Zoom Communications: Why I Disagree With Wall Street

The stock market’s reaction to Zoom Communications’ fiscal 2025 results was swift and harsh: a 6.5% decline following the release of its Q4 earnings. Wall Street analysts, focused on modest revenue guidance and lingering concerns about customer retention, have dismissed Zoom as a relic of the pandemic-era tech boom. But this pessimism overlooks a critical reality: Zoom’s fundamentals are quietly strengthening, its strategic bets are paying off, and its valuation offers a compelling entry point for long-term investors. Here’s why I believe Zoom is poised to outperform expectations—and why the bears are wrong.

The Case Against the Bearish Consensus

Wall Street’s skepticism hinges on two pillars: slowing revenue growth and the challenges of competing in an AI-driven landscape. Analysts have slashed growth forecasts to just 2.9% revenue growth and 2% earnings growth for fiscal 2025, citing stiff competition from Microsoft Teams and Google Workspace. Yet the data tells a more nuanced story.

First, Zoom’s operational metrics are robust. In Q4 2025, enterprise revenue surged 5.9% to $706.8 million, driven by a 7.3% rise in clients spending over $100,000 annually—a key indicator of customer loyalty and upselling success.

. This contrasts with the net dollar expansion rate hovering “just below 100%,” which, while not ideal, suggests stabilization rather than decline. Meanwhile, operating cash flow jumped 20.9% to $424.6 million, and free cash flow rose 25.1% to $416.2 million, signaling strong liquidity and financial flexibility.

The stock’s post-earnings dip obscures its underlying resilience. While short-term traders focused on the modest 2026 revenue guidance ($4.785–4.795 billion), the 430 basis point improvement in operating margins to 19% reveals a company executing on cost discipline. This efficiency, paired with a $75.82 share price trading at a forward P/E of ~14x (below peers like Microsoft at ~30x), suggests the market is undervaluing Zoom’s future prospects.

The AI Pivot: A Long-Term Growth Catalyst

Analysts have criticized Zoom’s pivot to an “AI-first company” as a risky distraction, citing concerns about R&D costs and execution. Yet this strategy is the clearest path to differentiation in a crowded market. The Zoom AI Companion, designed to streamline workflows, enhance collaboration, and personalize user experiences, addresses a critical gap in enterprise software. While competitors focus on broad AI capabilities, Zoom is tailoring its AI to the core use case of its platform: communication.

The transition is already bearing fruit. In Q4 2025, non-GAAP EPS hit $1.41, exceeding the $1.30 consensus, even as the company invested heavily in AI development. The $416.2 million in free cash flow provides ample room to fund innovation without diluting shareholders. While near-term profit pressure is inevitable, the long-term payoff—monetizing AI-driven features like automated meeting summaries, real-time language translation, and predictive analytics—could redefine Zoom’s value proposition.

Why the Bear Case Fails

Wall Street’s bearish stance rests on three flawed assumptions:
1. Customer retention is deteriorating: The net dollar expansion rate being below 100% is framed as a red flag, but it ignores the fact that Zoom’s enterprise client base has grown steadily. High-value clients increased by 7.3%, suggesting core customers are deepening their commitments.
2. Revenue growth is peaking: At 3.3% annual growth in fiscal 2025, Zoom is outpacing many legacy software giants. With a total addressable market for cloud communications estimated at over $100 billion, there’s ample room for expansion—even in a maturing sector.
3. AI is a cost burden, not a revenue driver: Competitors like Microsoft are pouring billions into AI without clear monetization paths. Zoom’s focused approach, leveraging its deep customer relationships, could yield faster ROI.

Conclusion: A Contrarian Opportunity

Zoom’s stock is priced for stagnation, but the data points to gradual but sustainable growth. The 25.1% jump in free cash flow, the 19% operating margins, and the strategic clarity around AI position Zoom to weather competition and economic cycles. Even if 2026 revenue grows just 2.5%, the stock’s current valuation leaves room for upside if margins expand further or AI adoption accelerates.

Analysts may focus on the short-term, but investors should remember that Zoom’s core product—reliable, intuitive communication—remains indispensable. The AI Companion isn’t a Hail Mary play; it’s a logical evolution of its platform. At $75.82, Zoom offers a rare chance to buy a dominant software brand at a discount. The bears see a fading star; I see a company primed to shine.