Zoom Video (ZM) Continues Streak of Exceeding EPS Expectations

As the Thanksgiving holiday draws near, communications platform provider Zoom Video (ZM) stands out in the current tech landscape. This week, even with limited major earnings announcements, Zoom has captured attention by reporting its Q3 results on Monday, which exceeded expectations.

Zoom’s Q3 Results

In its Q3 report, Zoom announced earnings per share (EPS) of $1.38, surpassing Zacks estimates of $1.31. This figure also represents a 7% increase from last year's EPS of $1.29. The CEO and Co-Founder, Eric Yuan, credited this success to the company's advancements in artificial intelligence, with total sales reaching $1.17 billion, a 3% year-over-year increase, and slightly above the anticipated $1.16 billion.

Impressively, Zoom has consistently surpassed the Zacks EPS Consensus since going public in 2019. In fact, the company has maintained an average EPS surprise of 14.29% over its last four quarterly reports.

Zoom’s Favorable Guidance

For Q4, Zoom provided guidance that slightly exceeded market expectations. Notably, the company reported record achievement in its Contact Center division with a deal exceeding 20,000 seats in the EMEA region (Europe, Middle East, and Africa). In addition to this, Zoom's Workvivo platform secured its largest deal ever with a Fortune 10 company. Zoom's full-year revenue guidance for the fiscal year 2025 is between $4.65 billion and $4.66 billion, which is above the current Zacks Consensus estimate of $4.64 billion, indicating a 2% growth.

ZM Stock Performance & Valuation

So far this year, Zoom's stock has appreciated by approximately 19%. Although this performance lags behind broader market indicators and the Zacks Internet-Software Market's return of 33%, it is noteworthy that the Zacks Internet-Services Industry ranks in the top 14% among 250 Zacks industries, with companies like Twilio (TWLO) and Fortinet (FTNT) also showing strong performance.

Despite its underperformance relative to its industry's gains this year, Zoom's stock presents an attractive valuation. Currently, ZM trades at a forward earnings multiple of 15.6, significantly lower compared to the S&P 500's 25.4. Moreover, Zoom's valuation is favorable when compared to its industry average of 32.6, with peers like Twilio at 28.6 and Fortinet at 44.2.

Takeaway

Following its positive Q3 report and outlook, Zoom Video enjoys a Zacks Rank of #2 (Buy). Analysts are likely to raise earnings estimates for the company in the near future, supported by its attractive price-to-earnings ratio and consistently positive performance.

Zoom, Earnings, Guidance