Zoom Video Communications (ZM) AI Stock Analysis

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Zoom Video Communications

(NASDAQ:ZM)

Rating:74Outperform

Price Target:

$87.00

▲(16.62%Upside)

Zoom Video Communications scores a solid 74.2, driven primarily by strong financial performance and a positive earnings call that highlights growth in key areas like AI and enterprise revenue. While technical analysis shows some short-term weaknesses, the company's strategic focus on innovation and robust financials support a positive outlook. Valuation is reasonable, though the lack of a dividend may limit appeal to some investors.

Positive Factors

AI Integration

The company plans to monetize AI Companion Add-On at USD12/user/month, marking a strategic shift in emphasizing AI-driven revenue streams.

Financial Performance

Adjusted EPS rose 8% y/y to USD1.43, 9.2% above consensus expectations.

Stock Buyback

Zoom repurchased $418 million of stock in FQ1, with $1.2 billion on its buyback remaining, ending FQ1 with $7.8 billion of cash.

Negative Factors

Competitive Environment

Zoom participates in a highly competitive environment globally, with intensified competition potentially creating downward pressure.

Video Conferencing Demand

The resumption of face-to-face meetings has lowered the video conferencing demand.

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

Market Cap

$22.61B

Dividend YieldN/A

Average Volume (3M)2.58M

Price to Earnings (P/E)22.4

Beta (1Y)0.96

Revenue Growth2.98%

EPS Growth24.11%

CountryUS

Employees7,412

SectorTechnology

Sector Strength93

IndustrySoftware - Application

Share Statistics

EPS (TTM)1.43

Shares Outstanding260,280,060

10 Day Avg. Volume2,917,270

30 Day Avg. Volume2,584,888

Financial Highlights & Ratios

PEG Ratio5.09

Price to Book (P/B)2.56

Price to Sales (P/S)0.00

P/FCF Ratio13.29

Enterprise Value/Market Cap0.95

Enterprise Value/Revenue1.15

Enterprise Value/Gross Profit6.01

Enterprise Value/Ebitda5.76

Forecast

1Y Price Target

$90.62

Price Target Upside21.47% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering23

Zoom Video Communications Business Overview & Revenue Model

Company DescriptionZoom Video Communications, Inc. (NASDAQ: ZM) is a leading technology company in the telecommunications sector, specializing in video conferencing solutions. The company offers a cloud-based communications platform that provides video meetings, voice, webinars, and chat across various devices and locations. Zoom's core product, Zoom Meetings, is designed to facilitate seamless virtual communication for businesses, educational institutions, and individual users globally. The company is headquartered in San Jose, California and serves a diverse range of sectors including enterprise, education, healthcare, and government.

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
Highlights the number of large-scale customers, indicating Zoom's ability to secure and retain high-value contracts that contribute significantly to its revenue.

Chart InsightsZoom's high-value customer base has shown consistent growth, reaching 4,192 by March 2025. This steady increase underscores strong enterprise adoption, despite macroeconomic challenges. The earnings call highlights robust enterprise revenue growth, which now comprises 60% of total revenue, and record low customer churn. These factors suggest resilience and strategic focus on high-value segments, supported by innovations like AI Companion and Zoom Phone, which are gaining traction. However, the company remains cautious about the broader economic outlook impacting future enterprise growth.

Data provided by:

Main Street Data

Zoom Video Communications Earnings Call Summary

Earnings Call Date:May 21, 2025

(Q1-2026)

% Change Since: -9.32%|

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 demonstrates strong financial performance with consistent revenue growth, robust margins, and minimal leverage. The company has efficient cost management with a gross profit margin of 75.83% and a net profit margin of 22.31%. The balance sheet is stable with a low debt-to-equity ratio of 0.01, and cash flow generation is strong with positive free cash flow growth.

Income Statement

Very Positive

Zoom Video Communications shows a strong income statement with consistent revenue growth and robust margins. The TTM (Trailing-Twelve-Months) gross profit margin is approximately 75.83%, indicating efficient cost management. The net profit margin stands at 22.31%, reflecting solid profitability. Revenue growth is steady with a 3.78% increase from the previous annual period. The EBIT and EBITDA margins are also strong at 16.57% and 22.50%, respectively, demonstrating effective operational management.

Balance Sheet

Very Positive

The balance sheet of Zoom is robust, characterized by a low debt-to-equity ratio of 0.01, highlighting minimal leverage. The return on equity (ROE) is impressive at 11.78%, reflecting efficient use of equity to generate profits. The equity ratio is high at 81.28%, indicating strong financial stability and a low risk profile.

Cash Flow

Positive

Zoom's cash flow statements exhibit strong operational cash flows with an operating cash flow to net income ratio of 1.76, indicating efficient cash generation from operations. The free cash flow to net income ratio is 1.62, suggesting ample free cash flow relative to net income. Free cash flow growth is positive at 6.68% from the previous annual period, reflecting healthy cash flow management.

Breakdown	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
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
EBITDA	935.93M	629.73M	245.43M	1.11B	688.71M
Net Income	1.01B	637.46M	103.71M	1.38B	672.32M
Balance Sheet
Total Assets	10.99B	9.93B	8.13B	7.55B	5.30B
Cash, Cash Equivalents and Short-Term Investments	7.79B	6.96B	5.41B	5.42B	4.24B
Total Debt	64.43M	72.95M	96.48M	105.72M	90.42M
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

Negative

Last Price74.60

Price Trends

50DMA

79.00

Negative

100DMA

76.64

Negative

200DMA

78.29

Negative

Market Momentum

MACD

-1.10

Positive

RSI

38.08

Neutral

STOCH

23.94

Neutral

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 74.6 is below the 20-day moving average (MA) of 76.59, below the 50-day MA of 79.00, and below the 200-day MA of 78.29, indicating a bearish trend. The MACD of -1.10 indicates Positive momentum. The RSI at 38.08 is Neutral, neither overbought nor oversold. The STOCH value of 23.94 is Neutral, 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

Overall Rating

UnderperformOutperform

Sector (68)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MNDY	78 Outperform	$14.43B	291.16	5.39%	―	32.25%	156.94%
DOCU	75 Outperform	$15.31B	14.58	70.20%	―	7.85%	935.80%
ZM	74 Outperform	$22.61B	22.35	12.19%	―	2.98%	24.11%
Sector *	68 Neutral	¥228.43B	14.64	7.50%	2.70%	9.28%	6.70%
GRAB	64 Neutral	$20.54B	916.07	0.38%	―	17.24%	―
GRND	62 Neutral	$4.16B	―	-63.52%	―	30.08%	-196.62%
COMP	55 Neutral	$3.44B	―	-14.96%	―	19.05%	78.91%

* Technology Sector Average

Performance Comparison

Zoom Video Communications

74.60

15.45

26.12%

DOCU

DocuSign

77.62

23.03

42.19%

GRND

Grindr

19.94

8.27

70.87%

GRAB

Grab

5.25

1.84

53.96%

COMP

Compass

6.57

2.11

47.31%

MNDY

Monday.com

289.84

62.75

27.63%

Zoom Video Communications Corporate Events

Shareholder MeetingsBusiness Operations and Strategy

Zoom Holds 2025 Annual Stockholders Meeting

Neutral

Jun 18, 2025

On June 12, 2025, Zoom Communications, Inc. held its 2025 Annual Meeting of Stockholders. During the meeting, stockholders elected Class III directors, ratified KPMG LLP as the independent accounting firm for the fiscal year ending January 31, 2026, and approved the executive compensation on an advisory basis. These decisions reflect the company’s ongoing governance and operational strategies, potentially impacting its future direction and stakeholder interests.

The most recent analyst rating on (ZM) stock is a Buy with a $84.00 price target. To see the full list of analyst forecasts on Zoom Video Communications stock, see the ZM Stock Forecast page.

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.Date of analysis: Jul 08, 2025