On Monday, Zoom Video Communications Inc (ZM  ) lifted its guidance as it reported better-than-expected revenue due to strong enterprise sales. Zoom became a household name during the COVID-10 lockdown, standing next to Microsoft Corporation (MSFT  ) and Cisco Systems Inc (CSCO  ). With the integration of AI and hybrid work trends, Zoom showed it is managing to hold its ground in a highly competitive landscape.

Fiscal Third Quarter Highlights

For the quarter that ended on October 31st, revenue grew 3.2% to $1.14 billion, slightly above FactSet's estimate of $1.12 billion. Zoom reported a net income of $141.2 million, improving from last year's comparable quarter when Zoom earned $48.4 million. Adjusted earnings amounted to $1.29 per share, topping LSEG's estimates of $1.09 per share. Free cash flow grew 66.2% to $453.2 million.

The AI companion was introduced during the third quarter. It allows paid users to access features including meeting summaries and catch-ups, along with email and chat composed prompts. As of Monday, it was enabled by more than 220,000 accounts. The Phone segment grew to about 7 million paid seats. The Contact Center reached about 700 customers. Zoom ended the quarter with 219,700 business customers with its userbase growing 5%.

An Improved Outlook

For the undergoing quarter, Zoom guided for revenue in the range between $1.125 billion and $1.130 billion, in line with LSEG's expectations.

Zoom lifted both its annual adjusted profit and revenue forecast. It guided for an annual adjusted profit per share in the range between $4.93 and $4.95 and forecasted revenue in the range between $4.485 billion to $4.495 billion. Free cash flow for the full year is expected in the range between $1.34 billion to $1.35 billion, which implies a 13% surge.

Zoom Is Hoping AI Will Help It Regain Its Pandemic Glory

Zoom enhanced its all-in-one intelligent collaboration platform with Zoom AI Companion as it continued to evolve its customer and employee engagement solutions. Zoom expanded beyond videoconferencing by rolling out phone and AI technology to equip hybrid workplaces. By adding AI tools, Zoom is hoping to gain an edge over Microsoft Teams.

Back in March, Microsoft held 42.6% of the communication and collaborative software market, leaving Zoom far behind with 6.8% share. Zoom even complained to US, UK, German and EU regulators that Microsoft is breaching antitrust rules with price bundling and design. But during the reported quarter, Zoom also faced a backlash due to silently editing its terms of service to give itself exclusive rights to train its AI models using user data without getting their proper consent.

Zoom also faced criticism for failing to fight against Zoom-bombing that has been troubling users since its pandemic-glory days. But its latest results show it is holding its ground in a highly competitive field of business collaboration software, but it is still facing a serious existential threat.

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