Earnings Beat: Zoom Communications Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

It's been a good week for Zoom Communications Inc. (NASDAQ:ZM) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.4% to US$84.43. Revenues were US$1.2b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$2.01, an impressive 148% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

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Taking into account the latest results, the current consensus from Zoom Communications' 29 analysts is for revenues of US$5.03b in 2027. This would reflect a satisfactory 4.6% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to tumble 34% to US$3.55 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$5.00b and earnings per share (EPS) of US$3.45 in 2027. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

View our latest analysis for Zoom Communications

The consensus price target was unchanged at US$94.58, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Zoom Communications at US$115 per share, while the most bearish prices it at US$69.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Zoom Communications' revenue growth is expected to slow, with the forecast 3.7% annualised growth rate until the end of 2027 being well below the historical 9.4% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 15% per year. Factoring in the forecast slowdown in growth, it seems obvious that Zoom Communications is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Zoom Communications' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$94.58, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Zoom Communications going out to 2028, and you can see them free on our platform here.

Even so, be aware that Zoom Communications is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.