Zoom jumps on sales forecast, signalling success of new products

ZOOM Video Communications projected sales and profit for the current quarter that topped Wall Street's estimates, a sign that the software vendor is finding ways to sustain growth beyond the pandemic boom. Shares jumped about 6 per cent in extended trading.

Revenue will be as much as US$1.12 billion in the period ending in July, the San Jose, California-based company said Monday (May 23) in a statement. Analysts, on average, estimated US$1.11 billion, or growth of about 9 per cent from a year earlier, according to data compiled by Bloomberg. Profit, excluding some items, will be as much as 92 US cents a share compared with analysts' average estimate of 84 US cents. For the full year, Zoom raised its earnings forecast to as much as US$3.77 a share from its February projection of US$3.51.

The company's new products are "enhancing the customer experience and promoting hybrid work", chief executive officer Eric Yuan said in the statement. "We believe these innovative solutions will further expand our market opportunity for future growth and expansion with customers."

Zoom hasn't maintained the breakneck triple-digit growth it experienced during the pandemic as offices reopen and competition increases from Microsoft's rival video communications platform. Fiscal first-quarter sales increased 12 per cent to US$1.07 billion, Zoom's slowest year-over-year growth on record. While the company's shares have plummeted 51 per cent this year as part of a broad decline among software makers, some analysts think the selloff has gone too far.

Benchmark's Matthew Harrigan said in a note before the results that investors have overlooked Zoom's potential as a key tool for hybrid workplaces as major industries embrace remote work. The company is focusing on its enterprise offerings by expanding products for customer service contact centres and analytics. Zoom recently announced the acquisition of Solvvy, a conversational AI startup, and unveiled Zoom IQ, a call analytics tool for sales departments.

"These new product launches encapsulate our strategy to expand horizontally and vertically to ensure our customers are getting more out of the platform," Yuan said in a conference call after the results. He also touted customers for Zoom's enterprise phone system, including Humana., Avis Budget Group and Franklin Covey Co.

Emphasizing this shift away from the consumer business, Zoom has started reporting new metrics for enterprise customers. In the period ended Apr 30, the company said it had 198,900 enterprise customers, an increase of 24 per cent from a year earlier, with a net dollar expansion rate of 123 per cent.

Chief financial officer Kelly Steckelberg told analysts on the conference call that Zoom expects enterprise customers to make up an increasingly larger share of revenue.

"I think the market wants to see signs that Zoom isn't just a Covid-stock," said Tejas Dessai, a research analyst at Global X, which counts Zoom as a top holding of its cloud-focused exchange traded fund. "We would like to see increased consumption from larger enterprises, especially those with more than US$100K in annual spending on the platform," Dessai said in an interview before the results were released.

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Shares jumped as much as 21 per cent in extended trading, before giving back much of those gains. The stock closed at US$89.33 in New York. BLOOMBERG