It also hosted its first annual user conference (Zoomtopia) in 2017 and launched its telehealth platform. In these years, the company rapidly integrated its solutions with those of existing companies that included Salesforce (CRM -5.31%), Slack (now owned by Salesforce), Microsoft (MSFT -1.98%), Meta Platforms (META -2.67%), and Alphabet (GOOGL +0.15%)(GOOG +0.21%). Early on in its business journey, the company raised $3 million in seed money from venture capitalists and various company leaders, including the founder of WebEx.
Salesforce
That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock. Zoom might not seem like an obvious play on the artificial intelligence (AI) market, but its management still mentioned “AI” more than 40 times during its latest conference call. Zoom recently hired Dr. XD Huang, the former chief technology officer for Microsoft’s Azure AI platform, as its new chief technology officer.
The company topped consensus revenue estimates each time over this period. Whether or not you should invest in Zoom stock is ultimately a personal decision, but there are some factors you should weigh when deciding whether or not the company makes sense for your portfolio. Zoom isn’t experiencing the level of growth it was in the early days of the pandemic, but it wasn’t reasonable to expect that streak to continue indefinitely, either. To restore that balance, Zoom is focusing on gaining larger enterprise customers that generate at least $100,000 in trailing 12-month revenues. That higher-value cohort grew by 18% year over year to 3,672 customers in its latest quarter.
Valuation Measures
The company was founded by Eric S. Yuan in 2011 and is headquartered in San Jose, CA. While Zoom has fallen out of favor with some investors, the business fundamentals still look good, the company is profitable, and it’s leaning into the potential of AI for its business. That could create a valuable buying proposition for investors looking for a potentially undervalued stock that was once a pandemic favorite, but has plenty of growth opportunity left to explore outside of that time frame. It’s encouraging to see Zoom grow faster than Webex as it locks in larger customers, expands its gross margins, and rolls out new AI features. But on their own, these three factors don’t make Zoom a more compelling investment yet — since it still faces a difficult uphill battle before it can evolve into a more diversified cloud-based communications company.
About Zoom Communications, Inc.
- However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.
- Those new AI features could lock in its customers and widen its moat against Microsoft Teams, Webex, and other potential competitors across the crowded video conferencing market.
- If you want to know the ins and outs of how to invest in Zoom stock, whether or not it’s currently profitable, and how the business is doing, keep on reading.
- The company beat consensus EPS estimates in each of the trailing four quarters.
- But it only expects its revenue to rise 2% this year as its adjusted earnings grow 6% to 7% — so it certainly seems like its hypergrowth days are over.
Zoom Communications Inc. provides an Artificial Intelligence-first work platform for human connection in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. Further, it provides Workvivo, an all-in-one employee experience platform; Zoom Rooms, a software-based conference room system; Workspace Reservation; Zoom Developer Platform; App Marketplace which integrates platform with other applications, platforms, websites, and services; and Zoom Apps. 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 Video Communications, Inc. and changed its name to Zoom Communications, Inc. in November 2024. The company was incorporated in 2011 and is headquartered in San Jose, California.
Here’s Why Zoom Communications (ZM) is a Strong Growth Stock
Zoom was the fifth-most-downloaded app in 2020 and experienced 30x growth in daily meeting participants between December 2019 and April 2020. Zoom Video is expected to post earnings of $1.30 per share for the current quarter, representing a year-over-year change of +0.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%. At the peak of the pandemic in April 2020, Zoom hosted over 300 million daily meeting participants, who used the platform to attend online classes, work remotely, and stay in touch with their friends and family members. But that growth was a double-edged sword, since many of those people were free users who didn’t generate any revenue. Its free meetings are capped at 40 minutes per session with a maximum capacity of 100 attendees, while its paid tiers provider longer time limits, room for more attendees, and other cloud-based services.
- Zoom Video is graded C on this front, indicating that it is trading at par with its peers.
- Click here to see the values of some of the valuation metrics that have driven this grade.
- While there were plenty of early investors in Zoom, many first started paying attention when witnessing its explosive streak of growth with the onset of the COVID-19 pandemic.
- It connects people through frictionless video, voice, chat and content sharing, and enable face-to-face video experiences for thousands of people in a single meeting across disparate devices and locations.
- That’s why Zoom now trades at about $68 with an enterprise value of $14 billion, or just three times the $4.5 billion in revenue it’s expected to generate in fiscal 2024.
In the quarter, 4,192 customers contributed more than $100,000 in trailing-12-month revenue, up 8% from the same quarter last fiscal year. New AI products include Zoom Virtual Agent, Zoom Revenue Accelerator, and Zoom AI Companion. Zoom Virtual Agent is a self-service chatbot that can handle a wide range of issues, including complex customer problems, and an AI virtual voice agent that enables self-service voice calls. The Zoom Revenue Accelerator uses machine learning algorithms to support better customer interactions, communication, and improve the performance of sales teams.
Copyright © 2025 FactSet Research Systems Inc.Copyright © 2025, American Bankers Association. SEC fillings and other documents provided by Quartr.© 2025 TradingView, Inc. Zoom Communications (ZM) is experiencing mixed market reactions ahead of its earnings release. Analysts project an EPS of $1.43, reflecting a 3.62% increase from last year, while concerns about growth and competition linger.
Those new AI features could lock in its customers and widen its moat against Microsoft Teams, Webex, and other potential competitors across the crowded video conferencing market. At its peak, Zoom’s enterprise value reached $160 billion — or 60 times the revenue it would generate in fiscal 2021. That nosebleed valuation became unsustainable as its growth cooled off in a post-pandemic world, more competitors entered the market, and rising interest rates ushered investors toward more conservative investments.
Yuan said Huang was joining Zoom at an “optimal moment” as it rolled out new AI tools across its platform. Zoom Video is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade. Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company’s earnings projection. This is Forex trader best because we believe the fair value for its stock is determined by the present value of its future stream of earnings.
With an impressive externally audited track record, our proprietary stock rating tool — the Zacks Rank — is a more conclusive indicator of a stock’s near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for Zoom Video. We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends.
For the next fiscal year, the consensus earnings estimate of $5.23 indicates a change of -1.5% from what Zoom Video is expected to report a year ago. No investment decision can be efficient without considering a stock’s valuation. Whether a stock’s current price rightly reflects the intrinsic value of the underlying business and the company’s growth prospects is an essential determinant of its future price performance. Those new features include Zoom Scheduler, which schedules meetings with people outside an organization; Intelligent Director, which uses AI and multiple cameras to capture the clearest images and angles; and its Zoom Virtual Agent chatbot for customer support.
Zoom’s founder and CEO Eric Yuan previously worked at Webex, a video conferencing start-up acquired by Cisco in 2007. Yuan joined Cisco as a vice president of engineering and pitched an idea of developing a simplified video conferencing app for mobile devices. When Cisco rejected that idea, Yuan left and founded Zoom in 2011.
If you don’t want to buy whole shares of Zoom, you may decide to invest in the stock through an exchange-traded fund (ETF). Doing so will also give you the opportunity to invest in a wide range of other stocks contained in that fund, an instant way to diversify your portfolio with a single investment. Several ETFs that feature Zoom as a holding include Fidelity Cloud Computing ETF (FCLD -0.74%), Invesco ESG NASDAQ Next Gen 100 ETF (QQJG -1.28%), and Fidelity Value Factor ETF (FVAL -1.14%). While there were plenty of early investors in Zoom, many first started paying attention when witnessing its explosive streak of growth with the onset of the COVID-19 pandemic.
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