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Zoom Communications Poised for Growth Acceleration Amid AI Momentum, RBC Says

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Zoom Communications Poised for Growth Acceleration Amid AI Momentum, RBC Says

Zoom Communications (ZM) appears poised for growth acceleration following a strong first quarter, given sustained momentum in its artificial intelligence products, RBC Capital Markets said in a note sent Friday.

Late Thursday, the video communication platform reported surprise earnings growth in the fiscal first quarter and stronger-than-expected revenue as clients increasingly turned to its AI Companion tool. The company raised its fiscal 2027 guidance and announced a $1 billion increase in share buyback authorization.

The stock jumped 13% intraday Friday, stretching year-to-date gains to about 27%.

"We believe the quarter was solid, with positive signs that continued AI monetization can drive growth acceleration in (fiscal 2027)," RBC analyst Rishi Jaluria wrote.

For fiscal 2027, Zoom now expects full-year adjusted EPS of $5.96 to $6 on revenue of $5.08 billion to $5.09 billion, up from the prior outlook of $5.77 to $5.81 in EPS on $5.065 billion to $5.075 billion in sales. Analysts in a FactSet poll currently look for non-GAAP EPS of $6.01 and revenue of $5.09 billion.

Generative AI assistant AI Companion's paid users soared 184% year over year in the first quarter, while the My Notes offering reached 1.5 million licensed users.

"We were encouraged to see continued traction with AI products, accelerating ($100,000 plus) customer growth, and strength of the (contact center as a service) business," Jaluria said.

The updated full-year outlook, however, implies a cut to second-half growth on a constant currency basis, said Jaluria, who views it as "appropriately cautious" amid higher customer churn in the company's online division.

Jaluria said "fundamentals remain strong" in the enterprise segment, with durable margins.

RBC raised its price target for Zoom to $130 from $110, while reiterating its outperform rating on the stock.

Price: $109.05, Change: $+12.30, Percent Change: +12.71%

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