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Zoom Video Communications (ZM)
NASDAQ:ZM
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Zoom Video Communications
(NASDAQ:ZM)
Rating:83Outperform
Price Target:
$96.00
▲( 21.09% Upside)
Positive Factors
AI Capabilities
Zoom's AI capabilities are driving superior price to value for customers, with new products and increased AI usage in Zoom Phone and Call Center.
Financial Performance
Zoom reported solid results with revenue and non-GAAP operating income surpassing expectations.
Stock Buyback
Zoom repurchased $418 million of stock, with $1.2 billion remaining on its buyback plan.
Negative Factors
Enterprise Outlook
Management noted incremental prudence on the Enterprise outlook due to sales cycle elongation and scrutiny for some large deals.
Enterprise Sales
Enterprise sales forecasts have been slightly reduced due to a more challenging and uncertain macroeconomic environment.
Zoom Video Communications (ZM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$24.19B
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 Strength78
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
$90.24Price Target Upside13.82% 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
Counts the number of high-value clients, indicating the company's success in securing substantial contracts and its focus on large-scale business relationships.
Counts the number of high-value clients, indicating the company's success in securing substantial contracts and its focus on large-scale business relationships.
Data provided by:
Main Street Data
Main Street DataZoom 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
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.88
Very Positive
Balance Sheet
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.85
Very Positive
Cash Flow
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.92
Very Positive
| 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 | 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
Neutral
79.28
Price Trends
76.29
Positive
78.48
Positive
75.98
Positive
Market Momentum
1.86
Positive
49.18
Neutral
35.78
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 79.28 is below the 20-day moving average (MA) of 80.54, above the 50-day MA of 76.29, and above the 200-day MA of 75.98, indicating a neutral trend. The MACD of 1.86 indicates Positive momentum. The RSI at 49.18 is Neutral, neither overbought nor oversold. The STOCH value of 35.78 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 |
|---|---|---|---|---|---|---|---|
83 Outperform | $24.19B | 23.80 | 12.19% | ― | 2.98% | 24.11% | |
80 Outperform | $17.13B | 16.55 | 68.18% | ― | 7.78% | 1345.45% | |
78 Outperform | $14.65B | 292.73 | 5.39% | ― | 32.25% | 156.94% | |
73 Outperform | $4.70B | ― | -63.52% | ― | 30.08% | -196.62% | |
67 Neutral | $20.17B | 883.93 | 0.38% | ― | 17.24% | ― | |
61 Neutral | $11.28B | 10.16 | -6.88% | 2.97% | 7.41% | -8.93% | |
48 Neutral | $3.17B | ― | -14.96% | ― | 19.05% | 78.91% |
* Technology Sector Average
Performance Comparison
ZM
Zoom Video Communications
79.28
17.22
27.75%
DOCU
DocuSign
84.61
26.90
46.61%
GRND
Grindr
24.00
14.74
159.18%
GRAB
Grab
4.95
1.30
35.62%
COMP
Compass
5.97
1.99
50.00%
MNDY
Monday.com
288.60
48.06
19.98%
Zoom Video Communications Earnings Call Summary
Earnings Call Date:May 21, 2025
(Q1-2026)
| % Change Since: -3.63%|
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 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.