Zoom has biggest rally in a year after giving strong forecast
Revenue growth has been meagre since the end of the pandemic and is expected to remain around 3% annually for at least the next two years
[NEW YORK] Zoom Communications shares soared as much as 9.8 per cent after the company delivered a stronger-than-expected forecast, suggesting that customers are buying more of its expanded line of software products.
Revenue will be about US$4.83 billion in the fiscal year ending in January, Zoom said on Thursday (Aug 21). Profit, excluding some items, will be US$5.81 a share to US$5.84 a share. Analysts, on average, projected sales of US$4.81 billion and earnings of US$5.60 a share.
The company’s videoconferencing platform rose to prominence during the pandemic. As the world reopened from Covid-19 restrictions, many consumers and small businesses let their Zoom licenses lapse. By contrast, corporate customers have largely held onto the company’s services even as more workers returned to offices and Microsoft increased competition with its Teams products.
The shares rose as high as US$80.35 in New York on Friday, marking their biggest intraday gain since August 2024. The stock had been down 10 per cent this year heading into the earnings report.
Fiscal second-quarter enterprise sales increased 7 per cent to US$730.7 million, compared with analysts’ average estimate of US$716.7 million. Zoom said that it had 4,274 customers in the period who contributed more than US$100,000 each over the past year.
The company has been working the past few years to diversify into a platform of business tools, including an artificial intelligence (AI) assistant. That AI companion feature now has “millions” of monthly active users, up four times compared with the prior year, Zoom said in a presentation.
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“It was an uncontroversial quarter for Zoom – growth rates are stabilising to improving, and the company continues to manage through ongoing growth headwinds,” wrote Tyler Radke, an analyst at Citigroup.
“We delivered an across-the-board strong Q2 marked by achieving our highest year-over-year revenue growth in 11 quarters,” chief executive officer Eric Yuan said.
Total revenue gained 4.7 per cent to US$1.22 billion in the period ended Jul 31. Profit, excluding some items, was US$1.53 a share.
The results reflect rising momentum and that new paid AI features appear to be providing a lift to revenue, wrote John Butler, an analyst at Bloomberg Intelligence. Still, revenue growth has been meagre since the end of the pandemic and is expected to remain around 3 per cent annually for at least the next two years. BLOOMBERG
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