Should You Buy Zoom Communications Stock At This Price?

Zoom Communications (ZM) stock trades at 8.4 times its earnings, against 21.5 for the median S&P 500 company. The stock has also lagged: it returned 13.7% over the past twelve months, behind the S&P 500’s 16.0%. That could mean a good business is on sale, or that the market is paying a fair price for a slow grower. So which one is a buyer at this price getting?

What Does A Buyer Of Zoom Stock Get?

A buyer gets a company that sells Zoom Workplace software, phone service and contact center software to businesses. That company keeps more of each sales dollar than most large companies do. Zoom’s operating margin was 23.7% over the last twelve months, against 18.6% for the median S&P 500 company.

Zoom holds a lot of cash for its size. The company ended fiscal Q2 2027 with $7.2 billion in cash and marketable securities, against a market value of $27.2 billion. Zoom also spent $1.6 billion buying back its own shares in its last fiscal year, $0.9 billion more than it paid out in stock compensation.

What Do Zoom’s Last Three Years Show?

They show a slow grower. The low P/E also rests on profit that did not come from Zoom’s operations, as the figures below show. Zoom’s revenue grew 3.8% a year on average over three years, and 5.0% over the last twelve months. Even that faster pace trails the median S&P 500 company, which grew 8.3% over the last twelve months.

But Zoom has been more profitable lately. Its operating margin was 23.7% over the last twelve months, against an average of 20.1% over three years.

Zoom reported net income of $3.3 billion over the last twelve months, but its operating income was only $1.2 billion. So most of the profit that makes the stock look this cheap did not come from Zoom’s operations, and it may not repeat.

Zoom’s Enterprise Business Is Outgrowing The Whole Company

Enterprise revenue grew 7.8% from a year earlier in fiscal Q2 2027. It made up 62% of total revenue. Management said on the August 25, 2026 call that Zoom is “clearly taking share.” Workvivo, another Zoom product, also passed $100 million in annual recurring revenue.

The rest of Zoom’s revenue comes from its Online business. Management cut its outlook there from slight growth to flat for fiscal 2027.

Management has set its own bar for the year. It raised its fiscal 2027 revenue guidance to 4.5% growth at the midpoint, from 4.1% at the start of the year. But for fiscal Q3 2027 it guided to 3.9% growth at the midpoint, below the 4.9% Zoom reported for fiscal Q2 2027. Revenue in that quarter came in $7 million above the top of Zoom’s own guidance.

Zoom already has the cash and the margins. So a buyer at this price is betting that the profit behind the low P/E holds up, and that Enterprise sales lift the whole company. Revenue growth clearly above the 3.9% management guided for fiscal Q3 2027 would show Enterprise sales lifting the whole company. Growth at or below 3.9% would show they are not, yet.

Does This Mean You Should Act On ZM?

Our purpose is to inform you with unique data so that you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

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