ZoomInfo’s Q1 Beat: A Glimmer of Hope or the Start of a Turnaround?

ZoomInfo (ZI), now rebranded as GTM, reported its first quarterly revenue decline in Q1 2025, sparking debates over whether its struggles are structural or temporary. While its GAAP revenue dipped 1% year-over-year to $305.7 million, management emphasized margin discipline and customer retention improvements as signs of resilience. The question remains: Can ZoomInfo’s B2B SaaS model sustain growth, or is this a fleeting reprieve?

Revenue: A Hurdle, but Not a Catastrophe

The 1% YoY revenue contraction marks a significant slowdown for ZoomInfo, which grew at a 20%+ clip in 2022. However, the Q1 results included a 108% year-over-year increase in customers with $100,000+ annual contract values (ACV), now accounting for 71% of total ACV. This shift toward high-value enterprise clients suggests a strategic pivot that could pay off as macroeconomic pressures ease.

Key Takeaway: While revenue growth has stalled, the company’s focus on upmarket customers—a segment with higher retention and pricing power—could stabilize margins over time.

Customer Retention: Stabilizing, Not Thriving

ZoomInfo’s net revenue retention rate improved sequentially to 87%, but it remains below the 90%+ threshold that SaaS investors demand. This suggests customers are spending less on average, likely due to cost-consciousness in a sluggish economy. However, the sequential uptick hints at stabilization. Notably, the 1,868 large enterprise customers (up 1% sequentially) are critical: these accounts have historically shown stronger retention and upsell opportunities.

Margins: A Mixed Picture, but Manageable

The adjusted operating margin fell to 33% from 39% in Q1 2024, driven by higher equity-based compensation and restructuring costs. Yet GAAP operating margins rose to 16%, up from 14%, thanks to cost-cutting. Unlevered free cash flow hit $124.5 million, a 1% YoY increase, underscoring cash generation despite revenue headwinds.

Key Takeaway: ZoomInfo’s cash flow remains robust, giving it flexibility to invest in AI tools like Go-To-Market Studio without diluting profitability.

AI: The X-Factor for Long-Term Dominance

ZoomInfo’s AI-driven sales intelligence platform is its crown jewel. With 12 billion data points and a 98% accuracy rate, its tools help sales teams prioritize high-intent leads, predict pipeline opportunities, and automate CRM updates. Clients report 30% productivity gains and 25% higher win rates, metrics that could justify premium pricing.

The Go-To-Market Studio, launched in Q1, integrates first- and third-party data to unify sales and marketing workflows. This product could become a “moat” against competitors like LinkedIn Sales Navigator or Datanyze, especially as enterprises seek integrated, AI-powered solutions.

Risks: Macro Stiffness and Margin Volatility

ZoomInfo’s struggles are not unique—B2B SaaS companies like HubSpot and Marketo have also faced slowing demand. Yet ZoomInfo’s margin drop to 33% (vs. peers averaging 40%) raises concerns about scalability. Additionally, its 1% revenue decline in a market crowded with AI startups could signal execution risks.

The Case for Buying Now: Data-Driven Optimism

ZoomInfo’s stock trades at a 10x forward EV/Sales multiple, near its five-year low, despite holding $124.5 million in unlevered free cash flow and a fortress balance sheet ($1.2 billion in cash). The rebrand to GTM and focus on upmarket clients signal a shift toward higher-margin, sticky revenue streams.

Key Bullish Metrics:
- 71% of ACV from high-value enterprise customers (up from 61% a year ago).
- $124.5 million in free cash flow despite revenue stagnation.
- 85% chatbot issue resolution, reducing support costs.

Conclusion: A High-Conviction Buy at Current Levels

ZoomInfo’s Q1 stumble is a speedbump, not a cliff. The shift to enterprise clients, margin discipline, and AI-powered differentiation position it to outperform peers as B2B data demand rebounds. With a valuation at a cyclical low and a symbol rebrand signaling renewed focus, this could be a rare buying opportunity in the SaaS sector.

Investment Thesis: Buy ZoomInfo (now GTM) at current valuations—its AI moat and cash flow stability make it a compelling play on the B2B data renaissance.

Final Note: Monitor Q2 results for signs of revenue stabilization and net retention above 90%. If achieved, this stock could rally 20%+ in 2025.