KeyBanc lowers Zoom Video stock price target to $69 on mixed outlook

Zoom Video (ZM) reported its strongest revenue growth in 11 quarters for Q2 FY26, with sales up 4.7% to $1.22 billion and pro forma EPS of $1.53, exceeding expectations due to robust enterprise demand and AI adoption. Despite this outperformance, analyst sentiment is mixed; while firms like Rosenblatt and Needham raised price targets, KeyBanc notably lowered its target to $69 from $73, maintaining an Underweight rating. KeyBanc cited ongoing SaaS sector multiple compression and a slight reduction in Zoom's second-half constant currency revenue expectations, highlighting a tension between ZM's strong operational execution and broader industry valuation concerns.

Analysis

Zoom Video (ZM) delivered its strongest revenue growth in 11 quarters, with Q2 FY26 sales rising 4.7% year-over-year to $1.22 billion and pro forma EPS reaching $1.53, significantly surpassing market expectations. The outperformance was driven by robust enterprise demand, which did not see the anticipated macroeconomic pressures, along with momentum from AI adoption and its Contact Center business. The Zoom Contact Center segment showed notable acceleration, with a 94% year-over-year increase in customers generating over $100,000 in annual recurring revenue. Despite these strong operational results and a full-year guidance raise of $9 million, analyst sentiment is bifurcated. While firms like Rosenblatt and Needham raised price targets to $110 and $100 respectively, citing the significant revenue beat, KeyBanc lowered its target to $69 and maintained an Underweight rating. KeyBanc's cautious stance is based on a slight $6 million reduction in the constant currency revenue expectation for the second half of the year and, more critically, the ongoing compression of terminal multiples across the broader SaaS sector. This divergence highlights a core tension between Zoom's excellent execution, evidenced by a 41.3% operating margin against a 38.7% consensus, and sector-wide valuation headwinds.

Key Decisions for Investors

• Investors should consider the disconnect between Zoom's strong operational performance, including its largest revenue beat in years and accelerating Contact Center growth, and the bearish sentiment driven by sector-wide valuation concerns.
• Given the wide dispersion in analyst price targets, ranging from KeyBanc's $69 to Rosenblatt's $110, it is crucial to monitor whether growth from new AI and Contact Center products can offset the SaaS multiple compression that is pressuring the stock.
• For those with a bullish outlook on the company's execution, the current valuation may present a buying opportunity, as InvestingPro data suggests the stock is trading below its fair value, supported by a robust 76.38% gross profit margin and strong earnings.