Shares of Zoom Video Communications Inc
The results came amid an exciting earnings season. Here are some key analyst takeaways.
- Stifel analyst Parker Lane maintained a Hold rating, while reducing the price target from $70 to $65.
- Goldman Sachs analyst Kash Rangan reiterated a Neutral rating, while slashing the price target from $73 to $70.
- RBC Capital Markets analyst Rishi Jaluria reaffirmed an Outperform rating and price target of $95.
- BofA Securities analyst Michael Funk maintained a Neutral rating and price target of $78.
- Rosenblatt Securities analyst Catharine Trebnick reaffirmed a Buy rating and price target of $78.
- Needham analyst Ryan Koontz reiterated a Hold rating on the stock.
- JMP Securities analyst Patrick Walravens reaffirmed a Market Perform rating.
- Oppenheimer analyst George Iwanyc reiterated a Perform rating on the stock.
"Management highlighted continued success in the Contact Center business," with the company reaching 90 customers with over $100,000 in annual recurring revenue (ARR), which represents 246% year-on-year growth, as well as "solid early traction with Zoom AI Companion with customers of all sizes," the analyst wrote. Online business was flat year-on-year, which signals some easing of headwinds seen in recent years.
Goldman Sachs: Zoom reported revenues around 1% higher than consensus, "while Op. Income and FCF handily outperformed estimates (+10% / +58% vs. Consensus)," Rangan said.
The revenue outperformance, "coupled with the unchanged FY25 revenue guide, points to a still choppy demand environment that could prolong an inflection to decelerating growth trends." He added, "Enterprise NRR stepping down to 99% (vs. 101% in 4Q), coupled with flat Online revenue, underscores this dynamic."
RBC Capital Markets: Zoom raised its guidance by less than the first-quarter upside, while setting its second-quarter below consensus, Jaluria said.
"Metrics were better than expected across the board, with acceleration in key indicators (revenue, billings, cRPO)," the analyst wrote. "Profitability and FCF upside were ahead trends, and guidance leans conservative," he added.
BofA Securities: Zoom reported "solid" first-quarter results and raised its revenue and operating income guidance, Funk said. Management expects growth to bottom in the second quarter, he added.
"Revenue growth acceleration is predicated on stabilization in online revenue and enterprise growth driven in large part by emerging product expansion," the analyst added.
Rosenblatt Securities: Zoom's total revenue grew 3.2% year-on-year, "driven by Enterprise, which generated 58% of total revenue and grew 5% Y/Y (vs. Street expectations of 4%), and Online which was flat Y/Y (vs-Street expectations of down 2% Y/Y)," Trebnick wrote.
Although investments in AI innovation impacted gross margin, this is expected to improve in the second half of the year, the analyst stated. The two "key highlights" were growth of Zoom Contact Center and continued expansion of Zoom Phone, "which has five corporations with >100K seats," she added.
Needham: "ZM reported major and sizable wins across its Phone, Contact Center, and Workvivo products as it aims to reignite topline growth," Koontz wrote in a note.
Revenue of $1.14 billion beat consensus by 1% but "marked the 10th consecutive quarter of LSD% y/y growth," he said. The company's free cash flows reached $570 million, representing 44% year-on-year growth, "boosted by tax seasonality, collections, interest income and disciplined cost management."
JMP Securities: "Zoom has high margins, strong cash flow, and $7.4B in cash," while having $1.35 billion remaining on its share repurchase authorization, which still leaved it around $6 billion for strategic M&A, Walravens said. While Zoom's revenue growth accelerated during the quarter, the company recorded several large wins with newer products, such as Zoom Contact Center, Zoom Phone, and Workvivo, he added.
"More specifically, Zoom Contact Center reached 90 customers with >$100,000 in ARR, representing 246% growth as the company has a disruptive play in this very attractive market that Gartner estimates will grow from $19B in 2023 to $39B in 2027 (including contact center, conversational AI, and virtual assistants)," the analyst wrote.
Oppenheimer: Zoom reported revenue slightly higher than expectations, "as the demand environment stabilizes," Iwanyc said.
"Enterprise NDER (99%, -2pts QoQ) is also starting to stabilize, though 2Q is still expected to be the low point for NDER and YoY top-line growth before 2H improvement," the analyst wrote. He added that the company fiscal 2025 growth projections appear "achievable/beatable."
ZM Price Action: Shares of Zoom Video Communications had dipped by 0.33% to $63.88 at the time of publication on Tuesday.
