle

Management highlighted a more cautious outlook for the Enterprise segment due to extended sales cycles and deal scrutiny for larger customers.

Zoom Video Communications (ZM) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$24.17B

Dividend YieldN/A

Average Volume (3M)2.17M

Price to Earnings (P/E)23.8

Beta (1Y)1.00

Revenue Growth2.98%

EPS Growth24.11%

CountryUS

Employees7,412

SectorTechnology

Sector Strength77

IndustrySoftware - Application

Share Statistics

EPS (TTM)1.43

Shares Outstanding262,605,530

10 Day Avg. Volume3,001,098

30 Day Avg. Volume2,173,749

Financial Highlights & Ratios

PEG Ratio3.43

Price to Book (P/B)2.79

Price to Sales (P/S)0.00

P/FCF Ratio13.71

Enterprise Value/Market Cap0.97

Enterprise Value/Revenue1.28

Enterprise Value/Gross Profit6.77

Enterprise Value/Ebitda6.94

Forecast

1Y Price Target

$90.24

Price Target Upside14.37% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering23

Zoom Video Communications Business Overview & Revenue Model

Company DescriptionZoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices. It also provides Zoom Rooms, a software-based conference room system; Zoom Hardware-as-a-Service allows users to access video communication technology from third party equipment; Zoom Conference Room Connector, a gateway for SIP/H.323 endpoints to join Zoom meetings; Zoom Events, which enables users to manage and host internal and external virtual events; OnZoom, a prosumer-focused virtual event platform and marketplace for Zoom users to create, host, and monetize online events; and Zoom Webinars to provide video presentations to large audiences from many devices. In addition, the company offers Zoom Developer Platform that enables developers, platform integrators, service providers, and customers to build apps and integrations using Zoom's video-based communications solutions, as well as integrate Zoom's technology into their products and services; Zoom App Marketplace, which helps developers to publish their apps, as well as third-party integrations of Zoom; and Zoom Contact Center, an omnichannel contact center solution. It serves individuals; and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not for profit and social impact, retail/consumer products, and software/Internet industries. The company was formerly known as Zoom Communications, Inc. and changed its name to Zoom Video Communications, Inc. in May 2012. The company was incorporated in 2011 and is headquartered in San Jose, California.

How the Company Makes MoneyZoom Video Communications generates revenue primarily through subscription fees from its various product offerings. The company operates a Software-as-a-Service (SaaS) model, charging businesses and individual users for access to its platform. Key revenue streams include Zoom Meetings, Zoom Phone, Zoom Webinars, and Zoom Rooms. Each product is typically offered in tiered plans, ranging from free basic options to more comprehensive paid plans with additional features and capabilities. Zoom also earns income from hardware sales, such as Zoom Rooms conference room equipment. Additionally, Zoom has established significant partnerships with other technology companies that enhance its platform capabilities and distribution, contributing to its revenue growth. The company's global reach and adaptability to various sectors, especially during the rise of remote work and virtual collaboration, have been critical in driving its financial success.

Zoom Video Communications Key Performance Indicators (KPIs)

Any

Customers Contributing More Than $100K Revenue

Customers Contributing More Than $100K Revenue
Counts the number of high-value clients, indicating the company's success in securing substantial contracts and its focus on large-scale business relationships.

Chart InsightsZoom's high-value customer base continues to expand, with a 7% year-over-year increase in customers contributing over $100K. This growth aligns with Zoom's strategic focus on the enterprise segment, which now constitutes 60% of total revenue. Despite a cautious revenue growth outlook, the company's strong AI adoption and significant partnerships, such as with Amazon and Delta Airlines, are expected to drive further enterprise engagement. However, challenges persist in the Online segment, which may temper overall growth momentum.

Data provided by:

Main Street Data

Zoom Video Communications Earnings Call Summary

Earnings Call Date:May 21, 2025

(Q1-2026)

% Change Since: -4.10%|

Next Earnings Date:Aug 25, 2025

Earnings Call Sentiment Positive

The earnings call reflected a strong quarter for Zoom with several key achievements, including significant growth in AI Companion usage, a revenue and earnings beat, and record low churn rates. However, challenges such as macroeconomic pressures impacting the enterprise outlook and slight declines in gross and operating margins were noted. The positive highlights, particularly the strong revenue performance and product adoption, outweigh the lowlights.

Q1-2026 Updates

Positive Updates

AI Companion Growth

Zoom's AI Companion saw an increase in monthly active users by nearly 40% quarter over quarter, demonstrating strong adoption and customer enthusiasm.

Revenue and Earnings Beat

Zoom reported total revenue of $1.175 billion for Q1 FY '26, representing a 3% year-over-year increase and exceeding guidance by $8 million. Non-GAAP income from operations grew 2% year-over-year to $467 million, surpassing guidance by $22 million.

Strong Performance in Zoom Phone and Contact Center

Zoom Phone revenue grew in the mid-teens, and the number of Zoom Contact Center customers increased by 65% year-over-year, with significant upsells and new deals contributing to high double-digit growth.

Record Low Customer Churn

Average monthly churn in Q1 was 2.8%, marking a 40 basis point improvement year-over-year and the lowest ever churn rate for a first quarter.

Share Buyback Acceleration

Zoom accelerated its share buyback plan, purchasing 5.6 million shares for $418 million in Q1, demonstrating a commitment to returning value to shareholders.

Increase in Enterprise Revenue

Enterprise revenue grew approximately 6% year-over-year, accounting for 60% of total revenue, up 2 percentage points from the prior year.

Negative Updates

Macroeconomic Challenges Impacting Enterprise Outlook

Zoom cited a more challenging and uncertain macroeconomic environment affecting the enterprise business, leading to a more prudent revenue outlook for this segment.

Slight Decline in Non-GAAP Gross Margin

Non-GAAP gross margin was 79.2%, slightly lower than the previous year due to ongoing investments in AI.

Lower Operating Margin

Non-GAAP operating margin for Q1 was 39.8%, down 23 basis points from the previous year, impacted by changes in bonus structures and AI investments.

Company Guidance

During Zoom's Q1 FY '26 earnings call, the company provided guidance with several key metrics, indicating a positive outlook despite some macroeconomic challenges. Zoom's total revenue grew by approximately 3% year-over-year to $1.175 billion, surpassing the high end of their guidance by $8 million. Their enterprise revenue increased by about 6% year-over-year, comprising 60% of the total revenue. The company reported a non-GAAP gross margin of 79.2% and a non-GAAP operating margin of 39.8%. Zoom also highlighted strong growth in their AI Companion, with monthly active users up nearly 40% quarter-over-quarter, and noted the adoption of Zoom Phone, which saw revenue grow in the mid-teens. The company's guidance for Q2 anticipates revenue between $1.195 billion to $1.2 billion, with a non-GAAP operating income expected to range from $460 million to $465 million. For the full fiscal year '26, Zoom raised its revenue guidance to $4.8 billion to $4.81 billion, reflecting a 3% year-over-year growth at the midpoint, and increased its non-GAAP earnings per share outlook to $5.56 to $5.59.

Zoom Video Communications Financial Statement Overview

Summary

Zoom Video Communications exhibits a strong financial standing, characterized by impressive revenue growth, high profitability margins, and robust cash flow generation. The company's minimal debt levels and strong equity base enhance its financial stability, positioning it well for future growth and resilience against market fluctuations.

Income Statement

Very Positive

Zoom has demonstrated strong revenue growth over the years, with a robust revenue growth rate of 3.05% in TTM (Trailing-Twelve-Months). The gross profit margin stands at an impressive 74.46%, indicating efficient cost management. The net profit margin improved significantly to 21.65% in the TTM period, showcasing strong profitability. EBIT and EBITDA margins are solid at 18.99% and 18.63%, respectively, reflecting strong operational efficiency.

Balance Sheet

Very Positive

Zoom maintains a strong balance sheet with a low debt-to-equity ratio of 0.0042, highlighting minimal leverage and financial risk. The return on equity (ROE) is a healthy 11.31%, indicating effective use of shareholder funds. An equity ratio of 81.32% underlines a strong equity base, enhancing financial stability.

Cash Flow

Very Positive

Zoom's cash flow is robust, with a free cash flow growth rate of 22.85% illustrating strong cash generation capabilities. The operating cash flow to net income ratio of 1.93 indicates efficient conversion of profits to cash. The free cash flow to net income ratio stands at 1.79, further emphasizing strong cash flow dynamics.

Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
4.67B	4.53B	4.39B	4.10B	2.65B
	Gross Profit
3.54B	3.45B	3.29B	3.05B	1.83B
	EBIT
813.29M	525.28M	245.43M	1.06B	659.85M
	EBITDA
813.29M	629.73M	245.43M	1.11B	688.71M
	Net Income Common Stockholders
1.01B	637.46M	103.71M	1.38B	672.32M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
7.79B	6.96B	5.41B	5.42B	4.24B
	Total Assets
10.99B	9.93B	8.13B	7.55B	5.30B
	Total Debt
64.43M	72.95M	96.48M	105.72M	90.42M
	Net Debt
-1.28B	-1.49B	-990.35M	-957.11M	-2.15B
	Total Liabilities
2.05B	1.91B	1.92B	1.77B	1.44B
	Stockholders Equity
8.94B	8.02B	6.21B	5.78B	3.86B
Cash Flow		Free Cash Flow
1.81B	1.47B	1.18B	1.46B	1.39B
	Operating Cash Flow
1.95B	1.60B	1.29B	1.61B	1.47B
	Investing Cash Flow
-1.11B	-1.18B	-318.32M	-2.86B	-1.56B
	Financing Cash Flow
-1.03B	60.19M	-936.94M	34.07M	2.05B

Zoom Video Communications Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price78.90

Price Trends

50DMA

76.39

Positive

100DMA

78.44

Positive

200DMA

76.09

Positive

Market Momentum

MACD

1.52

Positive

RSI

47.72

Neutral

STOCH

25.04

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZM, the sentiment is Neutral. The current price of 78.9 is below the 20-day moving average (MA) of 80.68, above the 50-day MA of 76.39, and above the 200-day MA of 76.09, indicating a neutral trend. The MACD of 1.52 indicates Positive momentum. The RSI at 47.72 is Neutral, neither overbought nor oversold. The STOCH value of 25.04 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ZM	83 Outperform	$24.17B	23.80	12.19%	―	2.98%	24.11%
DOCU	80 Outperform	$17.13B	16.55	68.18%	―	7.78%	1345.45%
MNDY	78 Outperform	$14.65B	292.73	5.39%	―	32.25%	156.94%
GRND	73 Outperform	$4.67B	―	-63.52%	―	30.08%	-196.62%
GRAB	67 Neutral	$20.17B	883.93	0.38%	―	17.24%	―
Sector *	61 Neutral	$11.29B	10.17	-6.88%	2.97%	7.41%	-8.93%
COMP	48 Neutral	$3.17B	―	-14.96%	―	19.05%	78.91%

* Technology Sector Average

Performance Comparison

Zoom Video Communications

78.90

16.84

27.14%

DOCU

DocuSign

86.25

28.54

49.45%

GRND

Grindr

23.86

14.60

157.67%

GRAB

Grab

4.97

1.32

36.16%

COMP

Compass

5.98

2.00

50.25%

MNDY

Monday.com

299.11

58.57

24.35%

Zoom Video Communications Corporate Events

Executive/Board Changes

Zoom’s Chief Accounting Officer Resigns, CFO Steps In

Neutral

Apr 16, 2025

On April 11, 2025, Shane Crehan announced his resignation as Chief Accounting Officer of Zoom Video Communications, effective May 2, 2025, to pursue a position at another company. Following his departure, Michelle Chang, the current Chief Financial Officer, will take over as the principal accounting officer, while the company searches for a permanent successor.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.