Zoom reported quarterly earnings this past Monday after market close. Revenue was $1.1B vs. $1.08B expected. Adjusted EPS was $1.16 vs. $0.99 expected. The company also raised the whole year revenue guidance to $4.465B- $4.485B vs. $4.435B- $4.455B forecasted. ZM 0.00 stock price, however, tanked ~10% in the past two trading sessions after the report.
Overall, it’s not a bad quarter. The revenue actually increased YoY and they generated ~$400M of free cash flow. Zoom’s current market cap is $18.6B and the company has $5.6B of cash/cash equivalent on their balance sheet. In other words, Zoom’s Enterprise Value to Revenue ratio is ~3. However, Zoom spent $282M or ~25% of its revenue on stock based compensation, which is bonkers. I do think the push for efficiency, the normalization of tech compensation and the productivity white collar workers gain from AI is going to make the overall expenses lower for Zoom. I personally think Zoom’s stock valuation is quite attractive. I have been a shareholder and I do plan to add onto my positions at the current level. People are still using Zoom and a lot of interesting AI features can be built on top of its core product. There are some short-term challenges such as people switching to the free plan due to a slowing economy. But I am long-term bullish on the company as it’s an essential product that I believe will stick around and be a core communication tool for most workers.