ZM

Zoom has transitioned from a pandemic growth story into a highly profitable, cash-generative platform trading at a value-stock multiple. FY2026 revenue grew just 4.4% to $4.87B, but net income surged 88.1% to $1.90B and diluted EPS jumped 92.5% to $6.18, lifting net margin to 39.0% and ROE to 19.4%. Gross margin of 77.0% and operating margin of 23.1% reflect genuine software economics, and the balance sheet is pristine — $9.81B of equity against just $2.15B of liabilities (0.22x leverage). At $86.36 the stock trades at only 14.0x earnings, an undemanding price for a business converting profits into $1.99B of operating cash flow.

The core debate is durability of growth. Management discloses that the Enterprise net dollar expansion rate has fallen below 100% amid slower hiring, seat downsells, and elongated sales cycles in key markets. That said, the franchise is broadening: large $100K+ customers grew to 4,468 (from 4,088) and now represent 32.8% of revenue, while Enterprise customers represent 60.3%. The pivot to an 'AI-first' platform (AI Companion, Contact Center, Workvivo, Zoom Phone) using a federated multi-LLM approach gives optionality to re-accelerate, though it is unproven in the numbers so far.