Why Zoom Communications (ZM) Is Sinking Today

Zoom Communications (ZM) is tumbling 9.5% after the company reported fiscal fourth-quarter revenue that was in line with analysts’ average estimate and provided Q1 revenue and earnings per share guidance that were below analysts’ mean outlook.

On a positive note, the company’s Q4 EPS did come in above the average estimate.

The Highlights of ZM’s Q4 Results and Its Q1 Guidance

Zoom’s Q4 revenue increased 3.3% versus the same period a year earlier to $1.18 billion and was approximately in line with analysts’ average estimate. The company’s EPS, excluding certain items, came in at $1.41, meaningfully above the average outlook of $1.35.

Also on the positive side, ZM’s Q4 operating cash flow increased 21% versus the same period a year earlier to $424.6 million.

But the firm predicted that it would generate Q1 sales of $1.162 billion to $1.167 billion, below analysts’ average estimate of $1.18 billion.  As far as Q1 adjusted EPS, ZM expects $1.29 to $1.31, versus the average outlook of $1.34.

ZM’s Comments

“Zoom AI Companion (has) emerged as the driving force behind our transformation into an AI-first company, enabling our customers to discover enhanced productivity opportunities. As Zoom AI Companion becomes increasingly agentic, we look forward to continuing to help our customers fully realize the benefits of AI and discover what’s possible with AI agents,” said CEO Eric S. Yuan in a statement.

While we acknowledge the potential of ZM, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.