Analysts Maintain Neutral Outlook on Zoom (ZM) Following Strong Earnings and Defense Expansion

Zoom Communications Inc (NASDAQ:ZM) is one of the best affordable AI stocks to buy now. On December 3, Zoom introduced Zoom for Defense, a secure, U.S.-based platform built to comply with the Department of Defense’s stringent IL4 security standards and NIPRNet requirements. Developed as an extension of Zoom for Government, the platform delivers compliant communication tools while preserving the familiar Zoom user experience. It is designed to support secure collaboration among defense agencies, contractors, and partners, allowing them to focus on critical mission objectives.

Offered exclusively through Carahsoft Technology Corp., Zoom for Defense includes capabilities such as Zoom AI Companion, Meetings, Team Chat, Webinars, Events, and Rooms, with Zoom Phone and Contact Center expected to follow. Zoom executives highlighted the company’s focus on privacy, security, and dependable technology, while Carahsoft emphasized the partnership’s importance in providing advanced, compliant collaboration solutions to the Department of Defense.

In a separate development, UBS reaffirmed its Neutral rating and $85 price target on Zoom Video Communications on November 25, following stronger-than-expected quarterly results. Revenue increased 4.4% year over year, exceeding forecasts by $15 million, while enterprise revenue grew 6%, above projections. The Online segment also posted a modest increase instead of the anticipated decline, and free cash flow margins reached 50%, well above UBS’s 40% estimate. Robust cash generation supported a 7% yield, with management continuing to return capital through share buybacks. UBS noted that earlier macroeconomic headwinds, including delayed deals, have largely eased.

After the earnings report, UBS slightly raised its revenue and free cash flow projections for FY27/CY26, while maintaining its Neutral outlook, citing the stock’s valuation at roughly 8x projected free cash flow. Zoom’s fiscal third-quarter 2026 results also drew broader analyst attention, with revenue surpassing expectations and earnings per share beating estimates by nine cents, highlighting the company’s ongoing operational strength.

Zoom Communications Inc (NASDAQ:ZM) operates an AI-first work platform that supports human connection across the Americas, Asia Pacific, Europe, the Middle East, and Africa.

While we acknowledge the potential of ZM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 15 Best Biotech Stocks to Buy According to Wall Street Analysts and 9 Cheap Oil Stocks Under $10 to Buy Now.

Disclosure: None. This article is originally published at Insider Monkey.