Zoom's Q1 Earnings Surprise Potential: Why History and Innovation Signal a Buy

The market is bracing for Zoom’s Q1 earnings report, but Wall Street’s cautious stance clashes with the company’s proven track record of beating expectations. While Zacks’ negative Earnings ESP score (-1.68%) and a #3 “Hold” ranking suggest a potential miss, Zoom’s four consecutive EPS beats and strategic momentum in AI and enterprise growth argue for a contrarian bullish stance. Here’s why investors should prepare for a surprise—and why the stock could rebound sharply.

The Discrepancy: Wall Street’s Shortsightedness vs. Zoom’s Track Record

Zacks’ bearish outlook hinges on near-term headwinds like reduced video conferencing demand and macroeconomic pressures. Yet its Earnings ESP model—designed to predict surprises—has a blind spot: Zoom has beaten EPS in every quarter since Q1 2024, including a 7.6% surprise in Q4 2024. This 100% beat streak isn’t a fluke; it reflects operational discipline and a strategy now gaining traction in AI-driven enterprise solutions.

The negative ESP (-1.68%) likely overweights short-term risks like weaker video conferencing demand, which accounted for only 40% of revenue in Q4. But Zoom’s focus has shifted to high-growth areas: enterprise software, AI integrations, and Contact Center deals. These segments—now 60% of total revenue—are underappreciated in current estimates.

Enterprise Growth: The Hidden Catalyst

Zoom’s enterprise segment is outperforming, with revenue up 6% YoY in Q4 and customer churn hitting a record low of 2.8%. The company’s recent wins are game-changers:

1. Landmark Deals: In early 2025, Zoom secured its largest-ever Contact Center deal, migrating 15,000 agents from a Fortune 100 tech giant’s internal platform. Seven of its top 10 Contact Center deals displaced cloud competitors, while three migrated from legacy systems.
2. Workvivo Momentum: Zoom’s employee communications platform grew 89% YoY, with Delta Air Lines and Meta Workplace defectors fueling expansion.
3. AI-Driven Upselling: The Custom AI Companion add-on ($12/user) is now live, monetizing AI’s productivity gains. Over 1.2 million accounts use the AI Companion, with adoption surging 68% QoQ in Q4.

These metrics show enterprise as the growth engine. Yet analysts have yet to fully price in the value of AI’s scalability or the Contact Center’s 100%+ YoY growth in high-ARR customers.

The AI Edge: A New Revenue Stream Ignored by Consensus

Zoom’s pivot to an “AI-first company” isn’t just buzz. The Custom AI Companion’s pricing strategy—$12/user for custom automation—directly ties AI adoption to revenue. Forrester estimates automation could save enterprises $12 billion annually by 2026—a market Zoom is already dominating.

Moreover, Zoom Workplace, its unified AI platform, integrates meetings, chat, and third-party tools (e.g., Microsoft/Google services). This ecosystem is displacing rivals like Microsoft Teams by offering simplicity and flexibility.

The data shows AI’s correlation with beat momentum. A 68% QoQ rise in AI Companion users in Q4 aligns with a 7.6% EPS surprise—a clear signal that AI is now a profit lever.

Risks, but Not Dealbreakers

Critics cite competition from Microsoft Teams and Cisco, as well as slowing online revenue (which now accounts for just 40% of sales). Yet Zoom’s churn rates and cross-selling into AI/Contact Center packages suggest customer stickiness is rising. Even if Q1 revenue grows only 3% YoY (as guided), the surprise could come from margins or guidance upgrades fueled by AI’s cost efficiencies.

The Contrarian Case: Buy the Dip, Bet on AI

Zoom’s stock has slumped 22% since late 2023, partly due to Wall Street’s myopia about enterprise/AI growth. A Q1 beat—driven by the hidden tailwinds above—could spark a rebound to $100+, especially if guidance hints at 2026 margin expansion.

The key takeaway: Zacks’ model is backward-looking, while Zoom’s future is AI-driven. Investors who overlook the enterprise and AI momentum risk missing a rare opportunity to buy a $13B market cap tech leader at a 40% discount to its 2021 peak.

Final Verdict: Zoom’s fundamentals justify a buy rating ahead of earnings. The market’s skepticism is misplaced; the real surprise will be how quickly Zoom’s AI and enterprise bets translate into sustained outperformance.