Zoom Rebrands and Focuses on AI as Growth Slows

Zoom Shares Sink Despite Revenue Beat. Is It Time to Buy the Stock on the Dip as It Turns to AI to Drive Growth? | The Motley Fool

A pandemic darling, Zoom Communications (ZM -3.13%) is well past its glory days when its stock was trading above $550 back in 2020. The company saw a lot of pull forward in demand during that time, and as a result, revenue growth has been much slower in the proceeding years. That slower growth was also evident in the company's most recent quarter. While its results topped analyst estimates, investors were still looking for more from the company. The stock price fell on news of the results and is now up about 15% on the year (as of this writing). Let's zoom into Zoom's most recent results to see whether the company has the opportunity for a turnaround after the most recent dip in its stock price. For its fiscal 2025 third quarter (ended Oct. 31), Zoom grew its revenue by nearly 4% year over year to $1.18 billion, topping the analyst consensus for revenue of $1.16 billion, as compiled by LSEG. Adjusted earnings per share (EPS) climbed 7% to $1.38, coming in ahead of the $1.31 consensus. Zoom has been performing better with large enterprise customers, while it continues to see softness among smaller, largely online self-service customers. This continued in fiscal Q3, with the company seeing enterprise revenue jump nearly 6% year over year to $698.9 million as the number of customers with trailing annual revenue of more than $100,000 increased by 7%. Online revenue, meanwhile, was flattish at $478.7 million. Online average monthly churn was 2.7% in the quarter, which was an all-time low. However, net dollar retention among enterprise customers was only 98%. A number under 100% means the company is seeing more churn or customers reducing spending versus expanding with the company's services. In reaction, the company is introducing a number of artificial intelligence (AI) features. It recently unveiled its AI-first Work Platform designed to help enhance interaction and productivity through AI tools. This includes its Zoom AI Companion 2.0, an AI assistant that can perform tasks such as summarizing conversations, identifying action items, and helping compose messages. Next year, meanwhile, the company plans to introduce Custom AI Companion add-ons for specific industries. In the first half, it will release solutions aimed at the healthcare and education verticals. It will also launch a new platform for frontline workers in the retail, healthcare, and manufacturing industries. Its new Zoom Workplace platform will be able to provide insights and shift summaries to these workers. Some areas do appear to be doing well. One is Workvivo, the collaboration platform it bought last year. The company saw the number of Workvivo customers surge by 72% in the quarter. It is also doing well in the contact center space. The company said it signed its largest-ever contact center deal with a customer -- for 20,000 seats -- in the quarter, and its customer count grew by 82%. One thing the company continued to do well was generate a lot of cash. It produced operating cash flow of $483.2 million in the quarter and free cash flow of $457.7 million. It ended the period with cash and marketable securities of $7.7 billion and no debt. Looking ahead, Zoom increased its fiscal 2025 guidance to a range of $4.656 billion to $4.661 billion in revenue with adjusted EPS of between $5.41 and $5.43. That was up from a prior forecast of adjusted EPS of $5.29 and $5.32 on revenue of between $4.63 billion and $4.64 billion. For fiscal Q4, the company guided for adjusted EPS of between $1.29 and $1.30 on revenue of $1.175 billion to $1.180 billion. Analysts were looking for adjusted EPS of $1.29 and revenue of $1.17 billion. Zoom is not exactly an expensive stock, trading a forward price-to-earnings ratio (P/E) of 15.5 next year's estimates and a forward price-to-sales ratio (P/S) -- a common metric by which software-as-a-service (SaaS) companies are valued -- of just over 5. But with about 30% of its market cap in cash, those valuation metrics are actually a bit overstated. Excluding its net cash, its P/E would be under 11, and its enterprise value-to-revenue would be about 3.6. The issue for Zoom, though, is that tech investors are generally looking for growth, not undervalued cash-producing machines. However, given this low valuation, if the company's new AI efforts can spur growth next year, there could be a lot of potential upside ahead. Considering this, I think investors should think about buying the stock on the dip.

Zoom struggles to grow beyond a crawl and its stock dips - SiliconANGLE

Shares of Zoom Communications Inc. were trading 4% lower in the after-hours session today, even as the company delivered strong third quarter earnings results and provided optimistic guidance for the current quarter. The company reported earnings before certain costs such as stock compensation of $1.38 per share, beating the Street's consensus estimate of $1.31 by a decent margin. Revenue increased 4% from a year earlier to $1.18 billion, only slightly ahead of the analysts' forecast of $1.16 billion. The communications technology provider has endured single-digit revenue growth for 10 successive quarters now, in stark contrast to the COVID-19 pandemic era, when its business tripled in size. Even so, it did make better progress in terms of profitability. The company clocked $207.1 million in net profit during the quarter, up from $141.2 million in the year-ago period. Zoom also made good progress in terms of customer acquisition. It now has 192,400 enterprise clients on its books, having added around 800 new ones during the quarter. However, the company's outlook suggests that revenue growth will continue to be in short supply. For the current quarter, Zoom said it's looking at earnings of $1.29 to $1.30 per share on sales of between $1.175 billion and $1.180 billion. That's only just ahead of the Street's target of $1.29 in earnings and $1.17 billion in revenue. On the other hand, Zoom did bump up its full-year guidance ever so slightly. It's now expecting earnings of between $5.41 and $5.43 per share on revenue of $4.656 billion to $4.661 billion. The middle of that range implies growth of around 3% compared to the year prior. During the quarter, at its annual Zoomtopia event, Zoom announced plans to expand its artificial intelligence offerings with a "Custom AI Companion" that will be made available to premium customers in the first half of next year. According to the company, it's a kind of chatbot that will help connect Zoom's platform to corporate glossaries and knowledge bases, as well as services such as ServiceNow, Salesforce and Workday. And in another update, the company rolled out support for single-use webinars with room for up to one million attendees on its platform. Those moves are in-line with Zoom's ongoing efforts to expand beyond video-based communications into areas such as AI-supported customer service that can boost its customer's productivity. Much of the focus is on Zoom's Contact Center platform, which powers enterprise's customer service operations. In a research note earlier this week, analysts from JPMorgan said Zoom's Contact Center has emerged as a "key growth area" for the company, even though its revenue declined in the proper quarter. It was a different story this time though, as third quarter Contact Center revenue rose 5.8%. In addition to the results, the company said it's changing its corporate name from "Zoom Video Communications Inc." to just "Zoom Communications Inc." On a conference call with analysts, Zoom's founder and chief executive Eric Yuan (pictured) said the name change reflects the company's "evolution into an AI-first work platform for human connection", as well as its overall "vision for long-term growth". Following today's after-hours action, Zoom's stock is up about 24% this year, slightly behind the broader S&P 500 Index, which is up 25%.

Zoom Changes Name to Emphasise AI Offerings, Gives Sales Forecast

Zoom said it's adding $1.2 billion to its existing share buyback program Zoom Video Communications gave a sales forecast for the current quarter that failed to impress investors who were expecting a bigger boost from the company's expanded suite of products. Revenue will be about $1.18 billion (roughly Rs. 15,170 crore) in the period ending in January, Zoom said Monday in a statement. Profit, excluding some items, will be $1.29 to $1.30 (roughly Rs. 110) a share. Analysts, on average, projected adjusted earnings of $1.28 a share on sales of $1.17 billion (roughly Rs. 9,860 crore), according to data compiled by Bloomberg. The shares declined about 4.5 percent in extended trading after closing at $89.03 (roughly Rs. 7,503 crore) in New York. While Zoom's outlook met estimates, the stock had gained about 48 percent since the company's last earnings report in August on optimism about the new products. The software maker known for videoconferencing has expanded its suite of tools to offer phone systems, a contact center application and Artificial Intelligence (AI) assistants. In October, Zoom named former Microsoft executive Michelle Chang as chief financial officer to replace Kelly Steckelberg, who left to join design startup Canva. Zoom has seen a 59 percent increase in monthly active users of its AI assistant since the prior quarter, the company said in a presentation to supplement its earnings statement. It also topped 1,250 customers of its contact center application. While there were "no major issues" with the results, a steep gain for the shares headed into Monday's earnings means the results may not attract new investors, wrote Tyler Radke, an analyst at Citigroup. Separately, the company announced it has dropped "video" from its official name and would now be known as Zoom Communications Inc. "Our new name more accurately reflects our expanding scope and plans for long-term growth," Chief Executive Officer Eric Yuan wrote in a post announcing the change. In the fiscal third quarter, sales increased 3.6 percent to $1.18 billion (roughly Rs. 9,946 crore), compared with analysts' average estimate of $1.16 billion (roughly Rs. 9,777 crore), according to data compiled by Bloomberg. Profit, excluding some items, was $1.38 (roughly Rs. 116.32) a share in the period ended October 31. Enterprise revenue increased 5.8 percent to $699 million (roughly Rs. 5,891 crore). Zoom said it had 3,995 customers who contributed more than $100,000 (roughly Rs. 84.2 lakh) over the past year. An ongoing loss of consumers and small businesses from Zoom has concerned investors, particularly since these customers are typically higher-margin than corporate clients. Average monthly churn in this segment was 2.7 percent in the quarter, which was better than analysts' estimates. Sales in the segment was little changed at $479 million (4,037 crore). That was Zoom's lowest-ever online churn, Chang said, according to remarks prepared for the company's earnings conference call. Zoom said it's adding $1.2 billion (roughly Rs. 10,114 crore) to its existing share buyback program, raising the total repurchase authorisation to $2 billion (roughly Rs. 16,857 crore). © 2024 Bloomberg LP

Zoom Communications Q3 Earnings: Revenue Beat, EPS Beat, Online Churn Hits All-Time Low, Company Name Change And More - Zoom Video Comms (NASDAQ:ZM)

Zoom announces a name change from Zoom Video Communications to Zoom Communications. Zoom Communications Inc ZM reported third-quarter financial results after the market close on Monday. Here's a look at the key details from the quarter. Q3 Earnings: Zoom reported third-quarter revenue of $1.18 billion, beating the consensus estimate of $1.16 billion. The communications company reported third-quarter adjusted earnings of $1.38 per share, beating analyst estimates of $1.31 per share. Zoom has now beat analyst estimates on the top and bottom lines in nine consecutive quarters, according to data from Benzinga Pro. Total revenue was up 3.6% on a year-over-year basis. Enterprise revenue was up 5.8% year-over-year, while online revenue was flat year-over-year. Zoom noted online monthly average churn reached an all-time low of 2.7% in the quarter. Net cash provided by operating activities was $483.2 million in the third quarter, down 2% year-over-year. Free cash flow came in at $457.7 million, up 1% year-over-year. Zoom ended the quarter with approximately 192,400 enterprise customers; 3,995 of those customers were contributing more than $100,000 in trailing 12 months revenue at quarter's end, up approximately 7.1% year-over-year. The company said it ended the quarter with $7.7 billion in cash, cash equivalents and marketable securities. Zoom said its board authorized the repurchase of an additional $1.2 billion of its common stock in November, bringing the total remaining amount under the buyback to $2 billion. See Also: CrowdStrike Q3 Earnings Preview: Analysts Anticipate Recovery, 'Customers Remain Confident' Guidance: Zoom expects fiscal fourth-quarter revenue to be in the range of $1.175 billion to $1.18 billion versus estimates of $1.17 billion. The company sees fourth-quarter adjusted earnings of $1.29 to $1.30 per share versus estimates of $1.28 per share. Zoom expects full-year revenue of $4.656 billion to $4.661 billion versus estimates of $4.64 billion. Full-year earnings are expected to be between $5.41 and $5.43 per share versus estimates of $5.35 per share. "At Zoomtopia we announced major milestones such as AI Companion 2.0 and paid add-ons for AI Companion and industry-specific AI customization, further cementing our vision to deliver a differentiated AI-first work platform that empowers customers to achieve more than ever," said Eric Yuan, founder and CEO of Zoom. Zoom announced that it changed its name from Zoom Video Communications to Zoom Communications on Monday. Management will further discuss the quarter on a conference call with analysts and investors at 5 p.m. ET. ZM Price Action: Zoom shares were down about 2.31% after hours, trading at $86.97 at the time of publication, according to Benzinga Pro. Read Next: Copper's High-Wire Act: Can EVs, New Tech Power The Metal's Next Big Surge? Photo: Shutterstock. Market News and Data brought to you by Benzinga APIs