ZoomInfo's Crossroads: Can AI and Enterprise Sales Overcome the Valuation Squeeze?

The SaaS sector’s mantra—growth at all costs—has long fueled investor enthusiasm, but ZoomInfo Technologies (ZI) now stands at a critical juncture. Despite its pivot to AI-driven enterprise solutions, its Q1 2025 results reveal a stark disconnect between its valuation and the harsh realities of a slowing economy. Let’s dissect whether ZoomInfo’s fundamentals justify its current price—or if the market’s skepticism is warranted.

The Growth Story: Cracks in the Foundation

ZoomInfo’s revenue dipped 1% YoY to $305.7 million in Q1 2025, marking its fourth consecutive quarter of declining growth. While CEO Henry Schuck cited “better-than-expected results,” the numbers tell a different story. The net revenue retention rate (NRR) flatlined at 87% for the second straight quarter—well below the 100% threshold that signals healthy customer expansion. This stagnation is particularly alarming given that 71% of its ACV now comes from the “upmarket” segment (customers with $100k+ contracts). While upmarket ACV grew 3% YoY, the downmarket segment (smaller clients) collapsed by 10%, underscoring a reliance on fewer, larger customers.

The customer count for these high-value clients rose to 1,868—a 108% YoY jump—but only 1 net new customer was added sequentially. This “feast or famine” dynamic raises a red flag: ZoomInfo’s growth is increasingly dependent on enterprise wins, which are harder to scale and more volatile in macro downturns.

Valuation: A Mirror of Investor Anxiety

ZoomInfo’s EV/Sales ratio has plummeted to 3.79x—nearly 40% below its three-year average and a fraction of its 2022 peak of 18.56x. This compression reflects two existential risks:
1. Margin Erosion: Sales and marketing expenses surged to 34.7% of revenue (up from 32.1% in 2024), as ZoomInfo ramps up spending to counteract customer attrition. Meanwhile, adjusted operating margins dipped to 33%, squeezing profitability.
2. Macro Headwinds: The downmarket’s 10% YoY contraction signals that smaller businesses are cutting costs—a trend unlikely to reverse in a weak economy.

Investors are right to ask: Can ZoomInfo sustain its upmarket momentum while nursing a wounded customer base? The answer hinges on execution of its AI pivot.

The Silver Lining: AI as a Lifeline

ZoomInfo’s launch of Go-To-Market Studio—unifying first- and third-party data for sales teams—is its best hope to reignite growth. The platform’s AI capabilities, which automate prospecting and pipeline forecasting, could finally deliver the “stickiness” missing from its NRR. Management’s confidence is reflected in aggressive share buybacks ($95 million in Q1 alone), signaling belief in long-term value.

Yet, even here, risks linger. Competitors like LinkedIn (Microsoft) and Salesforce are doubling down on AI, and ZoomInfo’s Q2 revenue guidance ($295–298 million) suggests no near-term rebound. The stock’s symbol change to “GTM” on May 13—a rebranding to emphasize its go-to-market focus—may boost sentiment, but it won’t mask weak fundamentals overnight.

The Investment Dilemma: Buy the Dip or Avoid the Squeeze?

ZoomInfo’s valuation is now so compressed that even a modest improvement in NRR or margin stabilization could spark a rebound. However, investors must weigh two timelines:
- Long-Term: The AI-driven enterprise play has legs. Companies desperate to optimize sales cycles will pay a premium for data-driven tools like Go-To-Market Studio.
- Near-Term: The market is pricing in a worst-case scenario. A further slowdown in upmarket growth or a margin collapse could push the stock lower.

Final Verdict: Proceed with Caution

ZoomInfo’s valuation is a screaming “buy” for those willing to bet on its AI future. But for capital preservation-focused investors, the risks are clear: a valuation at historic lows reflects justified skepticism about its ability to stabilize NRR and sales efficiency.

The stock’s May 13 rebrand to “GTM” is a symbolic reset—but unless Q2 delivers signs of customer retention stabilization or a rebound in downmarket spending, this may be a race against time. For now, the best move is to wait for proof that ZoomInfo’s pivot isn’t just a rebrand, but a revolution.