Zoom changes name to emphasize AI offering and provides sales forecast
Zoom Video Communications provided a sales forecast for the current quarter that failed to impress investors who expected a bigger boost from the company’s expanded product offering.
Revenue will be about $1.18 billion (about Rs. 15,170 crore) in the period ending January, Zoom said in a statement on Monday. Earnings, excluding some items, will be $1.29 to $1.30 (approximately Rs. 110) per share. Analysts on average forecast adjusted earnings of $1.28 per share on revenue of $1.17 billion (about Rs. 9,860 crore), according to data compiled by Bloomberg.
The shares fell about 4.5 percent in extended trading after closing at $89.03 (about Rs. 7,503 crore) in New York. While Zoom’s prospects met expectations, the stock was up about 48 percent since the company’s last earnings report in August on optimism about its new products.
The software maker known for videoconferencing has expanded its suite of tools to include phone systems, a contact center application and artificial intelligence (AI) assistants. In October, Zoom named former Microsoft executive Michelle Chang as chief financial officer, replacing Kelly Steckelberg, who left to join design startup Canva.
Zoom has seen a 59 percent increase in the number of monthly active users of its AI assistant since the previous quarter, the company said in a presentation supplementing its earnings statement. It also had the highest score among 1,250 customers with its contact center application.
While there were “no major issues” with the results, a steep gain for the stock impacting Monday’s earnings means the results may not attract new investors, wrote Tyler Radke, an analyst at Citigroup.
In addition, the company announced that it has dropped “video” from its official name and would now be known as Zoom Communications Inc. “Our new name better reflects our expanding scope and plans for long-term growth,” wrote Chief Executive Officer Eric Yuan. in a message announcing the change.
In the fiscal third quarter, sales rose 3.6 percent to $1.18 billion (about Rs. 9,946 crore), compared to the average analyst estimate of $1.16 billion (about Rs. 9,777 crore), according to data compiled by Bloomberg. Earnings, excluding some items, stood at $1.38 (approximately Rs. 116.32) per share in the period ended October 31.
Operating revenue rose 5.8 percent to $699 million (approximately Rs. 5,891 crore). Zoom said it had 3,995 customers who contributed more than $100,000 (approximately Rs. 84.2 lakh) in the past year.
A continued loss of consumer and small business customers from Zoom has investors concerned, especially since these customers tend to have higher margins than business customers. Average monthly churn in this segment was 2.7 percent in the quarter, which beat analyst estimates. Revenue in the segment was little changed at $479 million (4,037 crore). That was Zoom’s lowest online churn ever, Chang said, according to comments prepared for the company’s earnings conference call.
Zoom said it is adding $1.2 billion (approximately Rs. 10,114 crore) to its existing share buyback programme, increasing its total buyback authorization to $2 billion (approximately Rs. 16,857 crore).
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