Zoom raises annual sales forecast in sign pandemic-era customers here to stay

ZOOM Video Communications raised its full-year sales forecast in a positive sign for the software maker’s effort to continue growing in a post-pandemic world.

Still, the company that came to prominence as an essential tool during the pandemic didn’t add as many large corporate customers as analysts’ anticipated. These business customers are now Zoom’s focus and are vital to demonstrating the company can revive its sales growth.

Revenue for the fiscal year ending in January 2025 will be US$4.47 billion to US$4.49 billion, Zoom said on Monday (May 22) in a statement. That’s up from an earlier outlook of about US$4.44 billion. The company also raised its forecast for annual adjusted profit to US$4.25 to US$4.31 a share, compared with a previous forecast of US$4.11 to US$4.18 a share.

“Our customers see Zoom as mission-critical in how they collaborate internally and externally across the globe,” chief executive officer Eric Yuan said in the statement. “This relationship with our customers helped us to exceed our guidance due to enterprise growth and stabilising online revenue.”

Consumers and small businesses that flocked to Zoom during the pandemic had been dropping off the platform in recent quarters, denting profitability and sales growth. That group of customers is now stabilising, chief financial officer Kelly Steckelberg said in remarks prepared for a conference call after the results were released. The online segment should generate about US$480 million in the current period and remain relatively unchanged thereafter, she said.

The San Jose, California-based company said it had 215,900 enterprise customers in the period ended Apr 30, an increase of 9 per cent from a year earlier. Of those customers, 3,580 contributed more than US$100,000 in trailing 12-month revenue, an increase of 23 per cent from the period a year earlier.

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While growing, those enterprise customer numbers were shy of analysts’ expectations. The share of revenue from large businesses in the quarter – 57 per cent – was unchanged from the previous period.

In the fiscal first quarter, Zoom reported sales increased about 3 per cent to US$1.11 billion, topping estimates. Profit, excluding some items, was US$1.16 a share. Analysts, on average, estimated 99 US cents a share.

The results showed “good execution in an uncertain economy, progress towards more stable growth and strong cost management”, said John Butler, an analyst at Bloomberg Intelligence.

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The shares increased about 1 per cent in extended trading after closing at US$71.41 in New York. The stock has gained 5.4 per cent this year, lagging behind most software peers amid continued concerns about customer churn and competition from Microsoft. The ousting of high-profile sales President Greg Tomb in March fuelled questions about the success of the company’s sales operation.

Yuan touted the importance of artificial intelligence (AI) to its new enterprise offerings. Last week, the company announced an investment in startup Anthropic and said it will begin layering Anthropic’s AI assistant, Claude, into its products, beginning with the contact centre.

Steckelberg acknowledged that the sales teams experienced “some distraction” due to a reduction in headcount. The company announced in February that 1,300 workers would lose their jobs as part of a restructuring. BLOOMBERG