RBC Capital raises Zoom stock price target to $130 on AI growth

RBC Capital raised its price target on Zoom Video Communications to $130 from $110 and kept an Outperform rating, citing solid quarterly results and continued AI monetization potential into fiscal 2027. Zoom also beat first-quarter fiscal 2027 expectations with EPS of $1.55 versus $1.42 consensus and revenue of $1.24 billion versus $1.22 billion, though management remains cautious on second-half guidance due to churn dynamics.

Analysis

The important signal here is not the headline beat; it is that the market is still willing to assign a growth-multiple to a business that is already ex-growth on core usage. That creates a classic “multiple expansion on monetization delta” setup: if AI features can offset low single-digit online churn drag, the equity can rerate without needing a major top-line inflection. In other words, the path to upside is margin mix and ARPU, not seat growth.

The second-order winner is the broader enterprise software basket with credible AI attach potential, because investors will likely extrapolate that dormant installed bases can be re-monetized faster than feared. The loser is any adjacent collaboration vendor still trading on a pure user-growth story; if Zoom can defend churn and layer in paid AI, then incremental spend will likely consolidate to the category leader rather than fragment to niche tools. That argues for relative-value longs in “monetization-first” software versus lower-quality consumption names.

Near term, the risk is that guidance caution keeps the stock boxed in until there is visible evidence of AI ARPU lift in the next 1-2 quarters. A sharp aftermarket fade despite a strong print suggests the bar is now higher: the market wants proof, not narrative. If AI monetization slips even one quarter, the multiple can compress quickly because the stock is already priced for a fairly clean FY27 acceleration story.

The contrarian read is that consensus may be underestimating how little operating leverage is needed to justify a move from 12x to the mid-teens EV/FCF multiple. If free cash flow stays sticky and buybacks continue, the downside is bounded unless churn re-accelerates materially. The asymmetry is better for call structures than outright equity here because the rerating depends on perception change, which can happen faster than fundamentals.

Key Decisions for Investors

• Long ZM vs short a basket of lower-quality SaaS names trading on growth without monetization visibility; 3-6 month horizon. Best if the market continues rewarding AI attach and cash flow durability rather than revenue acceleration.
• Buy ZM Jan-2027 call spreads to express rerating toward 14-16x EV/FCF; risk/reward favors defined-risk exposure because the catalyst is a gradual multiple expansion, not a near-term earnings shock.
• Add to high-quality enterprise software names with proven AI upsell paths on any post-earnings weakness; 1-2 quarter horizon. The trade is that the market will pay for installed-base monetization before it pays for new-logo growth.
• Avoid chasing ZM on strength if implied expectations move toward a clean FY27 acceleration narrative without evidence of churn stabilization; upside remains, but the stock becomes vulnerable to any guidance reset.
• Pair trade: long ZM / short a collaboration peer with weaker FCF conversion and less pricing power; target 10-15% relative outperformance over 6 months if AI monetization remains credible.