Zoom Video Surpasses Q3 Expectations with Strong Earnings and Positive Guidance
As the Thanksgiving holiday approaches, Zoom Video ZM stands out in a quieter trading week for tech stocks.
Although this week doesn’t feature many major earnings reports, Zoom’s recent Q3 results, released on Monday, have caught attention with figures that exceeded expectations. The company has maintained a notable record of beating earnings forecasts, and its revenue guidance for the upcoming quarter appears promising.
Strong Q3 Earnings Report
In Q3, Zoom reported an earnings per share (EPS) of $1.38, surpassing the Zacks estimate of $1.31 and showing a 7% increase from last year’s $1.29. CEO Eric Yuan credited the company’s AI features for the success, as sales rose to $1.17 billion—up 3% year-over-year and slightly higher than the anticipated $1.16 billion.
Remarkably, Zoom has exceeded the Zacks EPS consensus in every quarter since its 2019 IPO, boasting an average EPS surprise of 14.29% in its last four reports.
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Promising Future Guidance
Looking ahead, Zoom provided favorable guidance for Q4, noting record-breaking performance in its Contact Center with a deal of over 20,000 seats in the EMEA region. Additionally, the Workvivo platform achieved its largest agreement with a Fortune 10 company. The revenue guidance for fiscal year 2025 is projected at $4.65-$4.66 billion, exceeding the Zacks consensus of $4.64 billion, representing a 2% growth.
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Stock Performance and Valuation Insights
Year-to-date, Zoom’s stock has appreciated by 19%, although this rate lags behind broader market indices, which have risen by 33%. Nevertheless, it’s worth noting that the Zacks Internet-Services Industry is performing well, ranking in the top 14% among 250 sectors, with companies like Twilio TWLO and Fortinet FTNT shining brightly.
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In terms of valuation, Zoom is trading at a sensible forward earnings multiple of 15.6X, significantly lower than the S&P 500’s 25.4X. Moreover, it trades at a discount compared to the industry average of 32.6X, while Twilio and Fortinet stand at 28.6X and 44.2X, respectively.
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Conclusion
Following a successful Q3 performance and positive outlook, Zoom Video holds a Zacks Rank #2 (Buy). With likely earnings estimates on the rise in the coming weeks due to its attractive valuation and strong performance history, there could be more growth ahead for investors.
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Zoom Video Communications, Inc. (ZM): Free Stock Analysis Report
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