Zoom Communications (NASDAQ:ZM) is set to announce its earnings on Wednesday, May 21, 2025. Analysis from the past five years shows that Zoom’s stock has recorded a negative one-day return after its earnings announcements in 68% of cases. These negative returns have a median of -8.1% and a maximum of -16.7%.
For event-driven traders, these historical trends can provide valuable insights, although the actual market reaction will ultimately depend on how the reported results align with consensus estimates and market expectations. There are two main strategies to exploit this historical data:
- Pre-Earnings Strategy: Grasp the historical probabilities of positive or negative reactions and take a position prior to the earnings release.
- Post-Earnings Strategy: Evaluate the relationship between the immediate market response to the earnings and the following medium-term stock performance, and position your trades accordingly after the announcement.
At present, consensus estimates anticipate Zoom to announce earnings per share of $1.31 on revenues of $1.17 billion for the upcoming quarter. This is a comparison to the same quarter last year, where Zoom reported earnings per share of $1.35 on revenues of $1.14 billion.
From a fundamental perspective, Zoom currently holds a market capitalization of $26 billion. Over the past twelve months, the company generated $4.7 billion in revenue, realizing an operating profit of $813 million and a net income of $1.0 billion. Additionally, see Buy or Sell Zoom Stock
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Historical Odds of Positive Post-Earnings Return for Zoom Communications
Here are some insights on one-day (1D) post-earnings returns:
- There are 19 earnings data points recorded over the last five years, with 6 positive and 13 negative one-day (1D) returns observed. In summary, positive 1D returns were noted approximately 32% of the time.
- Notably, this percentage increases to 36% if we analyze data from the last 3 years rather than 5.
- The median of the 6 positive returns is 7.8%, and the median of the 13 negative returns is -8.1%
Additional observations for the 5-Day (5D) and 21-Day (21D) returns post earnings are compiled in the table below.
Correlation Among 1D, 5D, and 21D Historical Returns
A relatively less risky approach (though not effective if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, identify a pair that exhibits the highest correlation, and execute the relevant trade. For instance, if 1D and 5D exhibit the highest correlation, a trader can position themselves “long” for the subsequent 5 days if the 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the relationship between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, the performance of peers can influence post-earnings reactions of stocks. Indeed, the pricing may start before the earnings are revealed. Here are some historical insights regarding the past post-earnings performance of Zoom Communications stock, compared with the stock performance of peers that reported earnings just before Zoom Communications. For accurate comparisons, peer stock returns also represent post-earnings one-day (1D) returns.
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