Zoom Video Communications Inc. reported quarterly sales and profit that topped analysts’ estimates, a sign that corporate customers are sticking with the software company. The shares gained more than 10% in extended trading.
The company also announced a $1.5 billion share buyback, which follows a $1 billion authorization started in 2022 that expired this month.
Sales gained 2.6% to $1.15 billion, the company said Monday in a statement. Analysts, on average, projected $1.13 billion. Profit, excluding some items, was $1.42 a share, compared with the average estimate of $1.15.
The new buyback is likely to be the biggest area of focus for investors, as it “answers one element of uncertainty” around how Zoom will use its stockpile of cash, Michael Turrin, an analyst at Wells Fargo. The move likely pushes back on the potential of a large acquisition, he added.
After hyper-growth during the pandemic, Zoom has experienced a dramatic sales slowdown amid competition for business customers from Microsoft Corp. and the departure of consumers from the videoconferencing platform. In the hopes of capturing more corporate clients, Zoom has expanded its product line to include phone systems, call centers and AI assistants.
Our team is dedicated to platform-wide innovation, introducing hundreds of new features, including those for Zoom Contact Center, which redefine the gold standard for customer experience,” Chief Executive Officer Eric Yuan said in the statement.
Contact center licenses about tripled over the last year, and 95 phone customers had more than 10,000 active users, Zoom said in an earnings presentation. About half a million accounts enabled Zoom’s AI free companion, the company added.
Improvement should take place in 2H as products such as Zoom Phone and Contact Center add more to sales. Both new offerings are evolving rapidly, which bodes well for continuing growth in fiscal 2025.
Enterprise revenue increased 4.9% to $667.3 million in the period ended Jan. 31. Zoom said it had 220,400 corporate customers at the end of the quarter, with 3,810 contributing more than $100,000 in trailing 12-month revenue.
Online sales, generally from casual consumers and small business, decreased 0.5% to $479.2 million. Zoom, on average, lost 3% of those customers each month in the quarter, matching its metric for the previous period, which was the slowest rate of churn the company had ever reported.
The buyback amount still allows “flexibility to consider M&A options to accelerate growth and deliver for our customers,” Chief Financial Officer Kelly Steckelberg said during a conference call with analysts after the results were released.
Zoom projected revenue of about $4.6 billion in the fiscal year ending in January 2025. Analysts, on average, estimated $4.66 billion. Profit, excluding some items, will be $4.85 to $4.88 a share, compared with the average projection of $4.72.
The shares hit a high of $71.96 in extended trading after closing at $63.12 in New York. The San Jose, California-based company’s stock has declined 15% over the past 12 months, missing the market rally that fueled many technology companies.
