Zoom Communications (ZM) Laps the Stock Market: Here's Why

Zoom Communications (ZM) recently closed up 1.8% at $83.16, outperforming the broader market and its sector over the past month. The company is projected to report Q3 2025 earnings on November 24, with consensus estimates forecasting a 3.62% year-over-year EPS increase to $1.43 and a 3% revenue rise to $1.21 billion, alongside positive full-year growth projections. Analyst sentiment is improving, reflected by a 0.2% increase in the Zacks Consensus EPS estimate and a Zacks Rank #2 (Buy) rating. While ZM's Forward P/E of 14.01 represents a discount to its industry average, its PEG ratio of 6.97, significantly above the industry's 1.97, suggests a less attractive growth-adjusted valuation.

Analysis

Zoom Communications (ZM) has demonstrated recent market outperformance, closing up 1.8% in the last session and appreciating 1.76% over the past month, exceeding both the S&P 500 and the Computer and Technology sector. The company is set to announce Q3 2025 earnings on November 24, with consensus estimates projecting a 3.62% year-over-year EPS increase to $1.43 and a 3% revenue rise to $1.21 billion. Full-year forecasts also indicate modest growth, with EPS expected to increase by 5.23% and revenue by 4.25%.

Analyst sentiment appears positive, reflected by a 0.2% increase in the Zacks Consensus EPS estimate over the last month and a current Zacks Rank #2 (Buy) rating for ZM. This positive revision aligns with the strong industry backdrop, as the Internet - Software sector holds a Zacks Industry Rank of 69, placing it in the top 28% of industries.

However, valuation metrics present a mixed picture. ZM's Forward P/E of 14.01 is a significant discount compared to its industry average of 29.82, suggesting relative value on a standalone earnings multiple. Conversely, its PEG ratio of 6.97 is substantially higher than the industry average of 1.97, indicating that its expected growth rate may not fully justify its current valuation on a growth-adjusted basis.

Key Decisions for Investors

• Consider ZM's recent market outperformance and positive analyst revisions as potential near-term catalysts, especially ahead of its Q3 2025 earnings announcement on November 24
• Evaluate the discrepancy between ZM's attractive Forward P/E relative to its industry and its elevated PEG ratio, which implies a less favorable growth-adjusted valuation compared to peers
• Monitor the upcoming earnings report for confirmation of projected growth rates and any management commentary on future growth drivers, particularly given the high PEG ratio