Shares in Zoom Video Communications popped after the company reported January-quarter earnings and revenue that topped estimates and announced a $1.5 billion buyback of its own shares. Fiscal 2025 earnings guidance for ZM stock came in above expectations.
The company reported fiscal fourth-quarter earnings after the market close on Monday.
Zoom Stock: Acquisition Possible?
Analysts have speculated that Zoom Video could make an acquisition to spur growth. The company had $7 billion on its balance sheet as of Jan. 31.
"Zoom said that the $1.5 billion buyback does not preclude M&A," said UBS analyst Karl Kierstead in a report. "We do conclude that it lowers the probability of a large deal."
At Evercore ISI, analyst Peter Levine said in a report: "Management reiterated that they have plenty of flexibility to execute any M&A, and this buyback will not alter their appetite."
Zoom earnings for the quarter ending Jan. 31 were 1.42 per share on an adjusted basis, up 16% from a year earlier. Revenue rose 2.6% to $1.146 billion.
Zoom stock analysts had projected earnings of $1.15 a share on sales of $1.13 billion.
ZM Stock: Enterprise A Bright Spot
In the enterprise market for business customers, revenue rose 5% to $667.3 million, topping estimates of $658 million.
"Zoom's fourth-quarter results were ahead of expectations as revenue beat by 1.5%, or $17 million, and operating income beat by 8%, or $32 million," said William Blair analyst Arjun Bhatia in a report. "The outperformance was driven by solid adoption of Zoom's new Contact Center offering, upmarket traction, Zoom Phone, and Zoom's recent AI (artificial intelligence) capabilities."
Zoom stock popped 8% to close at 68.17 on the stock market today. For 2024, ZM stock had retreated nearly 12% before the earnings report.
Zoom Stock: Earnings Outlook Beats
For fiscal 2025, Zoom said it expects earnings of $4.86 per share at the midpoint of its outlook vs. estimates of $4.66 per share. The company said it expects revenue of roughly $4.6 billion vs. estimates of $4.637 billion.
Zoom's cloud-based software sets up video calls, with chat tools available. Zoom Video aims to morph into a broader communications platform for business customers.
Heading into the Zoom earnings report, shares traded below their 50-day moving average.
Meanwhile, Microsoft and its Teams communication platform is a big competitor.
Zoom stock holds a dismal Relative Strength Rating of 24 out of a best-possible 99, according to IBD Stock Checkup.
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