Zoom Video Stock Slumps Despite Beat-and-Raise Q3 But Retail Stays Connected

Zoom Video Communications, Inc. ($ZM) shares tumbled over 7% in Tuesday’s premarket trading despite a very solid quarterly report but retail sentiment turned buoyant.

The San Jose, California-based company known for its videoconferencing app reported fiscal-year 2025 third-quarter non-GAAP earnings per share (EPS) of $1.38, ahead of the consensus estimate of $1.31 and the year-ago’s $1.29.

Quarterly revenue climbed 3.6% year-over-year (YoY) to $1.18 billion versus the $1.16-billion consensus estimate.

The results also bettered Zoom Video’s guidance for $1.29-$1.31 in non-GAAP EPS and  $1.16 billion-$1.165 billion in revenue.

Non-GAAP operating margin came in at 38.9%.

The company ended the quarter with $7.7 billion in cash. 

Among the customer metrics, customers contributing more than $100,000 in trailing 12-month revenue rose 7.1% YoY to 3,995. Its enterprise customers stood at 192,400.  The trailing 12-month net dollar expansion rate for enterprise customers was 98%.

Online average monthly churn fell 30 basis points to 2.7%.

Eric Yuan, Zoom Video founder and CEO, said, "At Zoomtopia we announced major milestones such as AI Companion 2.0 and paid add-ons for AI Companion and industry-specific AI customization, further cementing our vision to deliver a differentiated AI-first work platform that empowers customers to achieve more than ever."

Looking ahead, Zoom Video guided fourth-quarter revenue to $1.175 billion-$.1.180 billion and non-GAAP EPS to $1.29-$1.30. Analysts, on average, expect the metrics to come in at $1.17 billion and $1.29, respectively.

The company raised its fiscal year 2025 revenue from $4.63 billion-$4.64 billion to $4.656 billion-$4.661 billion, and non-GAAP EPS outlook from $5.29-$5.32 to $5.41-$5.43.

The consensus estimates call for revenue of $4.65 billion and non-GAAP EPS of $4.38.

Traders on Wall Street apparently did not take kindly to the modest growth the company projected.

In premarket trading as of 6:23 am ET, Zoom Video stock fell 7.02% to $82.78. The stock has tacked on about 24% so far this year.

Sell-side reactions to Zoom Video’s earnings have largely been positive, with Evercore ISI upgrading the stock from "In-Line" to “"Outperform," and Jefferies upped the price target for the stock from $70 to $85, the Fly reported.

Evercore ISI analysts said the company delivered another "very solid quarter," marked by consistent operational execution and "impressive momentum" across its new product offerings.

ZM sentiment and message volume November 26, 2024, premarket as of 6:23 am ET | Source: Stocktwits

On Stocktwits, retail sentiment was "extremely bullish," (91/100), with message volume spiking to "extremely high."

Some on the platform said the stock is worth accumulating even if it pulls back to the $80 area. 

A poll of Stocktwits platform users showed that a singularity of respondents (46%) voted that Zoom Video’s AI initiatives and share buybacks were enough to reignite growth.