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
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?
Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Why Investing Abroad Could Pay OffCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Are These the Next Stocks to Split?Interactive Brokers' recently split its stock to makes its shares more accessible to investors. Could these high-priced stocks be next?
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
