Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.
Durable competitive advantage creates a high Gross Margin % because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin %
1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key
Zoom Communications had a gross margin of 77.86% for the quarter that ended in Apr. 2026 => Durable competitive advantage
Be Aware
If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin % and Operating Margin % closely helps avoid value trap situations.
Zoom Communications Gross Margin % Related Terms
Zoom Communications Gross Margin % Historical Data
* Premium members only.
The historical data trend for Zoom Communications's Gross Margin % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
XSWX:ZM vs FICO, TEAM, ROP: Gross Margin % Comparison
For the Software - Application subindustry, Zoom Communications's Gross Margin %, along with its competitors' market caps and Gross Margin % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Zoom Communications Gross Margin % vs Software Industry
For the Software industry and Technology sector, Zoom Communications's Gross Margin % distribution charts can be found below:
* The bar in red indicates where Zoom Communications's Gross Margin % falls into.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.
Zoom Communications (XSWX:ZM) has a Gross Margin % of 77.86% as of Apr. 2026. Gross margin is the ratio of total gross profit to net sales. View historical data on Zoom Communications and its competitors. This is near median its historical median of 76.61. Over the past decade, Zoom Communications' Gross Margin % has ranged from 69.00 to 81.54. According to the industry distribution chart, Zoom Communications ranks #363 out of 2685 companies in the Software industry, placing it in the top 13.5%.
Is Zoom Communications' Gross Margin % too high?
Zoom Communications' current Gross Margin % of 77.86% is near median its 10-year median of 76.61. Over the past 10 years, this metric has ranged from a low of 69.00 to a high of 81.54. The Software industry median Gross Margin % is 40.45. Zoom Communications' value of 77.86% is 92.5% above this industry median. Based on the distribution chart, Zoom Communications ranks #363 out of 2685 companies in the Software industry, which is in the top quartile — a strong position relative to peers. Overall, Zoom Communications has a GF Score™ of 85/100, reflecting its overall financial health beyond just this single metric.
How does Zoom Communications' Gross Margin % compare to FICO and TEAM?
According to the Software industry distribution chart, Zoom Communications ranks #363 out of 2685 companies for Gross Margin %. This places Zoom Communications in the top 14% of its industry — outperforming the majority of peers. The industry median Gross Margin % is 40.45. Zoom Communications' value of 77.86% is 92.5% above this benchmark. Historically, Zoom Communications' own Gross Margin % has ranged from 69.00 to 81.54 over the past decade. While the company's 10-year median is 76.61 vs. the industry median of 40.45, Zoom Communications has consistently been above the industry average. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good Gross Margin % for a Software company?
The median Gross Margin % among Software companies is 40.45, based on 2,685 companies in the industry. Companies in the top quartile (top 25%) have a Gross Margin % significantly above this median, while those in the bottom quartile fall well below. However, Gross Margin % should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Zoom Communications's current Gross Margin % of 77.86% is 92.5% above the industry median. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high Gross Margin % mean?
A high Gross Margin % can signal that a stock is expensive relative to its fundamentals. Gross margin is the ratio of total gross profit to net sales. View historical data on Zoom Communications and its competitors. For the Software industry, the median Gross Margin % is 40.45 — values significantly above this may indicate overvaluation, while values below may suggest a bargain or underlying issues. Zoom Communications's current Gross Margin % is 77.86%, which is near median its own 10-year median of 76.61. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Zoom Communications stock overvalued right now?
Zoom Communications (XSWX:ZM) has a current Gross Margin % of 77.86%. The stock's GF Value™ is CHF63.80, compared to a current price of CHF68.47 — trading 7.3% above its estimated fair value. The current Gross Margin % is 77.86%, which is near median its 10-year median of 76.61 and 92.5% above the Software industry median of 40.45. Zoom Communications' overall GF Score™ is 85/100 with 3 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is Gross Margin % calculated?
Gross Margin % is calculated from a company's financial statements. For Zoom Communications (XSWX:ZM), the current Gross Margin % is 77.86% as of Apr. 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Zoom Communications (XSWX:ZM) Overvalued in 2026?
Based on GuruFocus' analysis, Zoom Communications stock appears to be overvalued.
The current stock price of CHF68.47 is trading 7.3% above its estimated GF Value™ of CHF63.80.
Key valuation signals for XSWX:ZM:
Gross Margin %: 77.86% (near median its 10-year median of 76.61)
GF Value™: CHF63.80 vs. price of CHF68.47 (7.3% above fair value)
Industry Position: 92.5% above the Software median (#363 of 2685)
No single metric tells the full story. See the XSWX:ZM stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Zoom Communications provides a video-first communications platform that connects people through frictionless video, voice, chat, and content sharing. The company's cloud-native platform enables video experiences and connects users across various devices and locations in a single meeting. Zoom has launched a variety of communications-related solutions, including Zoom Phone and Zoom Contact Center. The firm was founded in 2011 and serves companies of all sizes from all industries around the world.
85GF Score
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