AI Video Capabilities Will Expand Global Enterprise Reach

Key Takeaways

• AI-driven features and workflow integrations are boosting enterprise adoption, supporting higher-value deals and recurring revenue through premium offerings.
  
• Operational efficiencies and focus on regulated sectors improve margins, customer retention, and overall stability of future revenue growth.
  
• Reliance on pricing over subscriber growth, commoditization, weak enterprise retention, uncertain innovation returns, and macro pressures all threaten revenue stability and profit margins.

Catalysts

Provides video software solutions in the United States and internationally.

• Ongoing advancements and rollout of AI-powered video features-such as Agentic AI, AI translations, and enhanced natural language search-are driving higher-value enterprise deals and increasing customer adoption of premium features, which is likely to lift ARPU and support top-line revenue growth.
  
• Strategic focus on integrating with major workflow tools (like Zoom) and adding highly requested capabilities (e.g., Workspaces for secure departmental video management) positions Vimeo as a critical SaaS provider for businesses increasingly reliant on video for communication and collaboration, broadening the addressable market and supporting recurring revenue streams.
  
• The global shift toward remote and hybrid work environments is accelerating demand for scalable, self-serve video solutions, enabling Vimeo to benefit from the proliferation of digital content creation and improve operating leverage as more businesses adopt robust video infrastructure-positively impacting both revenue growth and margins.
  
• Improved efficiency in R&D and product platform consolidation has allowed Vimeo to upgrade EBITDA guidance while maintaining its innovation pace, highlighting lasting benefits to net margins and earnings through sustained cost discipline and higher operating leverage.
  
• Increased recurring usage from enterprise customers-driven by consolidation of video tools and expansion into regulated sectors like healthcare with HIPAA-compliant offerings-supports long-term customer retention, reduces churn, and provides stability for future revenue growth.

Vimeo Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Vimeo's revenue will grow by 5.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.1% today to 7.4% in 3 years time.
• Analysts expect earnings to reach $36.5 million (and earnings per share of $0.22) by about August 2028, up from $12.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.6x on those 2028 earnings, down from 54.0x today. This future PE is greater than the current PE for the US Interactive Media and Services industry at 16.1x.
• Analysts expect the number of shares outstanding to decline by 0.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.04%, as per the Simply Wall St company report.

Vimeo Future Earnings Per Share Growth

Risks

• The self-serve business is still experiencing subscriber declines, with recent growth driven primarily by pricing changes rather than underlying subscriber acquisition or retention, indicating vulnerability to future revenue declines once the impact of price increases normalizes or customers push back-creating medium-term risks to recurring revenue and growth.
  
• The bandwidth add-ons business is being commoditized, as evidenced by the loss of major enterprise customers who primarily consumed bandwidth rather than adopting differentiated Vimeo features; ongoing commoditization threatens top-line growth and pressures net margins as competitive pricing becomes the primary driver.
  
• Enterprise customer retention challenges are apparent, with sequential declines and heavy dependence on moving self-serve customers upmarket; lack of robust network effects and insufficient enterprise differentiation could increase churn and exposure to price-based competition, negatively affecting recurring revenue and profit margins.
  
• Management repeatedly highlights the importance of innovation and product feature rollouts (e.g., Agentic AI, Workspaces) as growth drivers, but heavy prior R&D spending has not consistently produced rapid adoption or breakout revenue growth, raising risks of operational inefficiency and persistently weak earnings if new innovations fail to convert.
  
• The macro environment presents uncertainties, including impacts from tariffs and sector-specific (e.g., health care, education) weakness, which, combined with changing market dynamics around SEO and search visibility, could further challenge customer acquisition efforts-leading to potential softness in revenue and prolonged pressure on earnings and free cash flow.

Valuation

• The analysts have a consensus price target of $6.6 for Vimeo based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $5.4.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $493.0 million, earnings will come to $36.5 million, and it would be trading on a PE ratio of 37.6x, assuming you use a discount rate of 8.0%.
  
• Given the current share price of $4.21, the analyst price target of $6.6 is 36.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.