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Investing.com - Goldman Sachs has reiterated its Neutral rating and $87.00 price target on Zoom Video (NASDAQ:ZM), a company that InvestingPro analysis shows maintains a "GREAT" financial health score, following the company’s second-quarter earnings report that exceeded expectations. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis.
Zoom shares jumped 6% in after-hours trading after the company reported revenue growth of 4.7% year-over-year, marking its largest revenue beat in four quarters at 1.6% above consensus estimates. The company also posted non-GAAP operating margins of 41%, exceeding consensus by 260 basis points, while free cash flow came in 29% above expectations. With an impressive gross profit margin of 76.38% and a PEG ratio of 0.88, InvestingPro data suggests the stock is trading at attractive valuations relative to its growth potential.
Enterprise revenue was a particular bright spot, accelerating to 7% year-over-year growth compared to 5.9% in the previous quarter and 3.5% in the same quarter last year. Net expansion rate remained steady at 98%, while online churn ticked up sequentially to 2.9% but remained flat year-over-year.
Zoom modestly raised its fiscal year 2026 guidance, increasing revenue projections by 0.1% excluding the approximately $20 million beat. The company expects third-quarter deceleration due to tougher comparisons and lower professional services benefit, followed by fourth-quarter re-acceleration driven by enterprise momentum.
Goldman Sachs highlighted several positives in the quarter, including strong AI adoption with AI Companion monthly active users growing fourfold year-over-year, accelerating Contact Center momentum with 229 customers generating over $100,000 in annual recurring revenue (up 94% year-over-year), and continued traction for Workvivo with large customers increasing 142% compared to the previous year. For deeper insights into Zoom’s AI initiatives and financial metrics, check out the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top stocks with expert analysis and actionable intelligence.
In other recent news, Zoom Video Communications Inc. reported its fiscal second-quarter earnings for both 2025 and 2026, surpassing analyst expectations. For the second quarter of 2026, Zoom achieved non-GAAP earnings per share of $1.53, exceeding the consensus estimate of $1.37. The company’s non-GAAP operating margin was reported at 41.3%, which was higher than the expected 38.8% and showed improvement from the previous quarter’s 39.8%. In the second quarter of 2025, Zoom also exceeded forecasts with earnings per share of $1.53 against the anticipated $1.38. Additionally, the company’s revenue reached $1.22 billion, slightly above the projected $1.20 billion. Despite these positive earnings results, Citizens JMP analyst Patrick Walravens reiterated a Market Perform rating on the stock. The analyst’s outlook reflects a neutral position following Zoom’s financial performance. These developments highlight Zoom’s consistent ability to outperform earnings expectations in recent quarters.
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