Zoom Video Communications, the popular videoconferencing software company, has raised its annual forecasts, indicating progress in its efforts to expand its product offerings to large enterprise customers. This announcement caused the company’s shares to rise by approximately 4% during extended trading.
According to a statement released on Monday, Zoom expects its revenue for the year ending in January 2024 to reach as much as $4.5 billion (€4.1 billion). This is a slight increase from its previous projection of approximately $4.48 billion. Additionally, the company’s annual earnings, excluding certain items, are now expected to be between $4.63 and $4.67 per share, compared to the previous forecast of $4.25 to $4.31 per share.
Investors have expressed concerns regarding the slowdown in Zoom’s once-explosive sales, as the company faces stiff competition from major rivals like Microsoft. To revive growth, Zoom is focusing on expanding its suite of tools for large businesses, including phone platforms, customer service systems, calendar applications, and chat features. These efforts are being fueled by advancements in artificial intelligence. Zoom has recently invested in AI startup Anthropic and announced its acquisition of workplace communication tool Workvivo.
In the fiscal second quarter, Zoom reported a 10% increase in enterprise revenue, reaching $659 million, surpassing analysts’ estimates. This strong performance indicates that Zoom’s strategy to offer more services to large companies is gaining traction, according to Bloomberg Intelligence’s John Butler. However, online sales to consumers and small businesses declined by 4.3% to $479 million.
During a conference call discussing the results, Zoom’s Chief Financial Officer Kelly Steckelberg stated, “Our increased total revenue guidance reflects a consistent view on Enterprise, with tempered expectations for Online for the remainder of the year.” The company reported having 218,100 enterprise customers as of July 31, a 6.9% increase from the previous year. Among these customers, 3,672 contributed more than $100,000 in trailing 12-month revenue, representing a nearly 18% gain from the previous year.
Steckelberg also highlighted the demand for Zoom’s new non-video products. Zoom Phone, the company’s phone platform, has reached an annualized run rate revenue of approximately $500 million, while its contact center tool has acquired over 500 customers. Despite some customers reducing their workforces, which affected spending on Zoom, the company has successfully cross-sold new products to “replace that revenue,” she added.
In the fiscal second quarter, Zoom reported a total revenue increase of 3.6% to $1.14 billion. Its profit, excluding certain items, was $1.34 per share, surpassing analysts’ average estimate. Following the announcement, Zoom’s shares surged to a high of $74.50 during extended trading, compared to its closing price of $67.27 in New York. However, the company has missed out on the major tech rally, with its stock declining by approximately 1% this year.
As Zoom continues to expand its offerings and target larger enterprise customers, it aims to regain momentum and overcome challenges posed by competitors in the videoconferencing market. With its increased revenue forecasts and strong performance in the enterprise segment, the company is optimistic about its future growth prospects.