Shares of Zoom Video Communications (NASDAQ:ZM) have been on an absolute tear recently. The stock is up 133% during the last six months and 64% in the last three months alone. Investor optimism for the videoconferencing company is fueled both by its strong business performance before the coronavirus pandemic and Zoom's perfect positioning to benefit from the rise of work-from-home trends during the pandemic.

The growth stock's torrid rise comes ahead of Zoom's first-quarter earnings release next week. Investor expectations going into the report are undoubtedly high.

Here's a closer look at the momentum in Zoom's business that has prompted such bullish investor sentiment and a preview of the company's upcoming earnings report.

A conference room of business people videoconferencing with someone.

Image source: Getty Images.

Incredible momentum

Zoom demonstrated outstanding business results in its most recent quarter. For its fourth quarter of fiscal 2020, which ended on Jan. 31, Zoom saw its revenue skyrocket 78% year over year to $188.3 million. Highlighting the leverage in Zoom's business model, non-GAAP (adjusted) net income climbed even faster, rising from $10 million in the year-ago quarter to $43.2 million. The same leverage was true for the company's full-year results. Fiscal 2020 revenue grew 88% year over year while full-year GAAP and non-GAAP net income increased 106% and 487% year over year, respectively.

The company is already generating substantial free cash flow, or operating cash flow less capital expenditures (the cold, hard cash left over after regular operations and growth investments are both taken care of). Free cash flow in fiscal 2020 was $114 million, up from $23 million in fiscal 2019.

Zoom's fiscal fourth quarter was fueled primarily by a 61% year over year increase in customers with more than 10 employees and an 86% jump in customers contributing more than $100,000 in trailing-12-month revenue.

What to watch when Zoom reports earnings

Since Zoom reported its fiscal fourth-quarter results in early March, management already has some visibility into how a rise in coronavirus cases was impacting its business. CFO Kelly Steckelberg said in the company's fiscal fourth-quarter earnings call that, as of March 4, it had already seen "significant usage" on its platform due to the coronavirus, and she noted that the company would "expand our capacity to meet the increased demands of both paid and free users."

Kelly, however, did say that much of the significant uptick in usage as a result of COVID-19 was related to free accounts. "So it's very early to tell whether or not that's going to convert long term into paying customers," Steckelberg explained.

Analysts seem to be planning on an acceleration in Zoom's business as a result of COVID-19. On average, The Street is modeling for year-over-year revenue growth of about 81% during fiscal Q1. Analysts also expect a big improvement in non-GAAP earnings per share, with the consensus for the period coming in at $0.09 -- up from $0.03 in the year-ago period.

There's no way to know how fiscal Q1 results will look compared to expectations or how investors will react. But one thing investors can expect with near certainty in the coming months: volatile trading in Zoom's stock price. After such a wild run, and given the company's business extraordinary momentum, investors are likely to be in for a bumpy ride, since so much of this stock's valuation today is based on speculative forecasts for future financial results.

Zoom is scheduled to report its fiscal first-quarter results after market close on Tuesday, June 2.