Zoom Beat Every Estimate and Fell Anyway. Citizens Says That’s Exactly the Point

Zoom Communications Inc. (NASDAQ: ZM) reported strong earnings for the second quarter of 2027, surpassing analysts' estimates in revenue and EPS. Despite the positive numbers, the stock plummeted following the release. Analyst Patrick Walravens maintained a Market Perform rating on Zoom, stating the stock is already fairly valued and the market is no longer rewarding it for consistently beating estimates.

Enterprise revenue, fueled by multi-product deals and AI-driven offerings, grew by 7.8% year-over-year to $787.5 million, now accounting for an estimated 62% of total revenue. The company's gross margin slipped to 79.1% due to increasing AI usage costs. While enterprise growth was impressive, online revenue growth has slowed, with the segment only growing 0.6% to $489.7 million.

Investors had likely expected higher performance, as Zoom's third-quarter profit guidance fell short of expectations, indicating growing competition. Insider Monkey reports that 71 hedge funds hold positions in Zoom, up from 60 in the previous quarter, reflecting growing institutional interest. However, the stock has a short interest of approximately 7.21 million shares, representing about 2.70% of its public float, suggesting limited bearish skepticism.

The company's focus on AI features has strengthened its AI strategy, with its AI-first Customer Experience Portfolio driving high-double-digit ARR growth. Zoom's bull thesis includes a valuable hidden stake in Anthropic, which delivered a $1.6 billion unrealized gain this quarter. Despite the stock's decline post-earnings, the company remains a turnaround story with promising potential.