On Tuesday, Bernstein issued an update on Zoom Video Communications , Inc. (NASDAQ: NASDAQ:ZM), increasing its price target from $78.00 to $89.00, while maintaining a Market Perform rating on the stock.
This adjustment comes in the wake of Zoom's fiscal third-quarter 2025 earnings report, which revealed a slight revenue beat and an upward adjustment to the full-year forecast.
Zoom's latest earnings showed a revenue beat of approximately 1.3% against the midpoint guidance and a full-year guidance raise by 0.5%, figures that are modest compared to the substantial beats in previous fiscal years 2023 and 2024.
However, a notable positive development was the growth in customers spending over $100,000, which saw a double-digit year-over-year increase of 11%—the first instance of such growth since the previous year.
Additionally, the company witnessed an increase in customers spending less than $100,000, marking the first quarter-over-quarter growth after more than a year of stagnant or declining numbers. The previous four quarters had not shown significant movement in this segment.
Zoom also reported improvements in monthly recurring revenue (MRR) churn among its online customers. This metric reflects the rate at which customers discontinue their subscriptions. The churn rate decreased to 2.7%, down from 2.9% in the preceding quarter and lower than the rate of just over 3% observed in the six quarters prior.
The analyst's commentary highlighted these key points, emphasizing the significance of the growth in high-value customers and the improvement in customer retention metrics. These factors contributed to the decision to raise the price target for Zoom Video Communications, reflecting a cautiously optimistic outlook for the company's financial performance.
In other recent news, Zoom Communications has posted promising results in its Q3 FY25 earnings call, indicating a successful transition to an AI-focused work platform.
The company reported a 4% year-over-year revenue increase, reaching $1.178 billion, exceeding its financial guidance and demonstrating robust performance across enterprise and online customer segments. Enterprise customers now account for 59% of Zoom's total revenue, and the company has reached its lowest churn rate ever at 2.7%.
Zoom's commitment to AI innovation is evident in its recent developments, including the introduction of Zoom AI Companion 2.0 and plans for industry-specific AI solutions. The company has also expanded its product offerings, securing a significant contact center customer and growing its WorkVivo customer base.
CFO Michelle Chang highlighted the company's continued investment in AI and platform development, while CEO Eric Yuan emphasized the company's commitment to customer empowerment and trust-building.
Zoom's strategic pivot to an AI-centric platform, targeting vertical markets like healthcare and education, and offering AI capabilities at no extra cost, underpins its market strategy. The company's efforts seem to be paying off, as indicated by its revenue surpassing expectations and setting a positive trajectory for future growth.
InvestingPro Insights
Zoom Video Communications' recent performance aligns with several InvestingPro metrics and tips, providing additional context to Bernstein's analysis. The company's market cap stands at $27.4 billion, reflecting its significant presence in the video communications sector. Zoom's impressive gross profit margin of 75.89% for the last twelve months as of Q2 2025 underscores its operational efficiency, which is crucial for sustaining growth in high-value customers as noted in the earnings report.
InvestingPro Tips highlight that Zoom "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations," indicating a strong financial position that supports its ability to invest in customer acquisition and retention strategies. This financial stability aligns with the company's efforts to reduce churn rates and grow its customer base across different spending segments.
The stock's recent performance is also noteworthy, with InvestingPro data showing a 22.58% price return over the past month and a 24.83% return over the last three months. This positive momentum correlates with the improved earnings results and the analyst's decision to raise the price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Zoom Video Communications, providing a deeper dive into the company's financial health and market position.
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