Zoom Video Communications reported second-quarter earnings and revenue that topped estimates as enterprise sales growth beat views. Plus, revenue guidance for Zoom Video stock came in above expectations as Wall Street analysts look for growth to re-accelerate.
The company reported July-ended quarter earnings after the market close on Wednesday. Zoom Video also said Chief Financial Officer Kelly Steckelberg will be leaving.
"Growth in the quarter was driven by newer products, including Zoom's Contact Center offering, Zoom Phone, and Workvivo," said William Blair analyst Arjun Bhatia in a report. "Revenue from customers over $100,000 in annual recurring revenue grew 9% and now represents 31% of total revenue, up one point sequentially. Despite a choppy operating environment, online monthly churn declined to 2.9%, down from 3.2% in the prior period and a record-low mark for Zoom. The company pointed to customers seeing value from features like AI as the primary driver for lower churn."
Bhatia added: "Management continues to believe revenue growth troughed in the second quarter, and third-quarter guidance calls for a slight pickup in growth despite remaining prudent with its outlook."
Additionally, Zoom earnings for the second quarter were $1.39 per share on an adjusted basis, up 4% from a year earlier. Revenue rose 2% to $1.162 billion. Sales growth slowed for the tenth-straight quarter.
Zoom stock analysts had projected earnings of $1.21 a share on sales of $1.149 billion.
ZM Stock: Enterprise A Bright Spot
In the enterprise market for business customers, revenue rose 3.5% to $683 million, topping estimates of $675 million.
"Zoom delivered a very solid quarter, marked by strong operational execution, greater margin leverage and free cash flow generation, and impressive momentum across their newer product offerings," said Evercore ISI analyst Peter Levine in a report. "Management commentary would lead us to believe we have reached the trough in terms of churn stabilization for the online segment. This should pave the way for revenue acceleration starting Q3."
Also, he noted that Zoom Video holds $7.5 billion in cash on its balance sheet.
Meanwhile, Zoom Video sales growth has slowed as the company adjusts to slower product demand in the post-coronavirus era. Amid the Covid-19 emergency, demand for Zoom videoconferencing software surged as businesses told employees to work from home.
Revenue Growth To Re-Accelerate?
On the stock market today, Zoom stock jumped 13% to close at 68.04. ZM stock had retreated nearly 18% before the earnings report.
For the October quarter, Zoom said it expects revenue in a range of $1.16 billion to $1.165 billion, beating estimates of $1.157 billion.
Zoom's cloud-based software sets up video calls, with chat tools available. Zoom Video aims to morph into a broader communications platform for business customers.
Heading into the Zoom earnings report, shares owned an IBD Relative Strength Rating of 23 out of a best possible 99, according to IBD Stock Checkup.
Meanwhile, Microsoft and its Teams communication platform is a big competitor.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
