Zoom Video Communications’ (ZM Quick QuoteZM - Free Report) second-quarter fiscal 2025 adjusted earnings of $1.39 per share beat the Zacks Consensus Estimate by 14.88% and increased 3.73% year over year. Revenues of $1.16 billion beat the consensus mark by 1.22% and increased 2.09% year over year on strong growth from Enterprise customers.

Zoom Video Communications increased its annual revenue forecast on Wednesday, thanks to robust demand for its AI-powered collaboration tools designed for hybrid work models. For fiscal 2025, Zoom expects revenue to be between $4.63 billion and $4.64 billion, up from the previous forecast of $4.61 billion to $4.62 billion.

The company's shares rose 12.97% in the key trading session on Aug 22, 2024. ETFs those have exposure to Zoom Video Communications are likely to benefit from this result. These ETFs include Global X Cloud Computing ETF (CLOU Quick QuoteCLOU - Free Report) (3.91% focus), First Trust Indxx Metaverse ETF (ARVR Quick QuoteARVR - Free Report) (3.37% focus), and VictoryShares Free Cash Flow ETF (VFLO Quick QuoteVFLO - Free Report) (3.11% focus).

Let’s delve a little deeper.

Expansion in AI and Hybrid Work Solutions

Zoom is boosting its focus on integrating artificial intelligence into its products and expanding its service offerings to capitalize on the growing trend of hybrid work. The company’s AI-powered, omnichannel Zoom Contact Center has secured several high-profile clients, including its largest single-order deal to date in the second quarter.

Impressive Growth Metrics

The company reported a 7.1% increase in large accounts, defined as customers contributing more than $100,000 in trailing 12-month revenue. Additionally, online average monthly churn reached its lowest ever rate.

Challenges and Opportunities

Jeremy Goldman, senior director of briefings at Emarketer, indicated that while Zoom is currently reinforcing its position, further innovation and expansion in its product offerings are required. The company's challenge will be to maintain this momentum and prove its mettle over the long term, as quoted on Reuters.

Inside the Zoom Stock’s Style Score

Zacks Rank #3 (Hold) Zoom stock has a Growth score of “A” and a Momentum score of “B.” The overall, VGM score of the stock is “A.” The ZM stock hails from a top-ranked internet-software industry (top 36%) and a top-ranked Computer-Technology sector (top 50%).

Price Target

Based on short-term price targets offered by 24 analysts, the average price target for Zoom Video Communications comes to $74.21. The forecasts range from a low of $55.00 to a high of $95.00. The average price target represents an increase of 23.21% from the closing price of $60.23 recorded on Aug 21, 2024.

Broker Rating

Zoom Video Communications currently has an average brokerage recommendation (ABR) of 2.65 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 31 brokerage firms. The current ABR compares to an ABR of 2.63 a month ago based on 30 recommendations.

Of the 31 recommendations deriving the current ABR, seven are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 22.58% and 3.23% of all recommendations. A month ago, Strong Buy made up 23.33%, while Buy represented 3.33%.

Bottom Line

Zoom is gaining traction from the hybrid working wave, which has accelerated the need for digital transformation among enterprises. The company is benefiting from steady growth in its subscriber base and enterprise customer base backed by strong demand for offerings like Zoom Phone. The launch of AI-driven solutions like Zoom Doc and Zoom AI Companion are the key tailwinds. However, acute competition from the likes of Microsoft (MSFT Quick QuoteMSFT - Free Report) and Cisco (CSCO Quick QuoteCSCO - Free Report) are threats.