Zoom beats expectations and lifts full-year guidance on enterprise business strength

Zoom shares rose as much as 8% in extended trading on Monday after the video-calling software provider announced fiscal second-quarter results that exceeded analysts’ expectations.

Here’s how the company did:

• Earnings: $1.34 per share, adjusted, vs. $1.05 per share as expected by analysts, according to Refinitiv.
• Revenue: $1.14 billion, vs. $1.12 billion as expected by analysts, according to Refinitiv.

Zoom’s revenue grew 3.6% year over year in the quarter that ended on July 31, according to a statement. The company’s net income increased to $182m, or 59c per share in the quarter. This compares to $45.7m, or 15c per share in the fiscal 2nd quarter a year ago. Zoom defines enterprise customers as business units with which Zoom’s resellers, direct sales teams or partners are in contact. The executives expected $1.07-$1.09 in adjusted earnings per shares on revenue between $1.115 and $1.120 billion for the third fiscal quarter. Analysts polled by Refinitiv had expected $1.03 in adjusted earnings per share and $1.13 billion in revenue.

Management raised Zoom’s full-year forecast. The executives now expect adjusted earnings per share of $4.63-$4.67 and revenue between $4.485B to $4.495B for the entire fiscal year 2024. The middle of the revenue range represents a 2% increase. She said that clients are “really making sure they do their full due diligence” and have been for some time. Analysts polled by Refinitiv had predicted that Zoom would produce $4.30 in adjusted earnings per share and $4.49 billion in revenue.

“Our increased total revenue guidance reflects a consistent view on enterprise, with tempered expectations for online for the remainder of the year,” Kelly Steckelberg, Zoom’s finance chief, said on a conference call with analysts.

Sales cycles remain longer than usual, she said.

Clients are “really making sure that they take advantage of doing their full due diligence,” she said.

Meanwhile, Zoom is still working to optimize its spending, including on cloud services, and it’s been slowing the growth of sales and marketing expenses as well.

During the quarter Zoom said that through free trials, certain customers could start requesting call summaries that they can share without recording conversations, and the company said it invested in artificial-intelligence startup Anthropic.

Eric Yuan, Zoom’s founder and CEO, said that unlike some of its competitors, the company won’t be charging a “crazy price” for artificial-intelligence features on top of existing software. He said that he did not believe it was fair to charge customers for artificial intelligence features on top of existing software. He said it would be better to integrate AI capabilities into current software services. Steckelberg stated that Zoom’s customer service software is a small company but it has grown rapidly, and now has over 500 clients.

The expansion follows Zoom’s failed effort to acquire

Five9

. The price of the contact center software is “highly disruptive,” Steckelberg said.

Notwithstanding the after-hours move, Zoom stock has declined about 1% so far this year, while the S&P 500 index has risen 15% over the same period.

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