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Zoom Communications (ZM -8%) slides toward four-month lows today despite exceeding Q4 (Jan) earnings estimates and projecting Q1 (Apr) and FY26 adjusted EPS in-line with consensus. Weaker-than-anticipated revenue forecasts for the upcoming quarter and FY26 have investors racing to exit their positions as the pandemic darling continues to face nagging macroeconomic and structural headwinds.

Alongside a shaky economic backdrop, as businesses rein in spending, the Trump administration has been insistent about federal employees returning to the office, shrinking the pool of potential video conferencing customers. CEO Eric Yuan did not express concern over a broader return-to-the-office trend during the call, referencing Zoom's several additional tools since the pandemic to compete in a world that likely would revert to in-office work.

• Zoom AI Companion is an exciting offering ZM has added to its arsenal, posting accelerating monthly active user growth in Q4, surging by 68% sequentially. ZM noted that Zoom AI Companion has become the driving force behind its transformation into an AI-first company, touting advanced agentic capabilities and integration with Microsoft (MSFT) and Google (GOOG) services. ZM is also launching Custom AI Companion add-ons in April that will be able to automate workplace tasks through custom AI agents, molding to a customer's needs.
• ZM also boasts a portfolio of workplace tools, including Zoom Phone, Team Chat, Events, Docs, Whiteboard, and Rooms, a factor in the company's big win with Amazon (AMZN) during the quarter. ZM's total Enterprise revenue grew around 6% yr/yr, outpacing consolidated growth of 3.3% to $1.18 bln and comprising 60% of its total sales. In its Enterprise business, ZM posted a 7% jump in customers contributing over $100K in TTM revenue.
• Meanwhile, although non-GAAP gross margins ticked slightly lower yr/yr to 78.8%, it was largely due to ZM's strategic investments in AI. Furthermore, ZM reiterated its goal of reaching 80% margins over the long term. Non-GAAP operating margins ticked 81 bps higher yr/yr to 39.5%, supporting ZM's double-digit earnings beat in Q4.
• Nevertheless, ZM's revenue forecasts were a letdown. The company expects Q1 revenue of $1.162-1.167 bln, representing a slight step down from Q4, and FY25 revenue of $4.785-4.795 bln, a 2.7% improvement yr/yr at the midpoint, mostly unchanged from the 3.1% increase in FY25. While ZM has not registered sales compression since delivering quarters of over +350% growth during the pandemic, its incredible rise during 2020 pulled a substantial sum of revenue forward, keeping growth at an amble pace.

ZM has been investing in the proper tools, from Zoom Rooms for larger-sized conferencing to Whiteboard for team collaboration, to help differentiate itself from a pure video conferencing company. We like its strategy of leveraging AI as a customized tool based on a user's needs rather than deploying a one-size-fits-all offering. However, investors are growing impatient with ZM's meager growth, particularly in an age of AI, which has benefited certain tech firms tremendously over the past couple of years. Until ZM can spur more robust demand, its shares may struggle to mount an aggressive rally.