Zoom vs. Microsoft: Which Video Collaboration Stock Offers More Upside Potential?

Zoom Communications and Microsoft are leading players in the video collaboration market, with Zoom's video-first design and AI initiatives driving growth, while Microsoft's extensive ecosystem and Teams integration with Microsoft 365 and Azure provide a competitive edge. Both companies are aggressively investing in AI to capitalize on the escalating demand in the market.

The video collaboration market, a cornerstone of hybrid work, has seen significant growth, with Zoom Communications (ZM) and Microsoft (MSFT) emerging as dominant players. Both companies are leveraging AI to capitalize on this expanding demand, but which stock offers greater upside potential?

Zoom Communications: A Video-First Approach

Zoom Communications stands out with its video-first design, delivering superior quality, lower latency, and more reliable connections than bundled alternatives. This specialization has driven renewed momentum, with revenue in the second quarter of fiscal 2026 rising 4.7% year over year to $1.22 billion [1].

Zoom’s AI initiatives, such as AI Companion, are enhancing its differentiation by integrating real-time insights and automated follow-ups into enterprise workflows. Monthly active users expanded over 4X year over year, with large-scale adoption demonstrated by a Fortune 200 company deploying Custom AI Companion to 60,000 employees [1]. Zoom Workplace and the Contact Center are also key growth drivers, with nine of the top 10 large deals won against competitors in the second quarter [1].

Microsoft: Ecosystem Integration and AI

Microsoft’s strength lies in its extensive enterprise ecosystem, with Teams embedded within Microsoft 365 and Azure. This integration has kept adoption closely linked to enterprise licensing, with Microsoft 365 Commercial Cloud revenues rising 18% year over year to $33.1 billion in the fourth quarter of fiscal 2025 [1].

Microsoft 365 Copilot, with over 100 million monthly active users, provides transcription, summaries, and translation within Teams. However, Teams’ AI features are broad rather than video-specific, limiting differentiation in meeting quality. Performance in external meetings and events is often seen as less consistent [1].

Stock Performance and Valuation

Year to date, Microsoft shares have gained 20.1%, reflecting steady confidence in its diversified model and AI positioning. Zoom, by contrast, has moved 0.4% lower, but this period of consolidation has positioned the stock for greater upside. Both stocks are overvalued, with Microsoft trading at a forward 12-month price-to-sales ratio of 11.92X and Zoom at 5.02X [1].

Conclusion

Both companies are poised to benefit from hybrid work and AI-enabled collaboration, but Zoom offers greater upside due to its video-first architecture, rapid AI Companion adoption, and growing Workplace and Contact Center businesses. Microsoft remains powerful through scale and bundling, but Teams lacks differentiation as a pure video solution.

Zoom currently sports a Zacks Rank #1 (Strong Buy), while Microsoft carries a Zacks Rank #3 (Hold), making Zoom the better pick at present levels [1].

References:

[1] https://finviz.com/news/155851/zm-vs-msft-which-video-collaboration-stock-has-more-upside
[2] https://www.nasdaq.com/articles/zm-vs-msft-which-video-collaboration-stock-has-more-upside