ZM vs. MSFT: Which Video Collaboration Stock Has More Upside?

The video collaboration and hybrid work market has become one of the most dynamic areas in enterprise technology, reshaping business operations in the post-pandemic era. Zoom Communications ZM and Microsoft MSFT have emerged as the leading players, with their platforms now embedded as essential infrastructure for global enterprises. 

Per Precedence Research, the global video conferencing market was valued at approximately $8.88 billion in 2024 and is expected to reach around $28.26 billion by 2034, representing a CAGR of about 12%.

Microsoft benefits from its extensive enterprise ecosystem by embedding Teams into Microsoft 365 and Azure, while Zoom is known for its streamlined, reliable collaboration tools, now increasingly enhanced with AI. Both are aggressively investing in artificial intelligence to capitalize on this escalating demand.

However, ZM or MSFT – which of these video collaboration stocks has the greater upside potential? Let’s find out.

The Case for Zoom

Zoom Communications is expected to remain differentiated by its video-first design. Built specifically for video communication, the platform delivers superior quality, lower latency and more reliable connections than bundled alternatives. This specialization has supported renewed momentum, with revenue in the recently concluded second quarter of fiscal 2026 rising 4.7% year over year to $1.22 billion.

Zoom’s AI initiatives are shaping the next stage of its differentiation. AI Companion enhances the meeting lifecycle through preparation, real-time insights and automated follow-ups integrated into enterprise workflows. Monthly active users expanded over 4X year over year, while large-scale adoption has already been demonstrated by a Fortune 200 company deploying Custom AI Companion to 60,000 employees. Broader rollouts are expected to drive further enterprise penetration.

Zoom’s strategy keeps meetings at the core of collaboration. Zoom Workplace extends its functionality with Docs, Whiteboard, and Phone, while the Contact Center has emerged as a key growth driver. In the second quarter, nine of the top 10 large deals were won against competitors and $100,000-plus ARR customers nearly doubled year over year to 229. Zoom Phone maintained mid-teens ARR growth, reinforcing its integrated ecosystem's ability to sustain competitive positioning and support long-term expansion.

The Zacks Consensus Estimate for fiscal 2026 earnings indicates an upward revision of 3.2% over the past 30 days to $5.77 per share. The market appears to be optimistic about Zoom’s growth trajectory.

Zoom Communications, Inc. Price and Consensus

Zoom Communications, Inc. price-consensus-chart | Zoom Communications, Inc. Quote

The Case for Microsoft

Microsoft’s strength in video collaboration is expected to remain tied to its ecosystem scale. Teams is embedded within Microsoft 365, enabling meetings to run alongside calendars, files and Office apps. This integration has kept adoption closely linked to enterprise licensing, with Microsoft 365 Commercial Cloud revenues rising 18% year over year to $33.1 billion in the recently concluded fourth quarter of fiscal 2025.

Artificial intelligence is anticipated to add further value. Microsoft 365 Copilot, with more than 100 million monthly active users, provides transcription, summaries and translation within Teams. Supported by over 400 data centers and expanding AI capacity, Microsoft is positioned to sustain Teams as a widely used collaboration platform.

However, Teams’ AI features remain broad rather than video-specific, limiting differentiation in meeting quality. Performance in external meetings and events is often seen as less consistent, and adoption is expected to stay driven by bundling. As a result, Teams is likely to maintain broad usage but may not emerge as the leading video-first solution.

The Zacks Consensus Estimate for Microsoft’s fiscal 2026 earnings is pegged at $15.35 per share, indicating an upward revision of 1.9% over the past 30 days. The market appears to be less optimistic about Microsoft’s growth trajectory as compared to Zoom’s.

Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote

Price Performance and Valuation of Zoom and Microsoft

The performance differential between Zoom and Microsoft becomes evident when examining their stock trajectories. Year to date, Microsoft shares have gained 20.1%, reflecting steady confidence in its diversified model and artificial intelligence positioning, though much of this strength already appears priced in. Zoom, by contrast, has moved 0.4% lower, but this period of consolidation has positioned the stock for greater upside. With revenue growth re-accelerating and adoption of AI Companion, Contact Center and Workplace gaining traction, Zoom is viewed as offering stronger upside potential compared to Microsoft from current levels.

ZM & MSFT Share Performance in YTD Period

Both stocks are overvalued as suggested by the Value Score of D. Microsoft trades at a forward 12-month price-to-sales of 11.92X, reflecting confidence in its scale but limiting near-term upside. Zoom trades at 5.02X, a steep discount compared to Microsoft, indicating that much of the pessimism around its post-pandemic trajectory has already been priced in. This relative compression provides greater room for re-rating if its recent revenue acceleration and adoption of AI-driven collaboration tools continue to build momentum.

ZM vs. MSFT: P/S F12M Ratio

Conclusion

Both companies stand to benefit from hybrid work and AI-enabled collaboration, but Zoom offers greater upside. Its video-first architecture, rapid AI Companion adoption, and growing Workplace and Contact Center businesses support stronger re-rating potential. Microsoft remains powerful through scale and bundling, yet Teams lacks differentiation as a pure video solution. With both stocks being overvalued, Zoom’s relative discount makes it the better opportunity.

Zoom currently sports a Zacks Rank #1 (Strong Buy), while Microsoft carries a Zacks Rank #3 (Hold), making Zoom the better pick at present levels.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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