To The Moon

From Pandemic Pin-Up to Profit Powerhouse

Zoom just reported 196% earnings growth on 4.4% revenue growth—and the market barely blinked. Only in tech could a company multiply its profits almost threefold and still be treated like yesterday’s novelty item. But beneath the market’s aloof shrug lies one of the most dramatic and, dare I say, underrated corporate evolutions of the post-pandemic era.

Reinvention begins quietly, then reshapes everything beneath the surface

Rather than chasing its former hyper-growth identity, $Zoom(ZM)$ has reimagined itself as something more stable, more efficient, and frankly more investable. The top line may now grow at a leisurely 4.4%, yet the company has become a masterclass in translating incremental revenue into outsized earnings. It’s the sort of transformation that makes you wonder whether Zoom fatigue applies more to investors than to users.

A Financial Deep Dive: The Cash Fortress

Here’s where the story gets genuinely interesting — the numbers that actually matter.

Zoom’s management deserves applause for displaying operational discipline rarely seen in a company once considered a pandemic rocket ship. The Trailing 12-Month Operating Margin of 25.24%, supported by a 77% Gross Profit Margin, signals a software business of genuine quality. Meanwhile, the gulf between the 20.68 Trailing P/E and 13.05 Forward P/E suggests analysts expect EPS to climb far faster than the current share price implies. The cost structure is tightening, the enterprise bundles are working, and profitability is accelerating at a pace that borders on comical.

Then there is the balance sheet—the envy of nearly every software peer. Zoom closed its most recent quarter with $7.94 billion in cash and a mere $28.07 million in debt, giving it almost $7.9 billion in net cash, or roughly 33.5% of its $23.52 billion market cap. This is fortress-level capital strength, rarely seen outside $Apple(AAPL)$ or $Alphabet(GOOGL)$.

This brings us to the valuation sweet spot. But valuation alone doesn’t make an investment — execution does. And here, Zoom faces its toughest test.

The Hidden Discount on Enterprise Value

Because of that enormous cash pile, the company’s Enterprise Value is just $15.80 billion, far below its market cap. That translates to an EV/EBITDA multiple of 14.29, squarely in surprisingly cheap territory for a high-margin SaaS business. The market is effectively valuing Zoom’s mature, stabilised collaboration franchise at a discount—and pricing the AI-driven expansion potential as if it may never materialise.

The Free Cash Flow picture is just as impressive. Zoom generated $2.04 billion in Levered FCF (TTM), against a market cap of $23.52 billion. That is a Price-to-FCF multiple of roughly 11.5. Coupled with $2.06 billion in operating cash flow, Zoom converts almost every operating dollar into free cash. For context, $Salesforce.com(CRM)$ trades at roughly 20–21× trailing FCF — Zoom at 11.5× looks notably undervalued. This is not a growth-company-that-used-to-be. This is a cash compounding machine that happens to be priced like a has-been.

Calm market despite fortress fundamentals shows mispricing

The AI Companion’s Battle

Zoom’s cash hoard isn’t merely decorative. It’s ammunition in a market where its two biggest competitors — Microsoft Teams and Cisco Webex — hold structural advantages Zoom must systematically overcome.

Microsoft Teams, in particular, remains the existential threat. Bundled at no incremental cost inside Microsoft 365, Teams often wins by inertia rather than superiority. Against that kind of bundling muscle, Zoom’s mission is not to win video but to deepen its utility across the whole workplace experience.

Here, the company’s biggest challenge becomes visible: the Enterprise Net Dollar Expansion Rate of 98%. Anything under 100% tells investors that existing enterprise customers aren’t meaningfully expanding spend. For comparison, best-in-class SaaS peers often exceed 110–120%. This is the number Zoom must push upwards if it wants investors to take its platform ambition seriously. AI might help—but the proof will need to show up in this metric. In my view, if the next two quarters show expansion rates crossing 100%, the re-rating could be swift.

Zoom’s answer is its broadened platform — Zoom Phone (over 10 million paid seats), the Zoom Contact Centre, and increasingly the AI Companion. The strategy is sound, but the expansion rate shows the execution still has distance to travel.

Mature strength orbiting quietly expanding possibilities

The ‘Federated AI’ Advantage with a Twist

Zoom’s pitch to enterprises is that its ‘Federated AI’ architecture provides more flexibility and data control than rivals. Customers can mix Zoom’s models with their own internal large language models or trusted third-party systems — an appealing proposition for regulated industries.

This could prove to be a differentiator if Zoom can demonstrate real-world enterprise adoption at scale. At present, the promise is conceptually attractive but evidence-light. Investors should watch for customer case studies, measurable workflow improvements and, ultimately, movement in that Net Dollar Expansion Rate. If Federated AI drives multi-product adoption, it becomes a moat. If not, it remains marketing.

The Optionality Play and Verdict

Zoom’s massive cash reserves provide strategic freedom that many competitors simply do not have. The recently announced plan to acquire BrightHire, for example, is more than a bolt-on — it signals a desire to expand deeper into workplace workflows, beginning with hiring and evaluation. If Zoom can weave BrightHire into its AI Companion ecosystem, it could strengthen its relevance across the employee lifecycle. If not, it becomes a cheap experiment. Either way, the optionality is real.

Performance-wise, the story remains stable: the 3-Year Return is positive but trails the S&P 500, and the Beta of 0.81 suggests a surprisingly low-volatility investment for a former tech high-flier. No investment is bulletproof, and Zoom’s thesis has genuine pressure points. Zoom may be undervalued today, but the market still wants proof that the AI pivot can reignite meaningful expansion.

A year of steadiness masking quietly building upside pressure

My verdict: $Zoom(ZM)$ is, in my view, an undervalued, high-quality asset hiding in plain sight. Its colossal cash reserves, strong margins and deeply discounted valuation offer a reassuring margin of safety. For investors with a bit of patience, the AI platform expansion — currently priced in at virtually zero — creates an asymmetric upside scenario. It may no longer be the stock market’s pandemic heartthrob, but it has matured into something arguably better: a cash-rich compounder with room to surprise on the upside.

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