Published - February 28, 2023 @ 11:46 AM (EET)
On Monday, shares of Zoom Video Communications (NASDAQ:ZM) jumped 8% in extended trading after the company said it would integrate more artificial intelligence into its products and offered optimistic earnings guidance ahead of Wall Street expectations.
The videoconferencing company said sales grew 4% to $1.12 billion, and enterprise revenue rose 18% compared with last year, signaling that a cost-cutting push is helping offset a sales slowdown. Meanwhile, online revenue, which measures individual customers, fell by 10%.
Looking ahead, earnings per share for the full year will be between $4.11 and $4.18 on an adjusted basis, topping estimates of $3.66 and suggesting that Zoom is finding its footing again after a turbulent period during the pandemic.
Zoom expects adjusted per-share earnings between 96 cents and 98 cents a share for the current quarter.
Still, the company has been grappling with slowing growth and customer turnover, while overall growth continues to be weighed down by the macroeconomic environment. Zoom sees annual revenue between $4.435 billion to $4.455 billion, implying an upside of 1.1% growth. Analysts were expecting sales of $4.6 billion.
WHY IT MATTERS
Earlier this month, Zoom slashed 15% of its workforce and started streamlining its cloud spending to help improve margins.
Up 12% from a year earlier, the company had about 213,000 enterprise customers at the end of the quarter. While it was slightly below the 216,587 projection, Zoom witnessed a more significant increase in clients spending more than $100,000 over the trailing 12 months. Those customers grew to 3,471, an increase of 27%.
Though larger corporate clients may potentially leave as well, the company has been steadily working to hold on to those customers with non-video offerings, including 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," touted Chief Executive Officer Eric Yuan on the earnings call.
RBC analyst Rishi Jaluria seemed optimistic about Yuan's comments. "I like that Zoom is proactively talking about these opportunities today, and I honestly believe it's necessary, especially given Microsoft is already including ChatGPT as part of Teams Premium," Jaluria said.
A broad return to pre-pandemic in-office conditions has curbed the need for videoconferencing platforms. The stock is down about 41% over the last 12 months.
