On Thursday, Goldman Sachs (NYSE:GS) reiterated its Neutral rating and a $72.00 price target for Zoom Video (NASDAQ:ZM), following insights from the company's recent Zoomtopia 2024 event and Investor Session on October 9. Analysts at Goldman Sachs expressed a more constructive view on Zoom's product development and growth strategies, particularly in areas such as Phone, Contact Center, and AI Companion offerings.
The assessment of Zoom's progress comes after witnessing the company's transition from a communications-focused entity to a broader AI work platform. This evolution has been facilitated through organic investment in products like Phone and Contact Center, as well as strategic acquisitions such as Workvivo and Solvvy. The firm believes these steps could mark a turning point for Zoom, potentially leading to stronger mid-term growth compared to the modest average revenue growth of 4% over the past six quarters.
Zoom's AI-first Contact Center solutions, including Virtual Agent and Expert Assist, are seen as potential game-changers in the fragmented Contact Center as a Service (CCaaS) market, which is expected to reach $47 billion by FY28. The company's strong product portfolio in emerging areas like Phone and Rooms could also benefit from this disruption.
Further, enhancements to Zoom's AI Companion through the 2.0 release are anticipated to boost the utilization of free AI services, leading to more opportunities for upselling the Custom AI Companion add-on, priced at $12 per user per month. This could support a sustainable sales strategy as enterprises increasingly adopt core AI functionalities for workflow integration across business applications.
Despite the positive outlook on Zoom's long-term trajectory, Goldman Sachs prefers to maintain a cautious stance, citing a challenging macroeconomic environment that may limit growth until the company's emerging product strategies fully take effect.
In other recent news, Zoom Video Communications (NASDAQ:ZM) reported Q2 2025 earnings and revenue that exceeded expectations, with non-GAAP income from operations reaching $456 million and total revenue amounting to $1.16 billion. Consequently, the full-year revenue outlook has been revised to between $4.63 billion and $4.64 billion, with non-GAAP earnings per share projected to be between $5.29 and $5.32. Analyst firms BTIG, Stifel, Citi, Deutsche Bank (ETR:DBKGn), and Goldman Sachs have maintained a neutral rating on Zoom.
Recent developments also include a partnership with ServiceNow (NYSE:NOW) to integrate their AI capabilities for enhanced workflow automation, set to launch in the first half of 2025. Zoom has launched its cloud phone service in India, marking the first cloud private branch exchange (PBX) solution in the country. Additionally, Zoom appointed Michelle Chang, formerly of Microsoft (NASDAQ:MSFT), as its new Chief Financial Officer.
Zoom has introduced new features and products aimed at improving compliance and security, including Zoom Compliance Manager Plus, Meeting Survivability, and Zoom Mesh for Meetings. In a strategic move, the company formed a partnership with Mitel to provide a hybrid cloud solution, expected to be available in the first half of 2025. The company's AI Companion, part of the Zoom for Government platform, has received authorization from The Federal Risk and Authorization Management Program (FedRAMP) Joint Authorization Board (JAB) as a moderate system.
InvestingPro Insights
Zoom Video's recent strategic moves and product developments, as highlighted in Goldman Sachs' analysis, are reflected in several key metrics from InvestingPro. The company's impressive gross profit margin of 75.89% for the last twelve months as of Q2 2025 underscores its ability to maintain profitability while investing in new technologies and expanding its product portfolio. This aligns with one of the InvestingPro Tips, which notes Zoom's "impressive gross profit margins."
Additionally, Zoom's financial health appears robust, with InvestingPro data showing that the company holds more cash than debt on its balance sheet. This strong financial position supports Zoom's ability to invest in AI-driven solutions and pursue strategic acquisitions, as mentioned in the article.
The market seems to be recognizing Zoom's potential, with the stock trading near its 52-week high and showing a strong return of 24.95% over the last three months. This positive momentum could be attributed to investor optimism about Zoom's evolving product strategy and its push into AI-powered solutions.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Zoom Video, providing deeper insights into the company's financial health and market position.
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