Zoom Shares Sink Despite Revenue Beat. Is It Time to Buy the Stock on the Dip as It Turns to AI to Drive Growth?

Core Viewpoint - Zoom Communications has experienced a decline from its peak stock price of over $550 in 2020, with slower revenue growth following the pandemic surge in demand [1][2] Financial Performance - For fiscal Q3 2025, Zoom reported a revenue increase of nearly 4% year over year to $1.18 billion, surpassing analyst expectations of $1.16 billion [3] - Adjusted earnings per share (EPS) rose by 7% to $1.38, exceeding the consensus estimate of $1.31 [3] - Enterprise revenue grew nearly 6% year over year to $698.9 million, with a 7% increase in customers generating over $100,000 in annual revenue [4] - Online revenue remained flat at $478.7 million, with an all-time low churn rate of 2.7% [4] Customer Dynamics - Net dollar retention among enterprise customers was reported at 98%, indicating some customer churn or reduced spending [5] - The company is focusing on enhancing its offerings with new AI features, including the AI-first Work Platform and Zoom AI Companion 2.0 [6][7] Strategic Initiatives - Upcoming AI solutions will target specific industries such as healthcare and education, along with a new platform for frontline workers [7] - The collaboration platform Workvivo saw a 72% increase in customers, and Zoom signed its largest contact center deal for 20,000 seats, with an 82% growth in customer count [8] Cash Flow and Valuation - Zoom generated operating cash flow of $483.2 million and free cash flow of $457.7 million, ending the period with $7.7 billion in cash and marketable securities and no debt [9] - The company raised its fiscal 2025 revenue guidance to between $4.656 billion and $4.661 billion, with adjusted EPS expectations of $5.41 to $5.43 [10] Market Position - Zoom's forward price-to-earnings (P/E) ratio is 15.5, and its price-to-sales (P/S) ratio is just over 5, but with 30% of its market cap in cash, these metrics may be overstated [11] - Excluding net cash, the P/E ratio would be under 11, and the enterprise value-to-revenue ratio would be about 3.6 [11] Growth Potential - The company is positioned as a cash-producing entity, but tech investors typically seek growth opportunities [13] - If Zoom's new AI initiatives can drive growth in the coming year, there may be significant upside potential for the stock [13]