Zoom Video Communications ZM is transforming from a pandemic-era video conferencing tool into an AI-first work platform poised for sustainable growth. The company's recent announcements highlight a strategic pivot that should excite forward-thinking investors, especially those looking to capitalize on practical AI applications in the enterprise space.
In March 2025, Zoom unveiled a comprehensive suite of agentic AI capabilities across its platform, signaling a significant evolution in its product strategy. The company's AI Companion is becoming truly agentic, leveraging reasoning and memory to execute multi-step actions on users' behalf. This development addresses real productivity challenges faced by knowledge workers and represents a key differentiator in the competitive collaboration market.
Financial Strength Provides Foundation for AI Investments
Zoom's financial results demonstrate the company's ability to fund innovation while maintaining profitability. For fiscal 2025, Zoom reported total revenues of $4.67 billion, up 3.1% year over year, with enterprise revenues growing 5.2% to reach $2.75 billion. More impressive was the company's operating cash flow, which jumped 21.7% to $1.95 billion, representing a 41.7% margin.
The company's disciplined approach to expenses has yielded significant improvement in the GAAP operating margin, which expanded 580 basis points year over year to 17.4%. With approximately $7.8 billion in cash and marketable securities, Zoom has ample resources to pursue its AI-centric strategy while continuing its share repurchase program, which included approximately 15.9 million shares during fiscal 2025.
The Zacks Consensus Estimate for fiscal 2026 indicates 2.68% year-over-year revenue growth to $4.79 billion. The consensus estimate for earnings has moved north by 1.5% to $5.37 per share over the past 30 days.
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AI Companion 2.0: The Centerpiece of Zoom's Strategy
Zoom's AI Companion has emerged as the driving force behind the company's transformation. Monthly active users grew an impressive 68% quarter over quarter, demonstrating strong customer adoption and validating Zoom's AI-first approach.
The newly announced Custom AI Companion add-on, available in April for $12 per user per month, allows organizations to personalize the AI experience with company-specific knowledge and industry-specific terminology. This approach addresses a key limitation of generic AI solutions by incorporating organizational context, potentially increasing the stickiness of Zoom's platform.
Zoom's federated AI approach is particularly noteworthy, combining small language models with third-party large language models to deliver both performance and cost-effectiveness. This hybrid approach allows for specialized AI tasks while maintaining flexibility — a strategic advantage as AI technology continues to evolve rapidly.
Beyond Meetings: Building a Comprehensive AI-First Platform
Shares of Zoom have seen its stock gain 10.9% in the past six-month period against the broader Zacks Computer and Technology sector’s decline of 4.5%. Despite this impressive rally, several fundamental catalysts and strategic initiatives suggest the stock has significant upside potential ahead as the company transforms into an AI-first platform for workplace collaboration.
6-Month Performance
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What makes Zoom's strategy compelling is its expansion beyond core meeting capabilities. The company is integrating AI across its growing product portfolio, including Phone, Team Chat, Events, Docs, and Contact Center. Notably, Zoom Contact Center secured its largest deal in history with a Fortune 100 tech company for more than 15,000 agents, demonstrating the company's ability to compete in adjacent markets.
The introduction of the Virtual Agent with advanced reasoning capabilities for both voice and chat channels positions Zoom to capture value in the growing customer experience automation market. This represents a significant expansion opportunity beyond Zoom's traditional collaboration focus.
Investment Thesis: Why Zoom in 2025
While Zoom trades at a premium with a trailing 12-month EV/EBITDA ratio of 13.59 versus the Zacks Internet - Software industry average of 10.78, the company's AI innovations and strong financial discipline justify this valuation. The company's strategic wins, including Amazon AMZN as a customer, validate its competitive position against heavyweights like Microsoft MSFT Teams and Cisco CSCO Webex.
ZM’s EV/EBITDA TTM Ratio Depicts Premium Valuation
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Investors should recognize that Zoom's evolution into an AI-first platform positions it to benefit from the productivity gains that generative AI promises to deliver. With strong cash generation, disciplined expense management, and a focused strategy targeting practical AI applications, ZM represents a compelling opportunity for investors seeking exposure to enterprise AI adoption.
Conclusion
As organizations look to leverage AI to enhance productivity and streamline workflows, Zoom's product innovations addressing real business challenges should drive customer adoption and loyalty. For investors with a medium to long-term horizon, Zoom's current valuation offers an attractive entry point to capitalize on the next wave of AI-powered workplace transformation. Zoom Video currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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