Zoom's AI Strategy Shift: New Features and Monetization Plans Boost Stock Performance

1 Artificial Intelligence (AI) Stock Is Up 23% in Just 2 Months, and It Can Still Climb Higher | The Motley Fool

This company's integration of generative AI features into its solutions could help accelerate future growth. Shares of Zoom Video Communications (ZM 0.74%) have underperformed the broad market this year, down 5% while the S&P 500 has gained 22%. However, a closer look at the stock's recent trajectory indicates the company is building impressive momentum. Zoom stock has surged around 23% since mid-August, and artificial intelligence (AI) seems to be playing a key role in its resurgence. Let's take a closer look at the AI-related prospects for Zoom and see why the growing adoption of this technology in the contact center market could become a game changer for the company. Zoom Video Communications became a household name during the pandemic with adoption of its platform skyrocketing, but its growth has been anemic for over two years now. Revenue in the fiscal 2025 second quarter (ended July 31) increased just 2.4% year over year in constant currency terms to $1.16 billion. The company has guided for full-year revenue of $4.64 billion to $4.65 billion, which would be an increase of just 2.5% from the previous year. However, certain metrics indicate Zoom's focus on integrating generative AI capabilities into its platform could help it accelerate its growth in the future. The company launched its generative AI assistant, AI Companion, just over a year ago, and this offering has been gaining traction. CEO Eric Yuan said on the August earnings call: Today, AI Companion enhances an employee's capabilities using generative AI to boost productivity through features like meeting summary chat compose, image generation, live translation, and enhanced features in Contact Center. As these features have grown in popularity, we are very happy to share that Zoom AI Companion is now enabled on over 1.2 million accounts. The company has already launched a new version of this tool, known as AI Companion 2.0. The updated generative AI assistant will allow users to generate answers using prompts, provide more contextual information from data collected across different workplace tools such as Microsoft Office, Outlook, Gmail, Google Calendar, and Google Docs; create tasks from meeting summaries; and recap email threads, among other things. Management also added that AI Companion has been enabled on more than 4 million customer accounts as of this month, more than doubling its reach since August. This could explain why Zoom's average monthly churn fell 30 basis points year over year to 2.9% in fiscal Q2, its lowest level ever. Meanwhile, customers are spending more money on Zoom's offerings. The number of customers contributing more than $100,000 in trailing-12-month revenue increased 7% last quarter. What's more, the company's remaining performance obligations (RPO), which refer to the total value of the company's future contracts that have yet to be fulfilled, increased 8% year over year to $3.78 billion. The faster growth in Zoom's RPO as compared to its actual revenue growth is a bullish signal for its revenue pipeline. Even better, Zoom's current RPO (which should be recognized as revenue in the next 12 months) increased 10% year over year to $2.23 billion. As a result, Zoom may end the fiscal year with stronger-than-expected revenue. More importantly, the lower customer churn and higher customer spending have led to a sharp increase in Zoom's profit margins in the past year, which should pave the way for robust growth in its earnings going forward. Zoom is currently trading at 25 times trailing earnings, while its forward earnings multiple of just 13 signals strong growth on the company's bottom line too. Given the healthy pace at which Zoom's profit margin is improving, it wouldn't be surprising to see the company's bottom line beat consensus estimates going forward. In fact, Zoom's earnings have exceeded Wall Street's estimates by significant margins in the past four quarters with its fiscal Q2 result beating the analyst consensus by nearly 15%. Analysts have been raising their earnings forecasts for Zoom throughout the year. With AI weaving its way into every industry, Zoom is effectively leveraging the technology to increase the appeal of its platform. This is helping the company build a solid revenue pipeline that should pave the way for stronger growth in the future.

Zoom Powers Up AI Strategy With New Monetization Push, Unveils AI Companion 2.0 - Zoom Video Comms (NASDAQ:ZM)

The upcoming $12/month Custom Add-on marks Zoom's first direct monetization of its AI capabilities, signaling a major business shift. Zoom Video Communications Inc ZM is stepping boldly into the future of productivity with the recent unveiling of its AI Companion 2.0 at the Zoomtopia 2024 user conference. As the company pivots from its original identity as a video conferencing platform, it is now positioning itself as a leader in workplace productivity and artificial intelligence (AI) solutions. JPMorgan analyst Mark R. Murphy emphasized that this strategic shift is designed to capitalize on the growing demand for integrated AI tools in the workplace. Innovations & Monetization From AI Companion 2.0 One of the most exciting announcements at the event was the introduction of AI Companion 2.0, which will be available to Zoom Workplace users at no additional cost. This enhanced version builds on the existing capabilities of the AI Companion, allowing for a more seamless integration of data across various applications. Key features include a persistent side panel, advanced contextual understanding, and the ability to automate tasks by synthesizing data from popular platforms such as Microsoft Outlook, Gmail, and Google Calendar. However, what truly caught the attention of investors is the upcoming Custom Add-on for AI Companion, set to launch in the first half of 2025. This add-on will be priced at $12 per user per month, representing Zoom's first direct monetization of its generative AI tools. This move signals a significant departure from its traditional business model and underscores the company's commitment to leveraging AI for revenue growth. As Murphy pointed out, the potential for increased earnings from this new offering is considerable, especially as enterprises look to enhance their operational efficiency. Read Also: Delta's Turbulent Q3: Mixed Results And Tech Troubles Cloud Holiday Outlook Financial Updates, Market Expansion In addition to the AI advancements, Zoom updated its long-term financial model, raising its target operating margin from 28-32% to 33-36%. While this projection is below the company's recent performance margins, which have hovered around 38-40%, the adjustments focus on sustainable growth. Moreover, Murphy noted the increasing traction Zoom is gaining as a comprehensive platform, with a notable rise in enterprise customers purchasing multiple products. The company's penetration in the enterprise market has reached 19% for Zoom Phone and 14% for Zoom Rooms, revealing a significant opportunity for expansion in these areas. As Zoom navigates the evolving landscape of enterprise communication, it remains focused on integrating AI capabilities to enhance customer experiences. The recent announcements highlight its ambition to redefine its business model, with a clear emphasis on AI as a core component of its strategy. Investors are likely to keep a close eye on Zoom's performance as it embarks on this transformative journey. Read Next: Tesla's Future Valuation: Analyst Pierre Ferragu Unveils Scenarios Ranging From $1.4 To $4.7 Trillion Based On FSD, Robotaxi Success Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

Zoom Custom AI Avatars Can Now Deliver Messages To Your Team As You -- Skipping Boring Remote Meetings Finally A Reality? - Microsoft (NASDAQ:MSFT), Zoom Video Comms (NASDAQ:ZM)

Zoom Video Communications Inc. ZM is gearing up to launch AI avatars that can communicate on behalf of users by posing as them. What Happened: Zoom is developing a feature that will allow users to create AI avatars of themselves to send brief messages to their teams. To generate a digital avatar, users will need to record a video of themselves, which Zoom's AI will analyze to create an avatar that mirrors their appearance and voice. Following these steps, users can type the message they'd like their AI avatar to deliver, and it will handle the speaking on the person's behalf. See Also: Unreleased M4 MacBook Pro Shown Off By Russian YouTuber: 'We've Seen Prototypes Leak Early But Never A Full Retail Apple Device Weeks In Advance,' Says Expert This feature will be integrated with Zoom's Clips feature, enabling users to record short video updates for their colleagues. "The custom AI Companion add-on will be $12 per user per month and is planned to be available for purchase in the first half of 2025, with select capabilities available in preview in the coming months," the company stated. However, paid Zoom subscribers without the add-on can still create clips using preset AI avatars and voices. Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. Why It Matters: While Zoom is addressing potential deepfake issues by implementing advanced authentication, watermarking technology, and strict usage policies, the introduction of AI avatars could come with potential risks. Several companies have created AI technology to digitally "clone" a person's face and match it with fairly natural-sounding synthetic speech. Generative AI startup Tavus, for example, enables brands to craft virtual personas for personalized video advertisements, reported TechCrunch. Last year, Microsoft Corporation MSFT also introduced a service that generates realistic digital replicas of individuals. However, many of these tools come with strict safeguards to prevent misuse. Tavus requires verbal consent from individuals, and Microsoft insists that customers obtain written permission and consent from anyone whose likeness is being used for avatars, the report noted. Check out more of Benzinga's Consumer Tech coverage by following this link. Photo: courtesy of Zoom Read Next: S&P 500 Earnings Season Kicks Off: Why Analysts Call This Quarter 'A Stock Picker's Paradise' Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs