Zoom Video Communications Stock Has More Than Doubled the Performance of the S&P 500 Over the Last Year. Is It the Beginning of a Long-Term Comeback?

If you bought shares of communications platform Zoom Video Communications (NASDAQ: ZM) in 2020, I'm sorry for your poor returns. The stock is down a whopping 86% from the heights it reached in the early days of the COVID-19 pandemic.

That said, if you bought shares of Zoom a year ago, congratulations: You've more than doubled the performance of the S&P 500. As of this writing, Zoom stock is up a nice 27% over the last year, compared to just an 11% return for the market.

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Some might say I've cherry-picked the timeframe, and perhaps I have. That said, outperforming the S&P 500 over one whole year is noteworthy for Zoom stock after years of underperformance. For that reason, I think it's important to investigate whether this could be the start of a long-term comeback.

Zoom is still fine, but can it create value?

Zoom is known for its video-conferencing platform. One might think that nobody uses it now that the pandemic is over, but that's far from the truth. The company's revenue is at an all-time high, boosted by ongoing use from enterprise customers. In fact, in its fiscal first quarter of 2026 (the most recent quarter), it had nearly 4,200 customers spending $100,000 or more annually, which was an 8% year-over-year increase.

Keep in mind that Zoom is far more than just its well-known video platform. The company has a growing contact center business, among other things. And it's done a good job of adding new features enhanced with artificial intelligence (AI). These are sensible features, such as AI meeting transcription, and have helped keep it relevant well beyond the pandemic.

But here's the problem with Zoom: It's simply not growing enough these days to make a difference for shareholders. At least it is growing -- not all companies are. But Zoom's Q1 revenue was only up 3% year over year. And for its entire fiscal 2026, management only expects 3% top-line growth as well.

In fact, single-digit growth has been all too common for Zoom over the last three years, as the chart below shows.

ZM Operating Revenue (Quarterly YoY Growth) data by YCharts

When it comes to creating meaningful shareholder value, companies usually need more than low single-digit growth. Zoom simply hasn't had enough revenue growth, and nothing appears to be materially improving its outlook.

Of course, companies can create value in other ways. Specifically, if profit margins dramatically improved, then perhaps Zoom stock would still perform well even with modest growth.

The good news is that Zoom's operating margin has improved. In Q1, the company's operating margin was nearly 21%. For perspective, that's higher than it was in the first quarter of the last three fiscal years.

That said, Zoom hasn't really done much with its higher profits. In reality, its balance sheet just keeps improving. It has nearly $8 billion in cash compared with less than $6 billion just a few years ago. It also has no debt. Therefore, it's making money, but it's just sitting there.

Why this stock could struggle

Some might object and point out that Zoom has been buying back stock like crazy. On the one hand, this is true. According to management, it's spent $1.4 billion on buybacks in just the last 12 months.

Buybacks are Zoom's primary way of returning capital to shareholders and creating value. But here's the problem: Because of its generous use of stock-based compensation, Zoom's share count is still near an all-time high. In other words, buybacks aren't creating value because the share count isn't going down.

ZM Average Diluted Shares Outstanding (Quarterly) data by YCharts

Looking at Zoom from multiple angles, I believe the stock will struggle -- I don't believe it will sustain its outperformance over the past year. Its growth is too modest, and its prospects don't point to a dramatic improvement anytime soon. Its profitability is good, but management is mostly just buying back stock to offset dilution from its stock-based compensation.

I say all of this as a patient shareholder -- there are many things that I like about Zoom. But if I'm looking at it realistically today, I don't think it's a compelling investment opportunity. Indeed, I may look to move on from this investment in the near future so I can put that money to better use elsewhere in the stock market.

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Jon Quast has positions in Zoom Communications. The Motley Fool has positions in and recommends Zoom Communications. The Motley Fool has a disclosure policy.