Zoom's Q4 Earnings Miss Underscores AI Monetization and Growth Struggles

What happened

Zoom Video Communications reported Q4 FY2026 results that missed analyst expectations, a sharp contrast to its 148% beat in the prior quarter. This volatility highlights the company's persistent challenge in achieving sustainable revenue growth, as detailed in recent filings showing low-single-digit increases and enterprise net dollar expansion stuck at 98%. Despite aggressive promotion of AI Companion features, Zoom has provided no quantitative KPIs for paid AI monetization, such as Custom AI Companion attach rates, leaving the growth narrative unsubstantiated. Competitive pressure from bundle offerings like Microsoft Teams continues to drive seat downsells, keeping expansion below the critical 100% threshold needed for re-acceleration. While strong free cash flow and buybacks offer a financial floor, the lack of clear drivers makes near-term upside contingent on elusive operational improvements.

Implication

The Q4 miss validates the DeepValue report's 'WAIT' rating, signaling that growth re-acceleration is not imminent and the bear case probability may be rising. Without disclosed AI revenue metrics, the market cannot underwrite Zoom's AI potential, capping valuation near the base scenario of $95. Persistent enterprise net dollar expansion below 100% indicates ongoing competitive displacement, risking further revenue deceleration toward the bear scenario's $75 implied value. However, Zoom's robust cash flow and aggressive share repurchases provide downside protection, supporting per-share earnings even in low-growth environments. Monitoring the next two quarters for AI monetization KPIs and NDR inflection above 100% is essential, as failure here could trigger a downward rerating despite financial resilience.

Thesis delta

The Q4 miss shifts the thesis slightly toward the bear case, confirming that growth challenges are more immediate than hoped and increasing the urgency for AI monetization and enterprise expansion improvements. It underscores that without concrete KPIs within the next 3-6 months, the stock could drift toward lower valuations, though strong buybacks maintain a floor. This reinforces the 'WAIT' stance, with reduced confidence in a near-term bullish catalyst.