Disappointing performance guidance drags stock prices down sharply! Zoom (ZM.US) shows strong results in the enterprise segment, but this cannot mask overall weakness, revealing divisions on Wall Street.

Notably, the stock price of video communication platform Zoom (ZM.US) fell approximately 7% in pre-market trading on Wednesday, as the company provided guidance that was less than satisfactory, seemingly disappointing investors who had higher expectations. At the same time, Wall Street analysts also reacted. For the quarter ending July 31, the cloud-based video conferencing platform reported adjusted earnings per share (EPS) of $1.55, surpassing the market consensus expectation of $1.48; revenue increased by 4.9% year-over-year to $1.277 billion, aligning with the market expectation of $1.27 billion. For the third quarter, Zoom expects revenue to be $1.28 billion, in line with market consensus; adjusted EPS is projected between $1.46 and $1.48 (the median being $1.47), below the consensus expectation of $1.50. For the entire fiscal year 2027, Zoom raised its adjusted EPS guidance to a range between $6.08 and $6.12 (the median being $6.10), up from the previous guidance of $5.96 to $6.00 (the median being $5.98). The market consensus expectation is $6.16. Zoom also raised its revenue outlook to between $5.09 billion and $5.10 billion, while the previous guidance was $5.08 billion to $5.09 billion. The market consensus expectation is $5.09 billion. Jefferies Financial Group Inc.: lowered target price to $116, maintains "Buy" rating. Jefferies Financial Group Inc. lowered its target price for the stock from $118 to $116 while maintaining a "Buy" rating. The firm noted that the enterprise business is showing healthy acceleration in growth, but a mixed outlook is suppressing the stock price. Analysts led by Samad Samana stated, "Revenue growth at constant currency (CC) is +4.7%, exceeding market consensus by 72 basis points (while the rolling average over the past 12 months was an exceedance of 92 basis points), but operating margins are 50 basis points lower than market consensus. The enterprise segment's growth accelerated to +7.8% year-over-year, although the online business has still not met expectations despite pricing adjustments. The revenue guidance for fiscal year 2027 at constant currency has been raised slightly less than the over-expectation for this quarter, as online business growth has been intentionally slowed. The operating profit guidance remains unchanged. We are not surprised by the 4% decline in after-hours trading and believe that a positive revision of the new fiscal year 2027 guidance is needed for the stock price to restart." Morgan Stanley: raised target price to $107, maintains "Hold" rating. Morgan Stanley raised its target price for Zoom from $105 to $107, while maintaining a "Hold" rating. Analysts Elizabeth Porter and her team stated, "The second quarter reinforced the investment logic of 'platform extension,' with the enterprise business recording record growth and broad product adoption driving strong bookings; however, the top funnel dynamics of the online business remain weak, and the outlook for the second half at constant currency has not been adjusted, leaving uncertainties regarding when overall growth will turn." Analysts noted that the second-quarter performance was generally in line with expectations. The trend in the enterprise business is strengthening, with corporate revenue accelerating to a year-over-year growth of 7.8%, the highest level in three years, despite headwinds from white-label customer churn, the analysts added. RBC Capital Markets: maintains "Outperform" rating and $130 target price. Royal Bank of Canada Capital Markets maintains its "Outperform" rating and $130 target price for Zoom stock. Analysts led by Rishi Jaluria stated, "Zoom's second-quarter performance was solid, with revenue, billings, and non-GAAP EPS all exceeding consensus expectations, while the non-GAAP operating margin was below consensus expectations. The fiscal year 2027 revenue and non-GAAP operating profit guidance are in line with market consensus, although the second quarter's revenue outperformance of 0.7% is lower than the previous four-quarter average outperformance of 1.3%; however, both non-GAAP EPS and free cash flow (FCF) exceeded expectations."