Zoom Stock Sinks as Revenue Outlook Offsets Better-Than-Expected Results

Zoom Video Communications (NASDAQ: ZM) reported strong financial results for the fourth quarter of fiscal year 2025, with total revenues of $1,184.1 million, up 3.3% year-over-year. However, the company's stock price fell in after-hours trading as investors focused on the slower-than-expected revenue growth outlook for the next quarter. Here's a closer look at the results and the market reaction.



Better-Than-Expected Results

Zoom's Q4 results surpassed analysts' expectations, with operating cash flow increasing by 20.9% to $424.6 million. The company's enterprise revenue grew by 5.9% to $706.8 million, driven by increased adoption and usage of Zoom's collaboration tools by businesses. Additionally, the number of customers contributing more than $100,000 in trailing 12 months revenue increased by 7.3% year-over-year, reaching 4,088 customers.

Slower Revenue Growth Outlook

Despite the strong Q4 results, Zoom's stock price fell as investors focused on the slower-than-expected revenue growth outlook for the next quarter. The company expects total revenue to be between $1.162 billion and $1.167 billion in the first quarter of fiscal year 2026, which is below analysts' expectations. This slower growth outlook may be due to the company's focus on improving operational efficiency and optimizing its cost structure.

Analysts' Perspectives

Analysts have mixed views on Zoom's future prospects. The average price target for Zoom's stock is $88.09, which is 18.54% higher than the current price. However, the consensus rating is "Hold," indicating that analysts are cautious about the company's short-term prospects.



Potential Catalysts for a Turnaround

There are several potential catalysts that could drive a turnaround in Zoom's stock price and investor sentiment. These include strong earnings growth, expansion into new markets, innovation and product development, and strategic partnerships and acquisitions. As Zoom continues to execute on its long-term growth strategy, investors may become more optimistic about the company's future prospects.

In conclusion, Zoom's Q4 results surpassed analysts' expectations, with strong revenue growth and improved operating margins. However, the company's stock price fell as investors focused on the slower-than-expected revenue growth outlook for the next quarter. As Zoom continues to execute on its long-term growth strategy, investors may become more optimistic about the company's future prospects.