On Tuesday, a Wedbush analyst updated the financial outlook for shares of Zoom Video Communications (NASDAQ: NASDAQ:ZM), raising the price target from $85.00 to $95.00, while maintaining an Outperform rating on the stock.
The adjustment reflects the company's increased fiscal year 2025 guidance, which indicates robust performance across its range of products and a positive trajectory in profitability, even as the firm scales up investments in artificial intelligence and other growth initiatives.
Zoom's forecast for the fourth quarter of fiscal year 2025 anticipates total revenue to be between $1.175 billion and $1.180 billion, surpassing analysts' expectations of $1.170 billion. This revenue uptick is attributed to the company's efforts to grow its share of spending among current customers by introducing innovative solutions that provide significant value.
The company also projects a non-GAAP operating income between $443.0 million and $448.0 million, which is above the market consensus of $442.7 million. The estimated earnings per share (EPS) range from $1.29 to $1.30, slightly ahead of the expected $1.28, as Zoom aims to enhance its operating leverage while continuing to invest in strategies to accelerate its growth.
The analyst highlighted that the past quarter was particularly strong for Zoom, with the launch of new solutions attracting multiple new clients to its platform. These offerings have also opened up numerous opportunities for cross-selling. The company's AI-first work platform has been successful in improving customer experiences, which is expected to pave the way for sustainable and profitable growth over the next 12 to 18 months.
In other recent news, Zoom Video Communications has been the subject of several target price revisions following its third-quarter earnings report. The company's revenue increased by 4% year-over-year, reaching $1.178 billion, surpassing expectations.
Analysts from Piper Sandler, Mizuho (NYSE:MFG) Securities, Benchmark, Rosenblatt Securities, and Stifel have all revised their price targets for Zoom, citing reasons ranging from stable growth in enterprise and online segments to the company's expanding product offerings and reduced risk of competition.
Zoom's product offerings, including the Contact Center and Workvivo, are gaining traction, contributing to the company's momentum. The company also highlighted its commitment to AI innovation with the introduction of Zoom AI Companion 2.0. Zoom's Board of Directors authorized an additional $1.2 billion for its share repurchase program, aiming to execute it by the end of fiscal year 2026.
However, some analysts, including those from Goldman Sachs (NYSE:GS), Citi, and Bernstein, expressed cautious stances due to concerns about the sustainability of revenue growth. These recent developments provide investors with a comprehensive understanding of Zoom's financial performance and strategic initiatives.
InvestingPro Insights
Zoom Video Communications' recent performance and future outlook align well with several key metrics and insights from InvestingPro. The company's impressive gross profit margin of 75.89% for the last twelve months as of Q2 2025 underscores its ability to maintain profitability while investing in growth initiatives, including AI. This is further supported by an InvestingPro Tip highlighting Zoom's "impressive gross profit margins."
The analyst's positive outlook is reflected in Zoom's strong market performance, with InvestingPro data showing a 24.83% price total return over the past three months and a 41.3% return over six months. These figures align with another InvestingPro Tip noting "strong return over the last three months."
Moreover, Zoom's financial health appears robust, with an InvestingPro Tip indicating that the company "holds more cash than debt on its balance sheet." This financial stability positions Zoom well to continue investing in AI and other growth strategies while maintaining profitability, as highlighted in the analyst's report.
For investors seeking more comprehensive insights, InvestingPro offers 13 additional tips for Zoom Video Communications, providing a deeper understanding of the company's financial position and market dynamics.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.