Zoom Video (ZM) Maintains Strong EPS Performance in Q3

Zoom Video (ZM - Free Report), a key player in the communication platform sector, remains a noteworthy technology stock as traders prepare for the shortened trading week surrounding the Thanksgiving holiday.

This week’s earnings reports may not showcase numerous high-profile companies, but Zoom stands out after exceeding expectations with its Q3 results released on Monday. The company not only continues to impress by exceeding earnings expectations but also provides optimistic revenue projections for the future.

Zoom’s Q3 Results

Zoom delivered a Q3 earnings per share (EPS) of $1.38, which surpassed Zacks estimates of $1.31 and marked a 7% increase from $1.29 per share in the same quarter last year. According to CEO and Co-Founder Eric Yuan, the strong Q3 performance is largely attributed to their advancements in AI, with revenues reaching $1.17 billion, up 3% year over year, and slightly exceeding forecasts of $1.16 billion.

Remarkably, Zoom has outperformed the Zacks EPS Consensus in every quarter since going public in 2019. In fact, the company has recorded an average EPS surprise of 14.29% across its last four quarters.

Zoom’s Favorable Guidance

Looking ahead, Zoom's revenue guidance for the fourth quarter is slightly above expectations, with the company celebrating a record setting deal in its Contact Center, securing over 20,000 seats in the EMEA region (Europe, Middle East, and Africa). Additionally, Zoom reported that its Workvivo platform achieved its largest deal ever with a Fortune 10 company. For its current fiscal year 2025, Zoom's full-year revenue guidance of $4.65 billion to $4.66 billion is above the Zacks Consensus estimate of $4.64 billion, indicating a 2% growth.

ZM Stock Performance & Valuation

Year-to-date, Zoom’s stock has appreciated by 19%, although this growth is behind broader market indices and lags the Zacks Internet-Software Market's growth of 33%. Nevertheless, it is worth noting that the Zacks Internet-Services Industry ranks in the top 14% of 250 Zacks industries, with companies like Twilio (TWLO) and Fortinet (FTNT) standing out in this sector.

Even though Zoom’s stock performance has been modest compared to its industry peers, its valuation remains attractive. Currently, ZM trades at a forward earnings multiple of 15.6X, which is notably lower than the S&P 500 average of 25.4X.

Furthermore, Zoom's stock offers a favorable discount compared to the industry average forward earnings multiple of 32.6X, with companies like Twilio and Fortinet trading at forward earnings multiples of 28.6X and 44.2X, respectively.

Conclusion

With its recent favorable Q3 report and guidance, Zoom Video's stock has attained a Zacks Rank of #2 (Buy). It is anticipated that earnings estimate revisions could increase for Zoom in the upcoming weeks, bolstered by the company’s compelling price-to-earnings valuation and consistent performance, suggesting further potential for growth.

Zoom, Earnings, Growth