With the rising demand to automate business processes, the demand for IT services worldwide is growing strongly. The global IT services market is expected to reach $1.85 trillion by 2031, expanding at a CAGR of 9.5%.
Amid this, the growing popularity of cloud-based services that enable seamless communication and collaboration between teams regardless of physical location, together with the rising need for remote work solutions, are the primary drivers of the collaboration software market. The collaboration software market is expected to grow at a CAGR of 12.8% by 2031.
Against this backdrop, let’s compare two collaboration platform stocks to analyze which stock is more productive: Zoom Video Communications, Inc. (ZM) and Microsoft Corporation (MSFT).
The Case for Zoom Video Communications, Inc. Stock
With a $21.47 billion market cap, Zoom Video Communications, Inc. (ZM) provides a unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings, Zoom Phone, Zoom Chat, Zoom Rooms, Zoom Conference Room Connector, Zoom Events, OnZoom, and Zoom Webinars.
On August 8, 2024, ZM unveiled new AI features, including AI-generated virtual backgrounds and enhanced meeting summaries. They also introduced a page builder for customizable event landing pages, streamlining event creation with AI-driven text and image generation.
ZM’s stock has gained 17.8% over the past three months to close the last trading session at $69.74.
In terms of the trailing-12-month gross profit margin, ZM’s 75.89% is 52.4% higher than the 49.80% industry average. Similarly, its 41.04% trailing-12-month levered FCF margin is 298.3% higher than the 10.30% industry average. Also, its 8.33% trailing-12-month Return on Total Assets is 284.8% higher than the 2.17% industry average.
ZM’s revenues for the second quarter, which ended on July 31, 2024, increased 2.1% year-over-year to $1.16 billion. Similarly, its gross profit rose marginally over the prior-year quarter to $877.43 million.
For the same quarter, the company’s non-GAAP income from operations stood at $455.54 million. In addition, the company’s non-GAAP net income was $436.42 million, or $1.39 per share, up 6.6% and 3.7% from the prior year’s quarter, respectively.
Street expects ZM’s revenue for the quarter ending October 31, 2024, to increase 2.4% year-over-year to $1.16 billion. Its EPS for the same quarter is expected to rise 1.4% year-over-year to $1.31. It surpassed the Street revenue and EPS estimates in each of the trailing four quarters.
ZM’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality and Value. ZM is ranked #10 out of 75 stocks in the Technology - Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see ZM’s ratings for Growth, Momentum, Sentiment, and Stability here.
The Case for Microsoft Corporation Stock
Valued at $3.20 trillion by market cap, Microsoft Corporation (MSFT) is a tech giant that innovates in software, services, and devices. Its divisions include Productivity & Business Processes; Intelligent Cloud; and More Personal Computing. The company’s flagship offerings include Office, Microsoft Teams, and advanced solutions like Microsoft Viva.
Shares of MSFT have surged 14.4% over the past nine months but plunged 3.7% over the past three months to close the last trading session at $430.30.
In terms of the trailing-12-month gross profit margin, MSFT’s 69.76% is 41% higher than the 49.80% industry average. However, its 0.53x trailing-12-month asset turnover ratio is 14.6% lower than the 0.62x industry average.
MSFT’s total revenue increased 15.2% year-over-year to $64.73 billion for the fiscal 2024 fourth quarter that ended June 30, 2024. Its operating income grew 15.1% from the year-ago value to $27.93 billion. Moreover, the company’s net income and EPS came in at $22.04 billion and $2.95, both growing 9.7% from the prior year’s quarter, respectively.
For the fiscal 2025 first quarter that ended September 2024, MSFT’s revenue is expected to increase 14.2% year-over-year to $64.53 billion. Its EPS for the ongoing quarter is expected to be $3.10, increasing 3.7% from the prior year’s period. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
MSFT’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.
MSFT has a C grade for Sentiment and Momentum. It is ranked #22 in the Software - Business industry.
Click here for the additional POWR Ratings for MSFT (Growth, Value, Stability, and Quality).
Zoom (ZM) vs. Microsoft Teams (MSFT): Which Collaboration Platform Stock Is More Productive?
With the rise of remote work and freelancing, team collaboration software has become an essential component of modern business operations. By leveraging collaborative technologies, organizations can create a virtual workspace that enables employees to exchange data and documents seamlessly.
As the trend toward remote work continues to grow, the demand for team collaboration software is only set to increase. Leading collaboration platform companies ZM and MSFT stand to capitalize on the optimistic industry outlook. However, ZM’s strong financial performance and higher profitability favor it as the better collaboration platform stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology - Services industry here and the Software - Business industry here.
What To Do Next?
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MSFT shares were trading at $423.00 per share on Tuesday afternoon, down $7.30 (-1.70%). Year-to-date, MSFT has gained 13.10%, versus a 20.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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