Zoom Video Communications (ZM) stock is soaring Thursday after the video conferencing company reported higher-than-expected results for its second quarter and raised its full-year outlook.
In the three months ended July 31, Zoom's revenue was up 2.1% year-over-year to $1.2 billion, driven by a 3.5% increase in enterprise revenue to $682.8 million. Its earnings per share (EPS) rose 3.7% from the year-ago period to $1.39.
"In Q2, we outperformed our guidance across the board and grew operating cash flow and free cash flow by 33.7% and 26.2% year over year, respectively, demonstrating our continued commitment to efficient growth," said Zoom CEO Eric Yuan in a statement. "We also saw strength in large accounts, with customers contributing more than $100,000 in trailing 12 months revenue increasing by 7.1% year over year, and resilience in our online business, with online average monthly churn reaching its lowest ever rate."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The company also said that its Zoom AI Companion – its generative artificial intelligence (AI) assistant that's included in paid services – reached 1.2 million accounts at the end of Q2.
In the earnings call, Yuan said that Zoom is "just getting started" on its AI strategy and that Wall Street can expect to hear more at its annual Zoomtopia event in October.
Zoom's top and bottom-line results topped analysts' expectations. Wall Street was anticipating revenue of $1.15 billion and earnings of $1.21 per share, according to Reuters.
As a result of its outperformance in the second quarter, Zoom raised its full-year outlook. The company now anticipates revenue in the range of $4.63 billion to $4.64 billion and EPS to arrive between $5.29 to $5.32. This compares to its previous outlook of revenue in the range of $4.61 billion to $4.62 billion and earnings per share of $4.99 to $5.02.
For the third quarter, Zoom sees revenue of $1.16 billion to $1.165 billion and EPS between $1.29 to $1.31.
The midpoints of these outlooks beat analysts' expectations of revenue of $1.16 billion and earnings of $1.24 per share, according to Yahoo Finance.
Zoom also said its chief financial officer is leaving the company.
Is Zoom stock a buy, sell or hold?
Zoom has struggled on the price charts in 2024, down nearly 7% even with today's pop. Wall Street is bullish on the tech stock, but barely. The average analyst price target at S&P Global Market Intelligence is $75.29, representing implied upside of more than 15% to current levels. And the consensus recommendation is a Buy, though with low conviction.
Financial services firm Needham is one of those that is not in the bull camp and currently rates Zoom stock a Hold.
Zoom "is in a strong position thanks to its brand ascent and revenue acceleration during 2020-21, which were significantly boosted by the pandemic," says Needham analyst Ryan Koontz. "While we commend the ZM team for their flawless execution during this period, we are concerned that growth at the lower end, particularly in the online segment, outpaced the company's mid-market and enterprise expansion."
The analyst adds that increased churn at the lower end of the market is creating headwinds before new product sales reach scale. "Although Phone is off to a solid start, we await evidence that other new Zoom products will contribute to meaningful growth," Koontz says.
Related Content
- Why Snowflake Stock Is Sinking After a Q2 Earnings Beat
- Apple's Strong Start in Virtual Reality
- Videoconferencing Platforms Get an AI Boost
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for WomenWhile most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational WealthPrivate placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational Wealth
Private placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.
-
I Want to Retire Next Year. Should I Keep My Money In the Stock and Bond Markets?We asked a financial expert to weigh in on where someone getting ready to retire should invest their money.
-
How to Maximize Your Social Security Now That the One Big Beautiful Bill Is LawWhen applying for your Social Security benefits, consider the new enhanced deduction for people age 65 and older, as well as your health, family situation and other financial issues.
-
I'm a Retirement Specialist: This Is How to Keep Your 401(k) on Track Amid Dire News AlertsHistory shows that consistent, disciplined investing far outweighs any attempt at market timing, so focus on long-term growth and tune out the sky-is-falling news headlines.
-
Five Money Moves to Make Before Your First Child Arrives: A Financial GuideI wish I'd known some of these when I was an expectant parent. These important steps include establishing an emergency fund, budgeting for new expenses, securing life insurance and more.
-
What CEOs Say About President Trump and Fed Chair PowellTop opinion-shapers and decision-makers are expressing mixed views on the evolving conflict between the White House and the central bank.
-
Retirement Tax Bombs: How Roth Conversions May Cut the Blue WireIf you have a significant amount in tax-deferred retirement accounts, you could be sitting on a tax time bomb. Luckily, there's a way to defuse the situation.
