Zoom Video (ZM) Stock Forecast & Price Target

Zoom Communications is projected to achieve revenue growth to $5,339 million in FY28, reflecting a year-over-year increase of approximately 5.3%, supported by its "system of action" strategy. The company is expected to experience continued margin expansion, reaching 41.0%, with a forecasted pro forma EPS of $6.18, indicating strong profitability. Additionally, robust growth in Zoom Phone's ARR, key enterprise wins, and accelerated adoption of AI-driven features underscore the company's positive market position and potential for future expansion.

Zoom Communications is experiencing a decline in gross margins, which fell to 79.8%, reflecting increased AI investments and cost-cutting measures, despite a year-over-year increase. The company's projected free cash flow margin for FY27 of 34% is well below consensus estimates of 39%, primarily due to an anticipated $75 million in capital expenditures related to asset refresh during the post-pandemic period, alongside rising tax expectations and declining interest income. Furthermore, there is significant execution risk associated with management's internal restructuring and the potential misalignment of direct sales incentives, which could adversely affect growth and investor sentiment.