On Monday, Zoom Video Communications (NASDAQ: ZM) exceeded both top and bottom-line estimates with its fiscal second quarter performance. Moreover, the video communications provider also lifted its full-year outlook with its shares rising 8% upon the report during extended trading. However, they fell 6% on Tuesday morning as Wall Street took a better look at the figures with its rival Microsoft Corporation (NASDAQ: MSFT) constantly upleveling its game by adding features to Teams.
Fiscal Second Quarter Highlights
For the quarter that ended on July 31st, Zoom reported its revenue increased 3.6% YoY to $1.14 billion, topping Refinitiv's expectation of $1.12 billion. Moreover, enterprise revenue rose 10.2% to $659.5 million, making 58% of total revenue.
Net income expanded from last year's comparable quarter when it amounted to $45.7 million to $182 million. The adjusted earnings per share amounted to $1.34 per share, again Refinitiv's expectation of $1.05 per share.
The Pace Is Still Sluggish Compared To Covid Times
This is still a far cry from the pandemic era when companies worked remotely and schools taught their curriculum online. On July 31st, Zoom had 218,100 enterprise customers which is only a 1% increase from April 30th.
Fiscal Third Quarter Outlook
Zoom management guided for adjusted earnings per share in the range between $1.07 and $1.09 while expecting revenue in the range between $1.115 billion and $1.120 billion. Refinitiv's survey of analysts was expecting adjusted earnings of $1.03 per share on the back of revenue of $1.13 billion.
A Lifted Annual Guidance
As Zoom continues to work on optimizing its spending, it now expects adjusted earnings per share in the range between $4.63 and $4.67, improving its prior range of $4.25 to $4.31. It expects revenue in the range between $4.485 billion and $4.495 billion, with the middle of the revenue range implying a 2% growth rate. It previously guided for the revenue range in between $4.465 billion and $4.485. Analysts were expecting a guided EPS of $4.30 and revenue of $4.49 billion, according to Refinitiv.
Novelties
During the reported quarter, Zoom's customers were able to start free trials for automated meeting summaries without recording calls. Zoom also boarded the AI train by investing in a startup Anthropic.
Interestingly, Zoom CEO and founder, Eric Yuan, revealed that the company will not be charging a high price for its AI features that will be added to its existing services. This is Zoom's latest efforts to spruce up its offerings and compete with Microsoft Teams that is dominating the field. With this partnership, Anthropic's large language model that competes directly with Microsoft-backed Open AI creation, will be integrated with its video platform. The ChatGPT rival will be added first to the call center service, Zoom Contact Center.
But one cannot but wonder if Zoom entered the AI field too late as Microsoft launched a premium version of the Teams app powered by ChatGPT back in February. Even Salesforce Inc (NYSE: CRM) integrated Microsoft-backed ChatGPT to its collaboration software Slack that unlike Zoom has messaging at heart, while Zoom's essence is video, but still, they are rivals competing for enterprise customers.
It remains to be seen how will Zoom's AI-powered solutions play out in a world where it competes with no other than a true tech titan, Microsoft.
What certainly is a pleasant surprise is that Zoom's latest report shows that there's life beyond enabling remote working. Therefore, although corporations are pushing employees back to offices, Zoom seems confident about its way forward that is built on generative-AI and it delivered solid numbers. But it remains to be seen how its AI roadmap play out now that is no longer 'powered' by the pandemic way of life.
DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.