Is Zoom Communications stock (NASDAQ: ZM) pricey at 18 times earnings? Not at all.
Especially if you consider the fact that the company’s earnings could be significantly higher as it pivots from a “meeting app” to an AI-powered “system of action.”
How is that?
We believe that Zoom can re-accelerate its top line as its Enterprise and AI segments take flight. While revenue growth sat at a modest 4.4% for fiscal 2026, reaching $4.87 billion, the underlying momentum in high-value contracts is telling a different story. For context, Zoom’s Enterprise revenue grew 7.1% last quarter, and customers contributing over $100,000 annually jumped by 9.3%. As Zoom’s agentic AI capabilities—like the “Custom AI Companion” and “AI Expert Assist” – become indispensable for the modern workforce, the company is positioned to capture a larger slice of the $100 billion+ UCaaS and Contact Center markets.
Combine revenue potential with the fact that Zoom’s margins are among the best in the software world. Unlike many tech peers that struggle with profitability, Zoom maintains a staggering non-GAAP operating margin of 40%. Even its GAAP net income saw a massive 92% year-over-year increase in the latest fiscal year, hitting $1.9 billion. As high-margin software services and AI add-ons like Zoom Phone (now at 10 million seats) and Zoom CX continue to scale, these efficiencies should drop directly to the bottom line.
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So is a significant expansion in earnings possible? Absolutely. When you combine a stabilizing revenue base with a shift toward high-margin AI subscriptions and a disciplined cost structure, the “earnings engine” is just starting to rev.
Now, if earnings grow substantially, the P/E multiple will shrink proportionally, assuming the stock price stays the same. But that’s exactly what the market might be mis-pricing. At a current P/E of roughly 18x, Zoom is trading more like a legacy hardware company than a high-margin AI leader. If Zoom proves it can sustain mid-to-high single-digit revenue growth while keeping its 40% margins intact, a re-rating to a P/E of 25x or 30x – closer to its SaaS peers – could easily drive a 2x growth in the stock price.
Check out Buy or Sell ZM Stock and see how ZM’s key metrics compare with peers such as Microsoft, Cisco, RingCentral, and Salesforce.
So yes, Zoom could, in fact, be considered a strong value buy right now – especially given its $7.8 billion cash fortress and aggressive share buybacks, which reduced the share count by millions in just the last quarter.
What about the time horizon? Whether the “AI inflection point” fully materializes in 2026 or 2027 matters less than the trajectory. As long as Zoom continues to displace legacy Contact Center players and embeds its AI “System of Action” into the daily workflow of global enterprises, the stock price is likely to follow that fundamental gravity upward.
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