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Zoom’s (ZM - Free Report) second-quarter fiscal 2025 adjusted earnings of $1.39 per share beat the Zacks Consensus Estimate by 14.88% and increased 3.73% year over year.
Revenues of $1.16 billion beat the consensus mark by 1.22% and increased 2.09% year over year on strong growth from Enterprise customers. Adjusting for foreign currency impact, revenues in constant currency were $1.166 billion, up 2.4% year over year.
Zoom Video Communications, Inc. Price, Consensus and EPS Surprise
Enterprise revenues were $682.8 million, up 3.5% year over year and represented 58.7% of total revenues. Customers contributing more than $100,000 in revenues in the trailing 12 months grew 7% to 3,933. These customers accounted for 31% of revenues, up from 29% in the year-ago quarter.
In the fiscal second quarter, as part of an effort to improve the customer experience and drive greater efficiency in operations, the company transitioned 26,800 Enterprise customers with low annualized revenue run rate (ARR) to Online. The number of Enterprise customers at the end of the second quarter, after accounting for the transition, was approximately 191,600.
The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 98%. As of the end of the quarter under review, the cumulative number of Zoom Rooms licenses purchased was more than 2 million.
In the quarter, Zoom saw amazing traction with Workvivo as it reached 69 customers with more than $100,000 in ARR, roughly doubling year over year. Workvivo was named Meta Platform’s only preferred migration partner for its customers as it retires Workplace from Meta.
ZM witnessed additional traction in Zoom Contact Center as it surpassed 1,100 Zoom Contact Center customers, representing more than 100% year-over-year growth. This was driven by its recently launched higher pricing tiers as well as its success in larger deals. The company now has five customers with 100,000 or more Zoom Phone seats. Zoom AI Companion has grown significantly with more than 1.2 million customer accounts enabled as of date.
Non-GAAP Operating Details
Non-GAAP gross margin in the fiscal second quarter was 78.6%, which was slightly lower than 80.3% in the year-ago period, mainly due to investments in AI innovation.
Research and development expenses increased 7.8% year over year to $206.7 million. Sales and marketing expenses declined 3.9% to $358.7 million, while general and administrative expenses plunged 15.3% to $109.5 million.
Operating income rose 13.9% to $202.37 million year over year. The operating margin came in at 17.6% compared with the year-ago quarter’s operating margin of 15.9%.
Balance Sheet
Total cash, cash equivalents and marketable securities, as of Jul 31, 2024, were $7.5 billion. As of Apr 30, 2024, cash, cash equivalents and marketable securities were $7.4 billion.
Net cash provided by operating activities was $449.3 million for the fiscal second quarter, up 33.7% year over year. Free cash flow was $365.1 million, up 26.2% year over year.
Guidance
Zoom expects third-quarter fiscal 2025 revenues between $1,162 million and $1,165 million.
Non-GAAP earnings per share are expected in the range of $1.29-$1.31.
For fiscal 2025, Zoom expects revenues in the range of $4.63-$4.64 billion.
Non-GAAP earnings per share are expected in the band of $5.29-$5.32.
Zacks Rank & Key Picks
Currently, Zoom carries a Zacks Rank #3 (Hold). Shares of ZM have lost 16.2% year to date.
Image: Bigstock
Zoom (ZM) Q2 Earnings Beat, Enterprise Customers Drive Revenues
Zoom’s (ZM - Free Report) second-quarter fiscal 2025 adjusted earnings of $1.39 per share beat the Zacks Consensus Estimate by 14.88% and increased 3.73% year over year.
Revenues of $1.16 billion beat the consensus mark by 1.22% and increased 2.09% year over year on strong growth from Enterprise customers. Adjusting for foreign currency impact, revenues in constant currency were $1.166 billion, up 2.4% year over year.
Zoom Video Communications, Inc. Price, Consensus and EPS Surprise
Zoom Video Communications, Inc. price-consensus-eps-surprise-chart | Zoom Video Communications, Inc. Quote
Quarter Details
Enterprise revenues were $682.8 million, up 3.5% year over year and represented 58.7% of total revenues. Customers contributing more than $100,000 in revenues in the trailing 12 months grew 7% to 3,933. These customers accounted for 31% of revenues, up from 29% in the year-ago quarter.
In the fiscal second quarter, as part of an effort to improve the customer experience and drive greater efficiency in operations, the company transitioned 26,800 Enterprise customers with low annualized revenue run rate (ARR) to Online. The number of Enterprise customers at the end of the second quarter, after accounting for the transition, was approximately 191,600.
The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 98%. As of the end of the quarter under review, the cumulative number of Zoom Rooms licenses purchased was more than 2 million.
In the quarter, Zoom saw amazing traction with Workvivo as it reached 69 customers with more than $100,000 in ARR, roughly doubling year over year. Workvivo was named Meta Platform’s only preferred migration partner for its customers as it retires Workplace from Meta.
ZM witnessed additional traction in Zoom Contact Center as it surpassed 1,100 Zoom Contact Center customers, representing more than 100% year-over-year growth. This was driven by its recently launched higher pricing tiers as well as its success in larger deals. The company now has five customers with 100,000 or more Zoom Phone seats. Zoom AI Companion has grown significantly with more than 1.2 million customer accounts enabled as of date.
Non-GAAP Operating Details
Non-GAAP gross margin in the fiscal second quarter was 78.6%, which was slightly lower than 80.3% in the year-ago period, mainly due to investments in AI innovation.
Research and development expenses increased 7.8% year over year to $206.7 million. Sales and marketing expenses declined 3.9% to $358.7 million, while general and administrative expenses plunged 15.3% to $109.5 million.
Operating income rose 13.9% to $202.37 million year over year. The operating margin came in at 17.6% compared with the year-ago quarter’s operating margin of 15.9%.
Balance Sheet
Total cash, cash equivalents and marketable securities, as of Jul 31, 2024, were $7.5 billion. As of Apr 30, 2024, cash, cash equivalents and marketable securities were $7.4 billion.
Net cash provided by operating activities was $449.3 million for the fiscal second quarter, up 33.7% year over year. Free cash flow was $365.1 million, up 26.2% year over year.
Guidance
Zoom expects third-quarter fiscal 2025 revenues between $1,162 million and $1,165 million.
Non-GAAP earnings per share are expected in the range of $1.29-$1.31.
For fiscal 2025, Zoom expects revenues in the range of $4.63-$4.64 billion.
Non-GAAP earnings per share are expected in the band of $5.29-$5.32.
Zacks Rank & Key Picks
Currently, Zoom carries a Zacks Rank #3 (Hold). Shares of ZM have lost 16.2% year to date.
Some better-ranked stocks from the broader Computer and Technology sector are Nutanix (NTNX - Free Report) , NVIDIA (NVDA - Free Report) and Dell Technologies (DELL - Free Report) . Nutanix sports a Zacks Rank #1 (Strong Buy), while NVIDIA and Dell Technologies carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nutanix’s shares have gained 11.6% year to date. NTNX is set to report its fourth-quarter fiscal 2024 results on Aug 28.
NVIDIA’s shares have surged 159.5% year to date. NVDA is set to report its second-quarter fiscal 2025 results on Aug 28.
Dell Technologies’ shares have rallied 46% year to date. DELL is set to report its second-quarter fiscal 2025 results on Aug 25.