Zoom Q1 Revenue Up 7.2% with 184% AI Growth; Shares Trade at 18.4x
ZM•Zoom’s Q1 FY27 enterprise revenue rose 7.2% to $755.7 million, fueled by a 184% surge in AI Companion users and generating $500.5 million in free cash flow with a new $1.0 billion share buyback. Shares trade at 18.4 times forward earnings, a 36% premium to its four-year average.
1. Q1 FY27 Financial Results
Zoom’s Q1 FY27 enterprise revenue reached $755.7 million, up 7.2% year-over-year, driven by a 184% increase in AI Companion users. The quarter generated $500.5 million in free cash flow, leaving $7.7 billion in cash on the balance sheet and prompting a newly authorized $1.0 billion share buyback.
2. Valuation Premium and Speculative Rally
Shares currently trade at 18.4 times forward earnings of $6.04 per share, reflecting a 36% premium to the stock’s four-year average forward P/E of 13.5 times. This valuation expansion has been fueled by speculative momentum tied to Anthropic’s IPO plans and optimism around Zoom’s AI-driven enterprise pivot.
3. Competitive Challenges
Zoom’s legacy Online revenue growth remained sluggish at 2.8%, while average monthly churn climbed to 3.0%, resulting in a Net Dollar Expansion Rate of 99%. Ongoing integration of Microsoft Teams into a broader enterprise suite continues to exert pricing pressure and risks further contract downgrades.
4. Investment Verdict
The current valuation compresses Zoom’s margin of safety despite clear AI upside and strong cash generation. Given structural headwinds from commoditization and competition, investors may consider waiting for a more favorable entry point before adding to positions.
