Zoom Communications (NASDAQ:ZM) Shares Gap Down - Here's Why

Key Points

• Zoom shares fell sharply at the open, dropping from a prior close of $100.92 to $95.20 after the company’s quarterly profit outlook came in slightly below Wall Street expectations.
• Zoom beat fiscal second-quarter estimates with adjusted EPS of $1.55 and revenue of $1.28 billion, while raising full-year adjusted EPS guidance to $6.08–$6.12. Enterprise demand, AI deals and contact-center bookings were cited as growth drivers.
• Investor concerns remain focused on slower online-business growth, customer churn, competition and potential AI-related margin pressure. Analyst views are mixed, though the stock retains a “Moderate Buy” consensus rating with a $112.55 price target.

Zoom Communications, Inc. (NASDAQ:ZM - Get Free Report) gapped down before the market opened on Wednesday . The stock had previously closed at $100.92, but opened at $95.20. Zoom Communications shares last traded at $94.9520, with a volume of 1,473,975 shares trading hands.

Zoom Communications News Summary

Here are the key news stories impacting Zoom Communications this week:

• Positive Sentiment: Zoom reported fiscal second-quarter adjusted earnings of $1.55 per share, above the roughly $1.48-$1.50 analyst consensus, while revenue rose 4.9% year over year to $1.28 billion, also exceeding expectations. Zoom Communications earnings report
• Positive Sentiment: Management raised fiscal 2027 adjusted EPS guidance to $6.08-$6.12, above the approximately $5.71 consensus, while maintaining revenue expectations near $5.1 billion. Enterprise revenue, AI-related deals and record contact-center bookings were highlighted as growth drivers. Zoom Communications fiscal second-quarter results
• Positive Sentiment: Needham reaffirmed its Buy rating and maintained a $130 price target, implying substantial upside from recent trading levels. BTIG also reaffirmed its Buy rating. Analyst rating updates
• Neutral Sentiment: Analyst opinion remains mixed: Citizens JMP reiterated Market Perform, KeyCorp maintained Sector Weight, and Cantor Fitzgerald assigned a Neutral rating, suggesting limited near-term conviction despite the long-term growth opportunity. Zoom analyst reactions
• Negative Sentiment: Zoom’s fiscal third-quarter profit outlook came in slightly below Wall Street expectations, triggering concern that competition and investment in AI features may pressure margins. Revenue guidance was broadly in line, making the profit shortfall the key market focus. Zoom forecasts quarterly profit below estimates
• Negative Sentiment: Investors also remain concerned about slower online-business growth and customer churn. Those risks make Zoom’s enterprise and AI expansion important, but they have not yet offset concerns about a relatively modest overall revenue-growth rate. Zoom stock retreats as guidance underwhelms

Wall Street Analyst Weigh In

ZM has been the topic of several research reports. Citigroup increased their target price on Zoom Communications from $122.00 to $126.00 and gave the stock a "buy" rating in a research report on Tuesday, May 26th. KeyCorp reissued a "sector weight" rating on shares of Zoom Communications in a research report on Wednesday. UBS Group boosted their price objective on shares of Zoom Communications from $105.00 to $115.00 and gave the stock a "neutral" rating in a research note on Thursday, August 20th. Rosenblatt Securities reiterated a "buy" rating and issued a $130.00 price objective on shares of Zoom Communications in a report on Friday, August 21st. Finally, Mizuho lifted their price target on shares of Zoom Communications from $100.00 to $120.00 and gave the stock an "outperform" rating in a research note on Friday, May 22nd. Sixteen research analysts have rated the stock with a Buy rating and twelve have assigned a Hold rating to the company. Based on data from MarketBeat, Zoom Communications presently has a consensus rating of "Moderate Buy" and a consensus price target of $112.55.

Zoom Communications Stock Performance

The company has a market cap of $27.57 billion, a P/E ratio of 13.81, a P/E/G ratio of 5.53 and a beta of 1.00. The business has a fifty day simple moving average of $94.00 and a 200 day simple moving average of $91.30.

Zoom Communications (NASDAQ:ZM - Get Free Report) last issued its quarterly earnings results on Tuesday, August 25th. The company reported $1.55 earnings per share for the quarter, beating analysts' consensus estimates of $1.48 by $0.07. The business had revenue of $1.28 billion during the quarter, compared to the consensus estimate of $1.27 billion. Zoom Communications had a return on equity of 11.87% and a net margin of 41.99%.The business's quarterly revenue was up 4.9% on a year-over-year basis. During the same period in the previous year, the business earned $1.53 EPS. Zoom Communications has set its FY 2027 guidance at 6.080-6.120 EPS and its Q3 2027 guidance at 1.460-1.480 EPS. Equities research analysts expect that Zoom Communications, Inc. will post 4.21 EPS for the current year.

Insider Buying and Selling at Zoom Communications

In other news, Director Santiago Subotovsky sold 7,911 shares of Zoom Communications stock in a transaction dated Tuesday, August 4th. The shares were sold at an average price of $101.33, for a total value of $801,621.63. Following the completion of the transaction, the director directly owned 127,060 shares of the company's stock, valued at approximately $12,874,989.80. The trade was a 5.86% decrease in their position. The transaction was disclosed in a filing with the SEC, which is accessible through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, insider Velchamy Sankarlingam sold 7,644 shares of the business's stock in a transaction dated Wednesday, July 15th. The shares were sold at an average price of $91.98, for a total transaction of $703,095.12. Following the sale, the insider directly owned 148,403 shares of the company's stock, valued at approximately $13,650,107.94. This represents a 4.90% decrease in their position. The SEC filing for this sale provides additional information. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. In the last three months, insiders sold 56,155 shares of company stock worth $5,654,761. Company insiders own 8.83% of the company's stock.

Hedge Funds Weigh In On Zoom Communications

Institutional investors have recently made changes to their positions in the stock. California State Teachers Retirement System boosted its position in Zoom Communications by 8,620.6% during the 2nd quarter. California State Teachers Retirement System now owns 31,999,864 shares of the company's stock valued at $2,761,908,000 after purchasing an additional 31,632,917 shares during the period. Norges Bank acquired a new stake in Zoom Communications in the fourth quarter worth $509,788,000. AQR Capital Management LLC lifted its stake in Zoom Communications by 43.9% in the fourth quarter. AQR Capital Management LLC now owns 12,195,243 shares of the company's stock valued at $1,052,328,000 after buying an additional 3,718,186 shares during the last quarter. Atreides Management LP bought a new stake in Zoom Communications in the first quarter valued at $105,761,000. Finally, Two Sigma Investments LP acquired a new position in shares of Zoom Communications during the third quarter valued at $86,709,000. 66.54% of the stock is owned by institutional investors.

About Zoom Communications

Zoom Video Communications, Inc (commonly referred to as Zoom) is a provider of cloud-based communications and collaboration solutions. The company's platform supports video conferencing, voice calling, instant messaging, webinars and large-scale virtual events, and meeting room systems, marketed to businesses, educational institutions, government organizations and individual users. Zoom's product lineup includes Zoom Meetings, Zoom Phone, Zoom Rooms, Zoom Video Webinars and Zoom Chat, and the company offers integrations and extensions through a developer marketplace and third-party apps.

Founded in 2011 by Eric S.

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