Latest news with #ZoomCommunicationsInc
Forbes
6 days ago
- Business
- Forbes
Securing The Future: How Big Data Can Solve The Data Privacy Paradox
Shinoy Vengaramkode Bhaskaran, Senior Big Data Engineering Manager, Zoom Communications Inc. As businesses continue to harness Big Data to drive innovation, customer engagement and operational efficiency, they increasingly find themselves walking a tightrope between data utility and user privacy. With regulations such as GDPR, CCPA and HIPAA tightening the screws on compliance, protecting sensitive data has never been more crucial. Yet, Big Data—often perceived as a security risk—may actually be the most powerful tool we have to solve the data privacy paradox. Modern enterprises are drowning in data. From IoT sensors and smart devices to social media streams and transactional logs, the information influx is relentless. The '3 Vs' of Big Data—volume, velocity and variety—underscore its complexity, but another 'V' is increasingly crucial: vulnerability. The cost of cyber breaches, data leaks and unauthorized access events is rising in tandem with the growth of data pipelines. High-profile failures, as we've seen at Equifax, have shown that privacy isn't just a compliance issue; it's a boardroom-level risk. Teams can wield the same technologies used to gather and process petabytes of consumer behavior to protect that information. Big Data engineering, when approached strategically, becomes a core enabler of robust data privacy and security. Here's how: Big Data architectures allow for precise access management at scale. By implementing RBAC at the data layer, enterprises can ensure that only authorized personnel access sensitive information. Technologies such as Apache Ranger or AWS IAM integrate seamlessly with Hadoop, Spark and cloud-native platforms to enforce fine-grained access control. This is not just a technical best practice; it's a regulatory mandate. GDPR's data minimization principle demands access restrictions that Big Data can operationalize effectively. Distributed data systems, by design, traverse multiple nodes and platforms. Without encryption in transit and at rest, they become ripe targets. Big Data platforms like Hadoop and Apache Kafka now support built-in encryption mechanisms. Moreover, data tokenization or de-identification allows sensitive information (like PII or health records) to be replaced with non-sensitive surrogates, reducing risk without compromising analytics. As outlined in my book, Hands-On Big Data Engineering, combining encryption with identity-aware proxies is critical for protecting data integrity in real-time ingestion and stream processing pipelines. You can't protect what you can't track. Metadata management tools integrated into Big Data ecosystems provide data lineage tracing, enabling organizations to know precisely where data originates, how it's transformed and who has accessed it. This visibility not only helps in audits but also strengthens anomaly detection. With AI-infused lineage tracking, teams can identify deviations in data flow indicative of malicious activity or unintentional exposure. Machine learning and real-time data processing frameworks like Apache Flink or Spark Streaming are useful not only for business intelligence but also for security analytics. These tools can detect unusual access patterns, fraud attempts, or insider threats with millisecond latency. For instance, a global bank implementing real-time fraud detection used Big Data to correlate millions of transaction streams, identifying anomalies faster than traditional rule-based systems could react. Compliance frameworks are ever-evolving. Big Data platforms now include built-in auditability, enabling automatic checks against regulatory policies. Continuous Integration and Continuous Delivery (CI/CD) for data pipelines allows for integrated validation layers that ensure data usage complies with privacy laws from ingestion to archival. Apache Airflow, for example, can orchestrate data workflows while embedding compliance checks as part of the DAGs (Directed Acyclic Graphs) used in pipeline scheduling. Moving data to centralized systems can increase exposure in sectors like healthcare and finance. Edge analytics, supported by Big Data frameworks, enables processing at the source. Companies can train AI models on-device with federated learning, keeping sensitive data decentralized and secure. This architecture minimizes data movement, lowers breach risk and aligns with the privacy-by-design principles found in most global data regulations. While Big Data engineering offers formidable tools to fortify security, we cannot ignore the ethical dimension. Bias in AI algorithms, lack of transparency in automated decisions and opaque data brokerage practices all risk undermining trust. Thankfully, Big Data doesn't have to be a liability to privacy and security. In fact, with the right architectural frameworks, governance models and cultural mindset, it can become your organization's strongest defense. Are you using Big Data to shield your future, or expose it? As we continue to innovate in an age of AI-powered insights and decentralized systems, let's not forget that data privacy is more than just protection; it's a promise to the people we serve. Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
Yahoo
23-05-2025
- Business
- Yahoo
Results: Zoom Communications Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates
Last week, you might have seen that Zoom Communications Inc. (NASDAQ:ZM) released its first-quarter result to the market. The early response was not positive, with shares down 2.1% to US$82.07 in the past week. Revenues were US$1.2b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.81, an impressive 30% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year. We check all companies for important risks. See what we found for Zoom Communications in our free report. After the latest results, the 33 analysts covering Zoom Communications are now predicting revenues of US$4.81b in 2026. If met, this would reflect a satisfactory 2.3% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to decline 14% to US$2.97 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$4.79b and earnings per share (EPS) of US$2.67 in 2026. Although the revenue estimates have not really changed, we can see there's been a substantial gain in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result. View our latest analysis for Zoom Communications The consensus price target was unchanged at US$90.94, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Zoom Communications analyst has a price target of US$115 per share, while the most pessimistic values it at US$65.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view. Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Zoom Communications' revenue growth is expected to slow, with the forecast 3.1% annualised growth rate until the end of 2026 being well below the historical 16% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 13% annually. Factoring in the forecast slowdown in growth, it seems obvious that Zoom Communications is also expected to grow slower than other industry participants. The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Zoom Communications' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$90.94, with the latest estimates not enough to have an impact on their price targets. Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Zoom Communications going out to 2028, and you can see them free on our platform here.. We also provide an overview of the Zoom Communications Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-05-2025
- Business
- Yahoo
Q1 2026 Zoom Communications Inc Earnings Call
Charles Eveslage; Head of Investor Relations; Zoom Communications Inc Eric Yuan; Chairman of the Board, President, Chief Executive Officer, Founder; Zoom Communications Inc Michelle Chang; Chief Financial Officer; Zoom Communications Inc Siti Panigrahi; Analyst; Mizuho Securities USA LLC Meta Marshall; Analyst; Morgan Stanley & Co. LLC Arjun Bhatia; Analyst; William Blair Matt Bullock; Analyst; Bank of America Securities William Power; Analyst; Robert W. Baird & Co Inc Samad Samana; Analyst; Jefferies LLC Tyler Radke; Analyst; Citi James Fish; Analyst; Piper Sandler & Co Allan Verkhovski; Analyst; Scotiabank Catharine Trebnick; Analyst; Rosenblatt Securities Tom Blakey; Analyst; Cantor Fitzgerald & Co. Austin Cole; Analyst; Citizens JMP Securities, LLC Peter Levine; Analyst; Evercore ISI Institutional Equities Matthew Harrigan; Analyst; Benchmark Co Operator Hello, and welcome to Zoom's Q1 FY26 earnings release webinar. As a reminder, today's webinar is being recorded. I will now hand things over to Charles Eveslage, Head of Investor Relations. Charles, over to you. Charles Eveslage Thank you, Megan. Hello, everyone, and welcome to Zoom's earnings webinar for the first quarter of fiscal year 2026. I'm joined today by Zoom's Founder and CEO, Eric Yuan; and Zoom's CFO, Michelle Chang. Our earnings release was issued today after the market closed and may be downloaded from the Investor Relations page at Also on this page, you'll be able to find a copy of today's prepared remarks, a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. During this call, we will make forward-looking statements including statements regarding our financial outlook for the second quarter and full fiscal year 2026; our expectations regarding financial and business trends, impacts from macroeconomic environment, our market position, stock repurchase program opportunities, go-to-market initiatives, growth strategy and business aspirations and product initiatives, including future product and feature releases and the expected benefits of such initiatives. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results which we discuss in detail in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, let me turn the discussion over to Eric, who will be debuting his new custom Avatar, Zoom Over to you, Eric. Eric Yuan Thank you, Charles. Thank you, everyone, for joining us. Today, I'm using our new custom Avatars for Zoom Clips with AI Companion to share my part of the earnings report. Among the first ever CEOs to use an Avatar in an earnings call. It's just one example of how Zoom is pushing the boundaries of collaboration and communication. At the same time, we know trust and security are essential. We take AI-generated content seriously and have built in strong safeguards to prevent misuse, protect user identities and ensure Avatars are used responsibly. Now let's get into it. We delivered another solid quarter, showcasing the power of our platform and innovation engine in helping customers navigate short-term challenges with greater efficiency while positioning them for long-term success through AI-powered innovation, Zoom is redefining modern work and delivering major cost savings and productivity gains for our customers. We had a tremendous quarter of innovation and launched several agentic AI innovations that advance our vision of intelligent productivity. Zoom tasks help surface, manage and complete tasks across Zoom workplace to get more done, bringing task together in a centralized management tab. Our new calendar manager allows you to ask AI companion to schedule meetings on your behalf. Soon, it will be able to optimize scheduling by suggesting time slots, resolving conflicts, managing meeting updates and proactively blocking focus time. We also made custom AI Companion, Zoom Workplace for frontline and Zoom Workplace for clinicians generally available in Q1. Adoption of Zoom AI companion continues to grow with monthly active users up nearly 40% quarter-over-quarter. Just last week, Raymond James shared in a press release how they are rolling out AI Companion meeting summaries firmwide. Zoom's cutting-edge AI capabilities will enable financial advisers to offload time-consuming administrative work, allowing them to dedicate more time to what truly matters, nurturing client relationships and delivering strategic financial guidance. AI Companion usage is quickly expanding far beyond summarizing your meetings to helping you answer questions, schedule and prepare for meetings, search through information, build content and catch up freeing you up to focus on higher impact work. While we continue providing tremendous AI value at no additional cost to users with a paid license, we're now monetizing through custom AI Companion. The only weeks in market, we're seeing strong enthusiasm from several global 2,000 trial customers who are especially excited about features like bring your own dictionary and index, meeting summary templates and our Jira integration. We're also rolling out custom AI Companion internally to allow Zoom is to get immediate answers from our custom knowledge basis empower them across a range of skills specific to their function. These milestones in our agentic vision exemplify how we're helping customers stay ahead through continuous innovation focused on delivering real business value. Zoom Workplace continues to drive value for customers and drive customers to adopt other solutions within our growing platform. In Q1, the 2024 NBA champion, Boston Celtics doubled down on Zoom. As longtime Zoom meetings users, the Celtix appreciated Zoom's unique balance between simplicity and rapid innovation and chose to upgrade to Zoom Workplace Enterprise Plus, including Zoom Phone and the game didn't end there. And over time, the Celtix decided to modernize their employee Internet with a custom-branded Workvivo employee experience solution designed just for their organization and we also landed a leading financial institution who selected the Zoom collaboration experience platform in an over $1 million ARR deal. This allowed them to simplify their tech stack and reduce costs by moving away from Teams and other third-party solutions beyond costs, they bought into our Better Together vision that unites the customer experience and collaboration experience under 1 AI-first platform and discussions are well underway to upsell them to the Zoom customer experience platform. Zoom Phone continues to perform strongly, with revenue growing in the mid-teens. It is also opening new markets for Zoom by integrating seamlessly with other productivity suites and delivering a best-in-class AI first voice experience. The adoption of Zoom phone integration with Microsoft Teams has grown significantly, showing how we can meet customers where they are and add value within their existing tech stack. We continue to drive encouraging results across our high-growth products that are positioned to target lines of business. Our customer experience offering has rapidly evolved since its launch just over three years ago. Transforming how customer-facing teams engage with their end users. In Q1, the number of Zoom Contact Center customers grew 65% year-over-year and Zoom Virtual Agent landed its largest deal to date as an upsell to Contact Center. Altogether, Zoom customer experience is a triple-digit million ARR business, growing in high double digits. In Q1, we were pleased to see Mimecast a leading cybersecurity company transforming the way businesses manage and secure human risk expand their partnership with Zoom. Already Zoom Workplace and Phone users, Mimecast value the simplicity and interoperability of our unified platform. They've now chosen the Zoom Contact Center Elite bundle with quality management to further modernize how they communicate and collaborate with their customers. Zoom Revenue Accelerator, our AI first sales enablement and conversational intelligence solution continues to deliver strong results for revenue teams. In Q1, licenses grew 72% year-over-year, reflecting growing traction. We landed Goosehead Insurance, a major US insurance distributor with over 2,500 producing insurance agents. They started as a Zoom Phone customer in 2023. In Q1, they decided to add Zoom Revenue Accelerator in order to further empower their large team of insurance sales reps to dial into additional deal focused AI features to drive higher win rates and faster deal cycles. Our employee experience platform Workvivo transforms the way HR departments engage their employee bases and build culture. Total Workvivo customer count in Q1 grew 106% year-over-year and acceleration from the past two quarters. This strong performance was driven in part by our Meta partnership. Last month, we welcomed Kim Storin as our new Chief Marketing Officer. With her extensive enterprise experience and proven track record of success, Kim will help us amplify Zoom's compelling value proposition and brand story to drive deeper resonance with customers. We continue to see strong momentum as we expand our channel. Just yesterday, we announced a new strategic partnership with Bell Canada. In addition, we completed a major transformation of our channel systems and processes in Q1, making it easier for partners to scale their businesses with us. Our channel investments drove some amazing wins in Q1. Docs Dermatology Group, a leading US dermatology roll-up came to us through a trusted channel partner going all in on the Zoom platform as a brand-new customer. Docs chose the Zoom Contact Center Elite package for the ability to manage the complexities of their appointment management, billing and inbound patient requests through our simple, intuitive interfaces our team's ability to rapidly innovate a powerful integration to one of their key tools and recognizing the importance of uniting their employee and patient experiences under one seamlessly integrated modern platform they also chose Zoom Phone along with Zoom Workplace. As we look ahead, we continue to double down on driving value for customers as they navigate an uncertain macro environment. Our AI-first strategy positions us to help customers stay ahead as technology evolves, while our platform approach delivers compelling TCO advantages. Now let me hand it over to Michelle to take us through the financial results. Michelle Chang Thank you, Eric, and hello, everyone. I'm excited to be here with you today. Let's dive into the financial results. In Q1, total revenue grew approximately 3% year-over-year to $1.175 billion. This result was $8 million above the high end of our guidance. As a reminder, Q1 of FY26 had one fewer day than Q1 of FY25. Our enterprise revenue grew approximately 6% year-over-year and now represents 60% of our total revenue, up 2 points year-over-year. We continue to see encouraging signs of stability in our online business. One, average monthly churn was 2.8%, a [40] basis improvement year-over-year and our lowest ever churn rate for our first quarter. In our Enterprise business, we saw 8% year-over-year and the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers now make up 32% of our total revenue, up 2 points year-over-year. Our trailing 12 months net dollar expansion rate for enterprise customers in Q1 held steady quarter-over-quarter at 98%. Pivoting to our growth internationally, our Americas revenue grew 4% year-over-year. EMEA grew 1% and APAC grew 2%. Moving to our non-GAAP results, which, as a reminder, exclude stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains or losses on strategic investments and all associated tax effects. Non-GAAP gross margin in Q1 was 79.2%, slightly lower than Q1 of last year as we continue to invest in AI. We remain focused on driving efficiencies and delivering AI capabilities in a scalable, cost-effective way. And we continue to reiterate our goal of reaching an 80% non-GAAP gross margin over the long term. Non-GAAP income from operations grew 2% year-over-year to $467 million exceeding the high end of our guidance by $22 million. Non-GAAP operating margin for Q1 was 39.8%, down 23 basis points from Q1 of last year. The margin declined was in line with expectations and due to changes in our bonus structure and investments in AI. Non-GAAP diluted net income per share in Q1 was $1.43 on approximately 313 million non-GAAP diluted weighted average shares outstanding. This result was $0.12 above the high end of our guidance and $0.08 higher than Q1 of last year. The EPS performance was due to strong business results as well as a reduction in diluted weighted average shares outstanding, driven by our focus on addressing dilution through our buyback and our stock compensation efforts. Turning to the balance sheet. Deferred revenue at the end of the period grew 5% year-over-year to [$1.43] billion, in line with the high end of our previously provided range. The growth was driven by business performance as well as continued refinement of our discounting strategy. In Q2, we expect deferred revenue to be up 4% to 5% year-over-year. Looking at both our billed and unbilled contracts, our RPO increased 6% year-over-year to approximately $3.9 billion. We expect to recognize 61% of the total RPO as revenue over the next 12 months, up from 59% in Q1 of last year. Operating cash flow in Q1 was $489 million, representing an operating cash flow margin of 41.6%. Free cash flow in the quarter was $463 million representing a free cash flow margin of 39.4%. The declines on the year-over-year basis were due to the timing of tax payments. We ended the quarter with approximately $7.8 billion in cash, cash equivalents and marketable securities, excluding restricted cash. In Q1, we accelerated execution of our existing $2.7 billion share buyback plan, purchasing 5.6 million shares for $418 million, an increase of 1.3 million shares quarter-over-quarter. The increasing pace of our share repurchase plan over the course of our buyback authorization has reduced our common stock outstanding and underscores our ongoing commitment to delivering value to our shareholders. As we pivot to the outlook, we're pleased to raise our full year revenue guidance by $15 million or $5 million on a constant currency basis. We now expect revenue to be in the range of $4.8 million to $4.81 billion, which represents approximately 3% year-over-year growth at the midpoint or 3.2% year-over-year growth on a constant currency basis. This is an net result of increasing our online outlook by $10 million to $15 million due to a $1 price increase for our monthly pro SKUs, reflecting increased product value to our customers. This is offset by a more prudent outlook in our enterprise business due to the more challenging and uncertain macroeconomic environment. We're pleased to raise our profitability outlook for the full year of FY26 as well. We now expect our non-GAAP operating income to be in the range of $1.865 billion to $1.875 billion, representing an operating margin of 38.9% at the midpoint. We are also pleased to raise our outlook for non-GAAP earnings per share for FY26 from $5.56 to $5.59 based on approximately 312 million shares outstanding. We continue to expect free cash flow for FY26 to be in the range of $1.68 billion to $1.72 billion. For Q2, we expect revenue to be in the range of $1.195 billion to $1.2 billion. This represents approximately 3% year-over-year growth at the midpoint or 3.1% year-over-year growth on a constant currency basis. We expect non-GAAP operating income to be in the range of $460 million to $465 million, representing an operating margin of 38.6% at the midpoint. Our outlook for non-GAAP earnings per share is $1.36 to $1.37 based on approximately 310 million shares outstanding. As a reminder, future share repurchases are not reflected in the share count and EPS guidance. In closing, as Eric highlighted, we're proud of the rapid pace of innovation towards our AI which is delivering real value to our customers. At the same time, we remain focused on accelerating our growth while delivering shareholder value through disciplined operations and responsible capital allocation. Thank you to our incredible Zoom team, customers, community and investors for your trust and support. Megan, please queue the first question. Operator (Operator Instructions) Siti Panigrahi, Mizuho. Siti Panigrahi Great. Thank you so much. And Eric, it's great to see your Avatar there. So I want to ask about the Zoom AI Companion. It's good to see that that's growing 40%, MAU growing 40% Q-over-Q. So now that you embed base level AI as part of your paid subscription. So what kind of adoption are you seeing in terms of SMB segment seeing free to paid migration. Are you seeing anything like that? And as you're launching also your paid AI company in SKU, how should we think about the adoption and revenue contribution there? Eric Yuan Yes. So Siti, thank you. First of all, I truly love my AI generator Avatar. I think we are going to continue using that. I can tell you, I like that experience a lot. So back to your question about AI Companion. First of all, if you look at the number of active users, look at the Q4 and Q1. And there are five types more, right? And meaning it's pretty healthy and more and more customers they enable AI Companion realizing the value in Raymond James. So the leverage Zoom AI Companion and features like making summary kind of improve their productivity. It's pretty accurate and with actionable insights as well. Overall, I think more and more customers that are going to enable AI Companion. So in terms of customized AI Companion and also the monetization, I think we already have a few customers, prospect testing that now. And it's pretty powerful. And of course, we can integrate it with your companies, your data index and data as well and also like a dictionary and also supported the customized meeting -- meeting summary template and our customized AI avatar as well. I think with more and more customers, they player on, realize the value. I'm pretty sure the customer AI Companion can help us and monetize more. Siti Panigrahi Okay. Great. Thank you. Eric Yuan Thank you. Operator Meta Marshall, Morgan Stanley. Meta Marshall Great. Thank you. And congrats on the quarter. I appreciate the statistics about kind of the increased traction with kind of the higher-priced SKUs on the AI portion of Contact Center. But just any statistics you can give on just kind of either how customers are starting with Contact Center with the higher price SKUs with the kind of virtual agents or just anything to add there? And then second, on your kind of more cautious outlook on Enterprise, is that just based on elongating deal cycles? Or is that based on just kind of more cautious outlook on seats? Thanks. Eric Yuan Yes. Michelle, I would address the first one, and you address the second. So if you look at the Zoom Contact Center, which is our customer experience platform and Zoom Virtual Agent is a very important part of that. And if you look at Q1, Q1 is the largest quarter in terms of ARR contribution. And so if you look at the number of the upsells of Zoom Virtual Agent and is the largest quarter ever. So meaning we do have a lot of upsell opportunity to sell Zoom Virtual Agent to our existing installed base. And also take a Zoom Phone, for example, right? We also deploy our Contact Center for a long time. When our team enabled Zoom Virtual Agent, we do see the huge value because we use the two metrics merit how successful there is one in the (inaudible) another one is a self-service rate. (inaudible) deploy Zoom Virtual Agent it does help us a lot because it's a number 70. And guess what, the self-service rate is 97% meaning 97% of those tickets resolved very well without any human agent involved, right? So it's a huge value. So we do see more and more customers want to test Zoom Virtual Agent. At the same time, literally, by the end of this month, we are going to launch our new version of Zoom Virtual Agent with a lot of new features plus Virtual Agent will be part of that as well. I think a more upsell opportunity and also more new opportunities as well and to double down on Zoom Virtual Agent, which is based on our AI Companion technology. Michelle Chang Maybe from my side, two quick comments on Contact Center customer experience, and then I'll move over to the question on the guide. Two things that I think we're seeing increasingly in terms of our customer buying behavior and customer experience is customers going straight to the Elite just because of all the AI value that is in that. And then maybe the other pattern that I think is clear in our deals is that this concept of better together that frequently customers are wanting a communication and collaboration platform, together with the customer experience platform and we see that as a real strong theme as to why Zoom's winning. So I wanted to add that in. On your question on the color on the enterprise. Let me start by just saying that broadly, across online and enterprise, the majority of the business in Q1 saw no change in buying behavior, no change in demand, still strong demand. Our fundamentals, as you see in all of the stats that we produce, be a record low churn and online to our customer deal size over 100,000 in enterprise strength of so many of the expansive TAM products that we have still so strong. What we saw in terms of my comments about primarily prudence going forward. But we saw in Q1 in a couple of customer scenarios in larger US customers, where there was just more prudent sales elongation more scrutiny on deal terms, no losses, but just, again, a bit of a sales elongation and more scrutiny. So look, we feel that going into Q2 and going into the second half, we have a great TCO and business value story. And so that's really where we're pivoting to make sure that we're really getting out and landing that message with our customers. Meta Marshall Great. Thanks. Operator Arjun Bhatia, William Blair. Arjun Bhatia Perfect. Thank you. Congrats on the strong start with here, especially on the Contact Center side. Eric, one thing for you maybe on a different topic. You mentioned the Team's integration with Zoom Phone. But I'm curious how the competitive dynamics of Zoom on the 4 video meeting solution, especially now that you've had AI Companion out in the market for a little while. We're seeing obviously adopting increase is unbundled their charging for AI capabilities. So is this -- are you starting to see it change the competitive ties? And what is it doing in terms of new customer acquisition on the core platform? Eric Yuan Yes, it's a great question. So look at the value of Zoom offering and first of all, and employees really love Zoom experience. And if you do any service, right, in any company, it's no matter which solutions they deploy. If you had an employee make decision, we have high confidence they all will choose Zoom platform, right? The second thing is to look at the total cost of ownership, in particular, look at AI. Our AI Companion is part of our offering compared with the other vendors who would like to charge a customer is a lot per user per month, right? So meaning for those customers truly care about the employee experience, truly deep dive to understand the total cost of ownership of those offerings, they are going to keep using Zoom or go back to Zoom platform. In one example, like one big fintech company in Q1, they dropped the Teams in the suite to Zoom platform because they like the Zoom experience with a lot of innovations, much more reliable and a great user interface, they are familiar with, right? So I think as long as we keep improving the product experience, make sure Zoom is employee choice, I think we will see more and more opportunities. Also, if you look at the entire workplace, we already be beyond meetings, right? The value of workplace can deliver more and more and value to customers. And we do see some more opportunities ahead of us. Arjun Bhatia Alright. Perfect. Thank you. Michelle Chang The one I might just quickly add in is we're seeing increasingly with the Team's integration. Many more customers come to that that way. So to your question about are we seeing that change in deal. We saw a lot of wins that we're proud of in Q1, there were Teams integration. Arjun Bhatia Perfect. Thank you so much. Eric Yuan Thank you. Michelle Chang Alex Zukin, Wolfe Research. Hey, guys. Thanks for taking my question. It's Evan here for Alex, obviously. Congrats on the solid quarter. And I want to ask another one on the Zoom Contact Center, which I think was super interesting, and it's great to see this new disclosure that it's like a triple-digit million ARR business growing in high double digits, if I'm not mistaken. But I think you used to disclose year-on-year growth in terms of the number of customers with larger than $100,000 ARR. So can you provide a little more color in terms of the deal sizes that you're seeing that's driving that growth? And then maybe more broadly, what are you seeing in the competitive environment for CCaaS? And sort of how is -- how are you positioning Zoom? And what the -- what sort of win rates are you seeing there, more greenfield or more replacement deals? Thank you, guys. Eric Yuan Sure, I can start. So Michelle feel free to chime in. I think if you look at the total number of Contact Center customers year-over-year. We do see around the 65% growth. And look at the top 10 deals and none of the deals are replacing existing cloud-based vendors, cloud-based solutions. And also -- and you look at the top 10 deals, I think, if I recall correctly, 6 or 7 are done by the channels. So many of the channels really help us and also replace other cloud-based vendors -- and because not only do we offer a lot of innovations and features but also seamlessly integrated with our Phone platform as well Zoom Virtual Agent is a part of that. That's the reason why customers may see the value of our Zoom Connect Center. Michelle Chang I mean the only other thing, I think those are the metrics that we give for disclosure. The other one might just be a thread back in the dialogue earlier on the Elite SKU. So we are seeing great traction. I think it's a 10% mix shift year-over-year towards and licenses to our elite SKU. So we're really proud and see a lot of momentum towards our AI-first solution. Eric Yuan Also at the same time, I want to share with you a you look at a lot of [individual] customers. Their Contact Center gasworks still on prem. So a lot of opportunities for Zoom for other cloud-based content winners, well, and in particular, you look at the AI-based virtual agent and also it also can play big role to drive the future growth. Thank you. Operator Michael Funk, Bank of America. Matt Bullock Hey, Eric, hey, Michelle. This is Matt Bullock on for Mike Funk, clearly. Thanks for taking the question. I'd love some additional color on the early reception from customers to the online monthly pro pricing increase, seems pretty modest, but would be interested in color on pricing sensitivity, any variance in customer churn for that cohort. And then assuming this pricing increase goes well, could we start to see pricing be more of a lever in the online business segment, considering all the positive trends with churn? Michelle Chang So maybe I can take that one, Eric. One thing that I think is really important just to know, and you said it is. We feel like it's a modest increase, but one that reflects really incremental value delivered to the customer. And that's sort of the bar that we hold ourselves whether you think about that as sort of the entirety of the platform, the AI, but I also want to call out that with our price increase, in particular, we doubled the storage limit. So look, it's a very different online business, I would say, than and one that we had maybe in the past. And the evidence points that I look at that under are, obviously, the record low churn that we continue to see quarter after quarter, the mix of our customers that have been with us over 16 months, the percentage that are buying with us annually. So we feel like we're just in a different place. We always take price increases very thoughtfully. And I would say this isn't the first one we've done, but no plans to do others at this stage. Matt Bullock Thank you. Operator William Power, Baird. William Power Okay. Great. Thanks for taking the question. I actually want to circle back on online and kind of the earlier macro discussion. And I guess just trying to understand that the levels of conservatism built into the online segment. You're trying to build a little more conservatism it sounds like on the enterprise side. Why wouldn't churn maybe start to increase a little bit on online relative to where you've been? And I guess maybe just probably what we are kind of the assumptions there? And then I have a second question. Michelle Chang Yes. So our outlook really reflects -- look at the more turbulent world than it was maybe the last time we got -- we talked to you. Yes, just to echo my earlier comments, we saw strong demand across our business. We do not see any impact of macro to online and as such, have not sort of reflected that in our outlook. And it was in those specific customer scenarios in the enterprise where we decided to take a prudent approach to how we thought about outlook and guide from there. William Power Okay. And then I want to ask a question on Zoom Phone. You provided the disclosure that I think that's growing mid-teens, which I think looks like it's above industry growth rates based on other peers and whatnot. So suggest or continuing to take share. On the other hand, still a really big market in theory, in terms of number of business phones out there. So I wonder if you can just kind of address what you're seeing competitively and what the forward growth outlook opportunity is? Is this a mid-teens grow from here? Could should we accelerate? What's kind of the opportunity still there? Eric Yuan So from a high level, in terms of opportunity, if you look at the total install of [phone CIS] the number of on-premise is still higher on cloud businesses, right? And I think it's around $150 million still on-premise seats, right? It's still a lot of opportunities. Those customers in the next few years, they still need to migrate to the modern cloud business solution. We are in much better positioned with our entire workplace platform, integration, open system. And that's the reason why our growth rate of fund higher the other cloud based phone service providers. Michelle Chang And maybe just to add on. There's opportunity for Zoom on both. We have a lot of strong partnerships like the Mitel partnership is a big one for us in the on-prem stuff. And then we certainly have go-to-market motions focused on competitive takeouts in the cloud as well as I might just say, across both. We've been talking about for a couple of earnings cycles here, just an investment and a maturation in our channel motion, which also will be advantageous to our phone business. So we think about it as a big opportunity. And maybe the other one that I might call out is the new partnership with Bell Canada. And then increasingly, we are seeing AI drive deals and seen more new customers to Zoom come through phones. So things that we're encouraged by. William Power Okay. Thank you. Operator Samad Samana with Jefferies. Samad Samana Hi. Thank you for taking my question and it's good to see everybody. Alright. It's good to see everybody. Maybe first just on Workvivo, the customer growth there is really strong. Eric, you called out an acceleration in your prepared remarks. How should we think about maybe Meta migrations or that piece of that mix? And can you just remind us at what point you lap the Meta benefits and maybe how durable the growth there is? And then I have one follow-up for Michelle afterwards. Eric Yuan Michelle, do you want to take that? Michelle Chang Yes. So look, I would say that we grow from both the Meta partnership as well as before that was consistent before the partnership was in place. Certainly, we're focused heavily on capitalizing against that amount of migration. And I think we said before that it's towards the second half of the year that, that sort of opportunity will normalize. What was the next question. Eric Yuan You look at a number. Samad Samana Sorry, please go ahead. Eric Yuan Just to add on to what Michelle said. You look at the number of the costs and I mean the Workvivo cost year-over-year, it's more than 100% growth. huge opportunities, not only driven by the Meta migrator customers, but also new opportunity as well. Michelle Chang Maybe just a punch to Eric's comments. 90% of our Workvivo customers, again, are new to Zoom. So it's a really great way for us to introduce the breadth of our platform as well to real strong customer and brand names up market. Samad Samana Understood. And then maybe, Michelle, just on the buyback acceleration, is that more of a reflection of opportunistic because of what happened with market conditions in F 1Q? Or is that -- should we take out of a signal that the buyback will be somewhat closer to these levels because that's the way that you guys are thinking about deploying the cash, at least for some for the short-term duration. Just help us understand how we should think about the magnitude given it was the biggest buyback activity that you've had? Michelle Chang Yes. Yes. So look, I would say you saw in our two announcements, the one I doubled down on when I started that look, this is going to be something that's important to Zoom of that original 2.7 tranche the two together. We have about 1.2 remaining. The way that I would think about Q1 is really that it reflects the reinforcement of confidence across myself, Eric and the Board. And look, certainly, we intentionally kind of went after acceleration here, but we remain committed to what we said before, which is the intention and expectation that we will go through the remaining $1.2 million in fiscal '26. Samad Samana Great. Thank you both for taking my question. Eric Yuan Thank you Operator Tyler Radke, Citi. Tyler Radke Hi. Good afternoon. Thanks for taking the questions. Wanted to go back on the billings outlook for the next quarter. And you talked about some of the dynamics on the enterprise side of the business. But I'm wondering if you could sort of Help us understand when you started to see some of these macro impacts layer into the business, how performance has been throughout kind of the month of April as well as May. And then as you think about the online business, how are you thinking about the new customer addition motion? I know churn was ahead of expectations, which was good to see. But how sensitive is that new customer acquisition motion to the macro? And if you could comment on what you're seeing there. Michelle Chang Yes. So first with the comment on when we saw the enterprise I would say that we saw deals are pausing and elongation throughout the quarter, but certainly, the bulk of our volume in enterprise happens towards the tail end of the quarter and things more so than to your online question of new customers, we had a strong quarter in terms of new customers as well as churn. And so that's why I start to say, no impact macro or no signs of macro impacting. James Fish Thank you. Operator James Fish, Piper Sandler. James Fish Hey, guys. Thanks for the question here. Just first, on the channel transformation, what were some of the changes put in place? And what's been some of the early feedback with that? Michelle Chang Yes. So I can answer that and then, Eric, feel free to jump in. Look, I would say, first and foremost, it's about expanding our partner ecosystem. It's about changing some of the channel incentives and really doubling down on those. And then in particular, one of the things that we have been talking about with our partner ecosystem was just the need to help them get from quote to cash faster. And so you may have seen that there was an article in the channel press about some efforts that we've made to really take that time from hours to minutes. So I would say broadly, our investments in the channel fall across those three things. And then I'd just say, look, the channel investments are very closely targeted towards our phone and contact center business where naturally they have both the ability to supplement what customers need as well as the ability to influence sales. And we're pleased with what we see in terms of the number of deals, the percentage of deals in both contact center and foam that are channel-led or heavily channel influenced. James Fish Got it. And I could follow up actually on Samad's prior question, it's nice to see the $100 million mark. It seems like most of the success you guys talked about, though, is coming from that Zoom ecosystem customer, meaning they already got workplace and phone together. So is there a way to understand what I'm guessing is still a very low percentage in terms of the penetration of Contact Center into that sort of combined base that uses Workplace and phone together. Thanks. Michelle Chang I'd say we don't disclose that as a metric, James. But what I would say is we see both bidirectional. My comments earlier is that we find that really to be a differentiator with customers where the integrations of being able to go out and talk to customers, come back in and resolve problems in-house, we find that to be a real big win for us customer-wise. Operator Allan Verkhovski, Scotiabank. Allan Verkhovski Hey, thank you taking my question. Congrats on all the product innovation. Michelle, I wanted to just double-click on the revised enterprise revenue outlook. You mentioned that there was some deal elongation that you saw in the quarter. Just want to be clear, are you guiding for a wider range of outcomes such that if the macro trends were to remain consistent, then you could potentially see more upside through the rest of the year? And could you also just update us on your updated time line for when we could see NRR potentially get back to 100%. Michelle Chang Yes. So let me start with the first one. Our outlook implies a consistent kind of macro environment relative to what we saw in Q1. So that's the way to think about the guide. In terms of net dollar expansion, I would say we're pleased with the stability that we saw. It's been something that we've seen come in over the last four quarters. It's certainly a foundation for us in terms of expansion and our numbers have been in line with guidance. Allan Verkhovski Great. Thank you. Operator Catherine Trebnick, Rosenblatt Securities. Catharine Trebnick Thank you for taking my question. Since Jim Fish took my channel question, I'll ask about your international. So can you update us on -- that was a big focus is to do internationally. People have talked and said you staff quite a bit in the UK. So can you give us any idea of some of the products or which key pieces of the business you're focusing on internationally? Thanks. Michelle Chang Yes, I can take that. Let me say that our strategy is a global one counter and I think the way that we go to market, the products that we are working on even our push and channel, our go-to-market and our product strategy are consistent globally. So maybe let me just say a little bit more of what we see really resonating in our EMEA business is really not better together and full buying into the platform of both that communication and collaboration experience together with the customer experience, maybe the other one that I would throw in is we're really seeing employee experience and quite well in EMEA. So we're encouraged about, again, the broad growth thesis resonating in Europe as well. Catharine Trebnick Great. Thank you. Operator Peter Weed, Bernstein. Eric Yuan Peter, are you there? Operator Tom Blakey, Cantor Fitzgerald. Tom Blakey Great. Thanks for taking my questions. Curious, just maybe in terms of the elongation, Michelle, you can talk about maybe any trends in downsells in enterprise if you've seen that. in 1Q, just kind of counterbalancing the reported results with some very strong CCaaS and Zoom Phone. And then just maybe an update, second question once here about just reaching that kind of 10%, it's not a line in the sand, but we talked maybe a year or so ago or longer ago that CCaaS would reach about 10% of revenue at the same kind of time horizon is phone just like to get an update on that where CCAS sits. Thank you. Michelle Chang Yes. So to your first question, we continue to see year-over-year improvement in churn and enterprise as well as continued low record churn rate in online. So I think in so many -- maybe the color I might give under that is that I think increasingly, when you look at sort of competitive themes, I think they're broadening out. It's, again, that holistic value, the vision of kind of better together across the collaboration as well as customer experience. In some, we see the boomerangs with the customer and customer love that Eric mentioned in some of ours. In others, it's the pace of innovation and the dedication Zoom has to customers. And in others, it's a coexist and sort of winning in a different way with things like the team's integration. So I think we feel good not only about the meta trend but some of the color that you see in the deal is emerging. And then to your second question around 10% and disclosures and CCaaS, we've tried to add some dimensions here for investors, not only on the customer count, but some of the elite SKU dimensions as well as the triple-digit ARR. And so we'll leave it at that for now. Tom Blakey Thank you. Operator Patrick Walravens, Citizens. Austin Cole This is Austin Cole on for Pat Walravens. Eric, it's really cool to see the AI Avatar. Maybe one day soon, more of us will be on this call using AI avatars. And that's actually what I wanted to ask you about is what kind of high-level trends maybe you see taking place through conversations with customers right now that give you kind of confidence in AI's role both in communication and how they're getting work done. So kind of a broad question there, but maybe even specifically, like what are the use cases for these avatars -- and how are you using this stuff internally to shape the work? Eric Yuan Yes, great question. Again, for the first time in history, right? So we let the AI generated avatar participate into the earnings call, right? It's again, I really love that experience. We are going to keep improving our Clips product. Back to your question about the AI and AI adoption. I mean, first of all, we look at every services, right, and we offer the customer, how to lever AI to improve the product, like all the basic core features already done for a while, like a meeting summary, compose a chat message and so on and so forth. Now a customer really want to send what we can do, right, to integrate with their existing systems because they are building the agent -- and there are other vendors also be agent. We also build agent, right? How to make sure our agent, our AI Companion agentic framework, customized AI Companion studio to be other agent how to incorporate with other agents like recently we announced an integration with ServiceNow, it Jira as well. And also, essentially, we would like to transform our business from being collaboration a communication company to be a system of actions like Avis meeting or, right, we have -- not only have a summary, but also we have tasks items and AR aging will automatically less created a general ticket and to follow to track, right? It's kind of become an entire business workflow. Without AI agent, it's really hard. You need to manually drive this and integrate other systems it's not visible. For now, customers look at how to automate everything with agency framework because all those agents can talk to each other, with the A2A protocol and also the MCP protocol, right? That's the reason why we feel very excited together with other vendors, we can become a part of our business workflow. That's -- on that front, we are very excited. Austin Cole Thank you. Eric Yuan Thank you. Operator Peter Levine, Evercore. Peter Levine Great. Thank you for squeezing me here. Maybe just to Michelle, you guys are talking a lot more about frontline workers. Can you maybe just help us understand what that product is? Is it really going after like the Microsoft think one or SKU -- maybe just help us understand what the intentions there are for frontline. And then second, for AI Companion 2.0, there is the monetization for those that want to customize your own AI agents. Can you just -- is there revenue coming in this year from that product? It's probably more second half, but just can you just help us understand what you're expecting from that? Thank you. Michelle Chang Sure. So let me start with frontline worker. The way to think about that is -- I mean let me start with the market opportunity broadly. 80% of the workers in the world are frontline workers and yet only 1% of the SaaS spend is on them. And so what that tells us, what our customers tell us is there's a lot of value that they need. And so this product was really born out of that. And so think about what the product does in sort of, I would call it, 3 buckets. It's on-ship communications. It's workforce management and its AI assistant sort of the flow of frontline worker work. And so that's kind of how to think about it. It just came into market. We are pleased. We've already closed several weeks in post Giga closed deals. We're excited with the interest that we see, in particular, in industries like health care, retail and manufacturing, worsens strong. To your second question on custom AI Companion, I would say we're equally excited, different use case there. That's the two I talked about earlier. I won't repeat. Seen also excitement in the way that you should think about our H2 outlook for all of these is that we've factored in sort of what we see in measured things, given the size and scale of our business, it won't be a movable number in FY26, and we'll just continue to update investors as we go through these earnings calls. Peter Levine Great. Thank you very much. Operator Matthew Harrikgan, Benchmark. Matthew Harrigan Hello. Thank you. That you're very proud just in creating [Slms]. What are you seeing -- it feels like a lot of people are taking kind of a Russian army approach with just more and more buying from NVIDIA. But as you improve the algos and you get more clever on the math, I mean, how is that affecting your business even on the cost side as well as the opportunity side. Thanks. Michelle Chang Eric, do you want to take that? Eric Yuan Sure, sure. So -- our AI approach is a federate AI approach, meaning we have our own large and models. Some customers just want to standardize our own model. At the same time, we integrated seamlessly with (inaudible), with open AI and (inaudible) and it is a federal approach. We also, for sure, let in media and also have the cloud GPU, and this is very standard, right, how to optimize our costs at the same time, offer the value. The reason why we can offer the free Zoom AI Companion to our customers because of optimization that works so well in terms of value and cost, we can offer that. And the customized AI Companion is different. It's more like enterprise the data or data index integration, and that's one is different. It's more like not on AI cost front. It's more like a system integration, a lot of other things. If you look at just the pure on AI front, we are very competitive because we always balance the cost and also the value. We have a very large team working on optimization. Matthew Harrigan Thanks, Eric. Nice, Avatar. Eric Yuan Thank you. Appreciate it. Next earning call will be much better. Operator Thank you. This concludes the Q&A portion of today's call. I'll turn it back over to Eric for closing remarks. Eric Yuan Thank you all and really appreciate your time. Thank you for all those investors who trust us, and we are going to do all we can to truly deliver happiness to you all. Thank you. Appreciate it. Michelle Chang Thank you. Operator Thank you, Eric and Michelle. This concludes today's earnings call. Thank you all for attending, and have a great rest of your day. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-05-2025
- Business
- Yahoo
Jim Cramer Says Zoom Communications (ZM)'s 'Last Quarter Was Actually Pretty Good'
We recently published a list of . In this article, we are going to take a look at where Zoom Communications Inc. (NASDAQ:ZM) stands against other stocks that Jim Cramer discussed recently. On Monday, Mad Money host Jim Cramer addressed the market's reaction to the recent U.S. debt downgrade by Moody's. 'Stories like the US debt downgrade story from Friday, they are classic… Stories that scare people out of very fine stocks that could otherwise make them rich. And sure enough, when Moody's downgraded the debt of the United States on Friday, the last of the three big rating agencies to do so, the market opened hideously as the get out now crowd took action. They fled. Then the market rebounded.' READ ALSO: Jim Cramer Put These 12 Stocks Under the Spotlight and 15 Stocks on Jim Cramer's Radar. Cramer warned that such panic is not a one-off. He mentioned that there will be many other 'get out now' calls issued ahead. He said that the warnings often come from sources who either do not fully grasp the situation or are motivated by less transparent reasons. In his view, some are simply uninformed, while others may be experienced short sellers using fear as a tactic to move markets in their favor. Even if the issues these fear-driven stories point to do materialize, Cramer believes they are manageable. He called out the overuse of the term 'stagflation,' often wielded by bearish commentators to provoke anxiety. He acknowledged how difficult it can be to resist the persuasive nature of such arguments. Still, he encouraged investors to stay the course as he added, 'You'll have to stick with me and we'll sit through this.' 'Let me give you the bottom line: The crucial thing that we in the media can do, and I say this as someone who talks to more individual veterans than almost anyone in the universe, and certainly more than anyone in the media, is simply cool it with the fear mongering and cut off guests who advocate it. A little history and some constructive thought would go a lot further if your goal is not to inflame, but to inform.' For this article, we compiled a list of 15 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on May 19. We listed the stocks in ascending order of their hedge fund sentiment as of the fourth quarter of 2024, which was taken from Insider Monkey's database of over 1,000 hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (). A close-up of a hand using a laptop to control an immersive video meeting. Number of Hedge Fund Holders: 51 A caller asked what Cramer thinks of Zoom Communications Inc. (NASDAQ:ZM), and he replied: 'I think Zoom's last quarter was actually pretty good. They do have some good apps. My stepson worked there in fairness to fully disclose, and I really like them very much, and I think they're doing a lot right, but it's taken them a very long time.' Zoom (NASDAQ:ZM) offers a comprehensive platform for video meetings, communication, and collaboration, including tools for messaging, workflow automation, event management, and contact centers, designed to enhance connectivity across various industries. In February, Cramer mentioned the company and said: 'Just in 2021, get this, we had roughly 400 traditional IPOs and another 200 SPAC mergers, which originally were meant to be blank check companies that would make a bunch of acquisitions over time. But in 2020, lots of startups began to use SPAC mergers as a way to come public while evading the strict regulations that the SEC, you know, the Securities Exchange Commission places on IPOs. Overall, ZM ranks 9th on our list of stocks that Jim Cramer discussed recently. While we acknowledge the potential of ZM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than ZM and that has 100x upside potential, check out our report about this cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
02-05-2025
- Business
- Yahoo
Is Zoom Communications Inc. (ZM) the Most Profitable Growth Stock to Buy Now?
We recently published a list of . In this article, we are going to take a look at where Zoom Communications Inc. (NASDAQ:ZM) stands against other most profitable growth stocks to buy now. The growth factor in investing refers to companies that grow their revenue and earnings at rates significantly above the market. These companies are usually small and young, operate in high-growth and less mature industries, and often lack the financial stability and resilience of their more mature counterparts. As a result, the growth factor becomes highly attractive and outperforms during secular bull markets (such as the 2010-2021 period) dominated by macroeconomic stability and low interest rates. On the other hand, the return of growth stocks significantly lags behind during bear markets or periods of heightened uncertainty and volatility. For reference, the growth factor underperformed significantly during the 2022 bear market as well as the 2025 year-to-date. While the growth strategy delivers superior returns most of the time, we believe there are ways to refine it and make it more reliable. One of the weaknesses of most growth stocks is weak profitability (due to aggressive investments in working capital for growth or R&D), which makes them more susceptible to economic downturns. The solution to this is to incorporate a profitability criterion as well – growth stocks with strong profitability will navigate economic slowdowns better and hold up well even during recessions. Our hypothesis is confirmed by modern financial research; the Fama-French 5-Factor Model (2015) introduced a profitability factor which, as the authors claim, can explain stock returns – stocks of companies with high profitability tend to outperform those with low profitability. READ ALSO: As legendary Warren Buffett has advised, to be greedy when others are fearful, we believe the best way to make money in the market is to engage in smart contrarian bets when everyone else is reluctant. The US stock market is still more than 10% below its all-time high as market participants are still digesting the tariffs situation as well as the new economic data, which is quite disappointing. The Philadelphia Fed manufacturing index decreased to -26.4 in April, well below expectations and the lowest reading since April 2023. It is also the second lowest level outside of official recessions, which hints towards the possibility that we are already in a recession that will only be declared at a later date. The employment, shipments, and new orders components all decreased as well, further pointing towards a slowing economy. Business surveys have also been quite grim – Hamilton Lane recently reported that at least 62% of CEOs see a recession on the horizon, while the 6-month Capex expectations fell to the lowest level since the pandemic. It is now clear that pretty much everyone is thinking about a recession now, and that's actually the most bullish indicator out there. The stock market is a forward-looking animal, meaning that its prices reflect the state of the economy 6-12 months from now. Given that the average recession in the US has historically lasted for about 3-4 quarters, and assuming that revised Q1 2025 data will be later recognized as the beginning of the recession, odds are that the US economy will already return to growth in calendar 2026. Also, history shows that the forward-looking stock market tends to disappoint the majority of investors, which means that if the majority expects a recession, then odds are that it is already priced in and that the market bottom is already in the rear-view mirror. To sum up, the fact that the US economy is in a slowdown and a state of uncertainty is pretty much obvious at this point. The key takeaway for readers is that stock prices are forward-looking and reflect the investors' outlook for several quarters ahead. Once it becomes completely clear that calendar 2026 will be past the current tariff turmoil, the US stock market will very likely return to growth. It is therefore an opportune moment to look for the most profitable growth stocks to add in anticipation of a broad market melt-up. A close-up of a hand using a laptop to control an immersive video meeting. To compile our list of most profitable growth stocks, we used a screener to identify stocks with at least 30% revenue CAGR in the last 5 years and a net profit margin of at least 20%. Then we included in the article the top 13 stocks with the highest net profit generated in the most recent fiscal year, ranked in ascending order. We also included the number of hedge funds that own each stock, as per Insider Monkey's Q4 2024 database. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points ().Zoom Communications Inc. (NASDAQ:ZM) is a provider of a cloud-native communications platform for video conferencing, team chat, phone services, and collaboration tools. Its notorious product suite includes Zoom Meetings, an AI-powered collaboration platform designed for modern work environments. ZM ranked fifth on our recent list of 10 Best Telehealth Stocks to Buy Now. Zoom Communications Inc. (NASDAQ:ZM) had a strong Q4 2025, with total revenue growing 3% YoY to $1.184 billion, exceeding guidance expectations. The company demonstrated significant progress in AI adoption, with AI Companion usage growing 68% QoQ, while also securing major wins, including Amazon as a Zoom Workplace customer and its largest ever Contact Center deal with a Fortune 100 tech company for over 15,000 agents. Enterprise revenue grew 6% YoY and now comprises 60% of total revenue, while the online business showed signs of stability with the lowest fourth-quarter churn rate ever at 2.8%. Looking ahead to fiscal 2026, Zoom Communications Inc. (NASDAQ:ZM) is focusing on three key strategic priorities: expanding AI capabilities, innovating within Zoom Workplace, and building upon momentum in new products like Contact Center and Workvivo. The company is launching new initiatives, including a Custom AI Companion add-on in April and enhanced AI capabilities for healthcare providers. Despite ongoing macro challenges, ZM's financial outlook remains stable, with fiscal 2026 revenue expected to grow approximately 2.7% YoY to $4.785-$4.795 billion, while maintaining strong profitability, which secures its place on our list of the most profitable stocks to buy now. Overall, ZM ranks 7th on our list of most profitable blue chip stocks to buy now. While we acknowledge the potential of ZM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ZM but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey.
