Zoom Video Communications Inc. soared in pre-market trading, setting the stage for the biggest gain in three weeks, after the company forecast quarterly profits that far exceeded analysts’ expectations.
(Bloomberg) — Zoom Video Communications Inc. soared in pre-market trading, setting the stage for the biggest gain in three weeks, after the company forecast quarterly profits that far exceeded analysts’ expectations.
The software maker said late Monday that it expects earnings to fall between 96 cents and 98 cents in the fiscal first quarter, beating an estimate of 87 cents and signaling that the company’s cost-cutting efforts are helping offset a slowdown in sales.
The outlook suggests Zoom may be finding its footing again after a dramatic boom-and-bust cycle during the pandemic. The stock soared in 2020, when Covid-19 lockdowns sent office workers and consumers clamoring for its platform — but lost most of its value in the following two years. Shares were up nearly 7% at $78.70 at 7:23 a.m. in New York.
The company has been grappling with slowing growth and customer turnover, leading it to cut expenses. Earlier this month, Zoom eliminated 15% of its workforce, slashing jobs more aggressively than most of its tech peers have.
The layoffs — in addition to streamlining its cloud spending — helped improve margins, Chief Financial Officer Kelly Steckelberg said in prepared remarks Monday. “Zoom is dedicated to maintaining a careful balance between growth and profitability,”
Fourth-quarter sales were $1.12 billion, up 4.3% from a year earlier. Analysts had estimated $1.1 billion.
The company had about 213,000 enterprise customers at the end of the quarter, an increase of 12% from a year earlier. That was a bit below the 216,587 projection, but Zoom saw a bigger gain in the number of clients spending more than $100,000 over the trailing 12 months. Those customers increased 27% to 3,471.
Many of Zoom’s customer defections in recent quarters have come from casual users, including small businesses. Average monthly churn for this group was 3.4% in the quarter, down 0.4% from the same period a year prior.
Larger corporate clients may still be at risk of leaving as well, especially as many contracts come up for renewal in the coming months, Morgan Stanley’s Keith Weiss said in a note before earnings were released. But the company has been working to hold on to those customers. That’s included adding non-video offerings, such as internet phone and contact center features.
Zoom Chief Executive Officer Eric Yuan touted those new products on Monday, particularly ones that use artificial intelligence, such as transcription, translation and sales intelligence tools.
“We will layer more AI technologies into our products to help our customers maximize their ROI on our platform and thrive in this new era of computing,” Yuan said on the earnings call. The shares jumped an additional 2 percentage points as he spoke about AI.
Still, the company predicted less revenue for the current quarter than Wall Street anticipated. Sales in the period ending April will be $1.08 billion to $1.09 billion, Zoom said. Analysts projected $1.11 billion. Its full-year outlook was similarly shy of estimates: Zoom said sales will be about $4.45 billion, while analysts expected $4.59 billion.
“While the macroeconomic situation continues to negatively impact our overall growth, we have maintained a healthy balance sheet and operating cash flow generation,” Yuan said in the statement.
The company also has been looking for acquisition targets and considers that part of Zoom’s strategy for the fiscal year, Steckelberg said on the earnings call.
Yuan founded Zoom in 2011 after leaving Cisco Systems Inc.’s web-conferencing division WebEx. When announcing layoffs earlier this month, Yuan said he would cut his base salary 98% and forgo a bonus.
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