Zoom Communications, Inc. Just Beat EPS By 73%: Here's What Analysts Think Will Happen Next

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 8.5% to US$106. It looks like a credible result overall - although revenues of US$1.2b were what the analysts expected, Zoom Communications surprised by delivering a (statutory) profit of US$1.42 per share, an impressive 73% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, the most recent consensus for Zoom Communications from 29 analysts is for revenues of US$5.09b in 2027. If met, it would imply a modest 3.2% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to plummet 43% to US$4.04 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$5.07b and earnings per share (EPS) of US$3.53 in 2027. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.

View our latest analysis for Zoom Communications

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 15% to US$112. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Zoom Communications at US$135 per share, while the most bearish prices it at US$66.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Zoom Communications' revenue growth will slow down substantially, with revenues to the end of 2027 expected to display 4.3% growth on an annualised basis. This is compared to a historical growth rate of 5.4% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Zoom Communications.

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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Zoom Communications' revenue is expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

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 estimates - from multiple Zoom Communications analysts - going out to 2029, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Zoom Communications (1 is concerning!) that we have uncovered.

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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.