Zoom Video has seen a dramatic decline in its stock price, losing 89% of its peak value reached in October 2020. The company’s revenue growth has slowed down significantly, with only a slight increase in the year ending May 5, compared to the surge it experienced in 2020 due to the Covid-19 pandemic. The end of the pandemic and competition from Microsoft’s Teams videoconferencing service bundled with Office software are major factors behind Zoom’s growth slowdown.
To revitalize investor interest in Zoom stock, the company is exploring the use of generative AI to target a large, fast-growing market and provide value-added services to customers. However, it is still uncertain whether customers will find enough value in Zoom’s AI-driven services to justify paying a price higher than the company’s costs. Analysts are forecasting slower growth for Zoom, with a five-year average annual growth rate of 1.5%, suggesting that generative AI could potentially help Zoom retain customers rather than boost revenue, or that analysts may be underestimating the company’s growth potential.
Zoom’s Fiscal Year 2024 Q4 financial results showed a revenue increase of 2.6%, exceeding analysts’ estimates by $13 million. The company also provided strong revenue guidance for Fiscal Year 2025, with adjusted earnings per share higher than expected. However, Zoom’s growth is still considered anemic compared to other cloud software companies generating more than $1 billion in annual revenue, such as Workday.
The market for internet voice services is significant, with opportunities in various sectors including Voice over Internet Protocol services, cloud telephony, contact center as a service, and Unified Communications as a Service. Zoom and its rivals are targeting these markets with generative AI-powered services to unlock growth potential and provide value to customers. However, competition in these markets will depend on the ability of providers to offer services that can help customers grow faster.
Zoom is integrating generative AI into its internet voice services to enhance productivity and collaboration among customers. The company’s AI-powered companion offers features like meeting summaries and email prompts for paid users, with a focus on retention and customer acquisition. Despite Zoom’s efforts in AI adoption, the company has not fully capitalized on the potential benefits of AI like some of its competitors, such as GoTo, which has seen significant productivity gains from implementing generative AI in its internal operations and contact center services.
In conclusion, as Zoom explores the use of generative AI to improve its platform functionality and user experience, analysts see potential upside in the company’s stock despite slow growth forecasts. Zoom’s focus on attracting and retaining users through smarter collaboration solutions could position the company for continued expansion. However, the risks of executing multiple growth strategies simultaneously and facing stiff competition from rivals offering compelling AI-powered services could impact Zoom’s future growth prospects. Investors should weigh these factors carefully before making investment decisions in Zoom stock.
