A month has gone by since the last earnings report for Zoom Video Communications (ZM Quick QuoteZM - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Zoom Video due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Zoom's Q3 Earnings Top Estimates, Revenues Jump Y/Y

Zoom’s third-quarter fiscal 2022 adjusted earnings of $1.11 per share beat the Zacks Consensus Estimate by 1.8% and increased 12.1% year over year.

Revenues of $1.05 billion surpassed the consensus mark by 3% and increased 35.2% year over year.

This outperformance was driven by a healthy mix of new and existing customers, with new customers accounting for around 74% of the incremental revenues and existing customers accounting for 26% of the same.

Revenues from Americas (66.6% of revenues) jumped 30% year over year to $700 million. Revenues from EMEA (19% of revenues) soared 48.1% from the year-ago quarter to $200 million. Revenues from APAC (14.3% of revenues) were $150 million, up 45.6% year over year.

User Base Jumps in Q3

At the end of the fiscal third quarter, Zoom had roughly 512,100 customers (with more than 10 employees), up 18% year over year. Its trailing 12-month net dollar-expansion rate in customers with more than 10 employees was above 130% for the 14th consecutive quarter.

Zoom had 2,507 customers with more than $100,000 in trailing 12-month revenues, up roughly 94% year over year.

Zoom Phone witnessed triple-digit year-over-year revenue growth in the reported quarter. Zoom Phone reached 30 customers with more than 10K paid seats.

Operating Details

Non-GAAP gross margin in the quarter under review expanded 770 basis points (bps) on a year-over-year basis to 76%.

Non-GAAP research & development (R&D) expenses as a percentage of revenues expanded 320 basis points (bps) on a year-over-year basis to 6.4%. Non-GAAP general & administrative (G&A) expenses decreased 160 bps on a year-over-year basis to 7.8%.

Moreover, non-GAAP sales & marketing (S&M) expenses as a percentage of revenues expanded 440 bps on a year-over-year basis to 22.6%.

Non-GAAP operating income surged 41.4% year over year to $411.3 million. Operating margin expanded 170 bps on a year-over-year basis to 37.4%.

Balance Sheet & Cash Flow

As of Oct 31, 2021, cash and cash equivalents and marketable securities were $5.4 billion compared with $5.1 billion as of Jul 31, 2021.

Non-GAAP free cash flow was $374.8 million in the quarter under review compared with $455 million in the previous quarter and $388.2 million in the year-ago quarter.

Guidance

For fourth-quarter fiscal 2022, Zoom expects revenues between $1.051 billion and $1.053 billion. Non-GAAP income from operations is expected between $361 million and $363 million. Moreover, non-GAAP earnings are expected in the $1.06-$1.07 per share range.

For fiscal 2022, Zoom now expects revenues between $4.079 billion and $4.081 billion.

Non-GAAP income from operations is expected between $1.598 billion and $1.600 billion. Moreover, non-GAAP earnings are expected in the $4.84-$4.85 per share range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Zoom Video has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zoom Video has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.