Zoom Communications Inc. (ZM): A Bull Case Theory

We came across a bullish thesis on Zoom Communications Inc. on LongYield’s Substack. In this article, we will summarize the bulls’ thesis on ZM. Zoom Communications Inc.’s share was trading at $82.47 as of August 22^nd. ZM’s trailing and forward P/E were 21.70 and 14.31 respectively according to Yahoo Finance.

Zoom Video Communications (ZM) has transitioned from a pandemic-era favorite to a resilient player in unified communications, with its AI-first platform encompassing meetings, phone, chat, and contact center solutions under Zoom Workplace. Its second-quarter fiscal 2026 results, released on August 21, highlighted a return to growth momentum, with revenue rising 4.7% year-over-year to $1.217 billion, above expectations, and non-GAAP EPS increasing 10% to $1.53. The strong performance marked the fastest revenue acceleration in nearly three years, driven by enterprise demand, where sales grew 7% and now account for 60% of total revenue.

Profitability was a standout, with GAAP operating margin expanding to 26.4% and non-GAAP operating margin reaching 41.3%, supported by cost efficiencies despite ongoing AI investments. Free cash flow surged 39% to $508 million, with liquidity of $7.8 billion providing ample strategic flexibility. Customer metrics reinforced stability, with accounts generating over $100,000 in trailing revenue rising 8.7% and enterprise net expansion at 98%.

Zoom’s competitive positioning remains defined by its federated AI approach, which has differentiated features across meeting preparation, task management, and contact center solutions, with flagship wins such as a Fortune 200 tech firm deploying Custom AI Companion for 60,000 employees. Products like Zoom Phone, Contact Center, and Workvivo continue to drive adoption, supported by partnerships and “boomerang” customers returning from competitors.

Guidance was raised for FY2026, with revenue projected up to $4.835 billion and free cash flow outlook improved to $1.78 billion, reinforcing management’s confidence. While risks remain from macro conditions, competitive intensity, and execution in AI monetization, investor sentiment has improved, with the stock gaining 5% post-earnings and trading near $72, reflecting cautious optimism for steady, AI-driven growth.

Previously we covered a bullish thesis on Zoom Communications Inc. (ZM) by mrmrmrj in January 2025, which highlighted the company’s robust balance sheet, 10% free cash flow yield, and margin of safety offering limited downside risk. The company’s stock price has appreciated approximately by 3.07% since our coverage as modest growth optimism returned. The thesis still stands given strong fundamentals. LongYield shares a similar view but emphasizes recent earnings beat, margin expansion, and AI-led enterprise traction.

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Disclosure: None.