Zoom (ZM) Q3 Earnings Preview: Will It Exceed Expectations?

Video conferencing platform Zoom (NASDAQ: ZM) is set to report its third-quarter earnings tomorrow afternoon. Here's what the market anticipates.

Last quarter, Zoom reported revenue of $1.16 billion, a 2.1% year-over-year increase, surpassing analysts' expectations by 1.1%. It was a standout quarter, with the company beating both billings and adjusted EBITDA estimates. Additionally, Zoom added 50 enterprise customers paying over $100,000 annually, bringing the total to 3,933.

For this quarter, analysts project Zoom's revenue to grow 2.4% year-over-year, also reaching $1.16 billion, in line with the 3.2% growth recorded in the same quarter last year. Adjusted earnings per share (EPS) are expected to come in at $1.31. Over the past 30 days, analysts have largely maintained their forecasts, reflecting confidence in Zoom's stability.

Notably, Zoom has missed revenue expectations only once in the past two years, with an average beat of 1.4%.

Zoom’s industry peers have already released their Q3 results, offering some context. Five9 delivered 14.8% revenue growth year-over-year, beating estimates by 3.6%, while 8x8 reported a 2.2% revenue decline but still exceeded expectations by 1.5%. Following their results, Five9’s stock rose 12.1%, and 8x8’s climbed 18.5%.

The video conferencing sector has seen strong momentum recently, with the segment’s stock prices up an average of 17.6% over the past month. Zoom’s stock has mirrored this trend, rising 17.7% in the same period. Currently trading at $86.95, it shows a premium over the average analyst price target of $77.71, indicating positive sentiment heading into earnings.

In summary, the market’s outlook for Zoom’s Q3 earnings is optimistic, bolstered by the company’s steady growth and the broader sector’s bullish sentiment.

On a daily chart, Zoom’s stock is in a robust uptrend, with pre-market trading showing a 1.78% gain, bringing the price to $85.88. The immediate resistance level is at $87.15, and should the earnings report exceed expectations, the stock could potentially surge to the next key resistance level of $117.29. Will Zoom deliver a better-than-expected performance? Let’s wait and see—what’s your take on this earnings report?