Zoom Video Communications Inc (NASDAQ: ZM) has raised its sales projections on Monday, as it reported better-than-expected revenue, thanks to strong corporate user sales. Despite facing competition from giants like Microsoft Corporation (NASDAQ: MSFT) and Cisco Systems Inc (NASDAQ: CSCO), […]
Zoom Video Communications Inc (NASDAQ: ZM) has raised its sales projections on Monday, as it reported better-than-expected revenue, thanks to strong corporate user sales. Despite facing competition from giants like Microsoft Corporation (NASDAQ: MSFT) and Cisco Systems Inc (NASDAQ: CSCO), Zoom has managed to gain significant popularity during the COVID-19 quarantine. By integrating artificial intelligence and hybrid work trends, Zoom has shown its ability to thrive in the competitive market.
Key highlights of the third-quarter report
For the quarter ending on October 31, revenue increased by 3.2% to $1.14 billion, slightly above FactSet’s estimate of $1.12 billion. Zoom reported a net income of $141.2 million, representing an improvement compared to the same quarter last year when it earned $48.4 million. Adjusted earnings per share were $1.29, higher than LSEG’s estimate of $1.09 per share. Free cash flow increased by 66.2% to $453.2 million.
Introduction of AI Assistant
The introduction of the AI assistant took place during the third quarter. Paid users can now utilize features such as meeting summaries, reviews, along with automatic email and chat reminders. Over 220,000 user accounts activated the AI assistant on Monday. The phone segment grew to approximately 7 million paid licenses, while the Contact Center reached around 700 customers. Zoom ended the quarter with 219,700 business customers, showing a 5% growth in its user base.
For the current quarter, Zoom projected revenue in the range of $1.125 billion to $1.13 billion, aligning with LSEG’s expectations. Zoom also revised its annual forecasts for adjusted profit and revenue. The projected adjusted earnings per share for the full year range from $4.93 to $4.95, while revenue is expected to be between $4.485 billion and $4.495 billion. Free cash flow for the entire year is expected to range from $1.34 billion to $1.35 billion, representing a 13% growth.
Zoom’s hope lies in artificial intelligence to regain its popularity beyond the pandemic period. By enhancing its fully integrated intelligent collaboration platform, including Zoom AI assistant, Zoom aims to improve collaboration solutions for users and employees. Zoom expanded its offerings beyond video conferencing by introducing phone services and AI technologies to equip hybrid workplaces. With the addition of AI tools, Zoom hopes to stand out in comparison to Microsoft Teams. Despite facing criticisms during the last quarter for secretly modifying its terms and conditions, enabling exclusive rights to train its AI models using user data without their proper consent, and failing to combat unwanted meeting intrusions, known as Zoom-bombing, the latest results show that Zoom manages to maintain its presence in a highly competitive business collaboration software market, even facing a serious existential threat.
Frequently Asked Questions
Q: How did Zoom improve its product during the third quarter?
A: Zoom introduced an AI assistant that provides additional functionalities and enhances the user experience.
Q: How many business customers did Zoom have at the end of the third quarter?
A: Zoom ended the quarter with 219,700 business customers, with a 5% growth compared to the previous period.
Q: How is Zoom handling the competition?
A: Zoom hopes that artificial intelligence will help differentiate itself from the competition, especially Microsoft Teams.
Q: What are the criticisms against Zoom?
A: Zoom has been criticized for secretly modifying its terms and conditions and for its failure to combat unwanted meeting intrusions, known as Zoom-bombing.
Q: What are the forecasts for Zoom’s future?
A: Zoom has increased its projections for annual profit and revenue, indicating optimism for further company growth.
Disclaimer: This content is for informational purposes only and is not intended as investment advice.