Text size
Zoom Video Communications
shares are trading sharply higher in late trading after the videoconferencing company posted better-than-expected profits for the fiscal first quarter ended April 30.
For the quarter, Zoom reported revenue of $1.074 billion, in line with the company’s guidance range of $1.07 billion to $1.075 billion. Non-GAAP profits were $1.03 a share, down from $1.32 a year ago, but ahead of the company’s forecast range of 86 to 88 cents a share. Under generally accepted accounting principles, the company earned 37 cents a share, down from 74 cents in the year earlier period. The company’s non-GAAP operating margin was 37.2%, down from 39.2% in the January quarter, but above Street estimates.
Gross margin in the quarter was 78.6%, up from 73.9% a year ago, and 78.3% in the fourth quarter. The company said that gross margin for the rest of the year should be in the 76% to 78% range, above the previous forecast for gross margins in the mid-70s. Zoom said the improved margins reflects “optimized usage” across the public cloud.
Zoom said it had 198,900 enterprise customers at quarter-end, up 24% from a year ago. The company had 2,916 customers with trailing 12 months revenue of $100,000 or more, up 46% from a year ago.
Zoom said that Americas revenue was up 15% in the quarter from a year ago, with 20% growth in the Asia Pacific region, offset by flat year-over-year growth in EMEA (Europe, Middle East and Africa). The company said the softer results in Europe reflects “continued headwinds” among smaller customers. Zoom also said that the Ukraine war has “broadly impacted” its online business in Europe.
Zoom shares in late trading were up 7% to $95.50, after initially spiking more than 15%. Zoom shares in recent months had given up all of their massive Covid-era gains, with declines of more than 50% for the year to date, and more than 70% over the last 12 months.
For the July quarter, Zoom is projecting revenue of $1.115 billion to $1.12 billion, with non-GAAP profits of between 90 and 92 cents a share, modestly above the old Street consensus estimates at $1.11 billion and 88 cents a share.For the January 2023 fiscal year, Zoom repeated its previous revenue projection of $4.53 billion to $4.55 billion, which would be about an 11% increase, but the company boosted its forecast for non-GAAP earnings. The company now sees profits on an adjusted basis of between $3.70 and $377 a share, up from a previous target of $3.45 to $3.51 a share.
Zoom said it repurchased $132 million of its common stock in the quarter. The company had announced a $1 billion stock repurchase program one quarter ago.
Zoom faces a few related issues. For one thing, the reopening of most schools and offices and a revival of corporate travel have simply reduced the population’s reliance on Zoom and other videoconferencing tools for holding meetings and classes. Zoom has moved into adjacent businesses—including cloud-based telephony and call center software—but it remains highly reliant on the core videoconferencing operations. In repeating financial results, the company said it has reached three million users for its Zoom Phone telephony service.In videoconferencing, Zoom faces increasing competition. In particular,
Microsoft
(MSFT) Teams, has been bundling its communications tools with Office 365, while also offering a low-cost version of the software to small businesses, in a direct challenge to Zoom.
“In Q1, we launched Zoom Contact Center, Zoom Whiteboard and Zoom IQ for Sales, demonstrating our continued focus on enhancing the customer experience and promoting hybrid work,” Zoom CEO Eric Yuan said in a statement. “We believe these innovative solutions will further expand our market opportunity for future growth and expansion with customers.”
Write to Eric J. Savitz at eric.savitz@barrons.com
Read More: Zoom Shares Rally as Profits Top Guidance