Zoom beats Q3 estimates as AI tools drive enterprise growth

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Zoom Video Communications has announced that its quarterly revenue exceeded the analysts’ predictions. This revenue outcome demonstrated outstanding performance for the software company’s diverse range of business tools. 

In a statement released on Monday, November 24, Zoom noted that its sales increased by 4.4% to reach an all-time high of $1.23 billion in the fiscal third quarter. The profit gained, after eliminating specific items, was reported at $1.52 per share. 

According to the earlier prediction presented by the analysts, a reliable source noted that the company’s average earnings were expected to be $1.44 per share. At the same time, revenue was estimated to total around $1.21 billion.

Zoom makes significant progress in increasing revenue 

Recent reports highlighted that Zoom is expanding its reach in the tech market by broadening its offerings to provide business phone systems and software designed for contact centers.  Notably, the company is famous for its popularly adapted videoconferencing application.

Additionally, it launched the newest version of its artificial intelligence assistant during its September annual conference. This AI assistant included upgraded features that allowed users to develop custom AI tools for a monthly fee of $12. 

Eric Yuan, the founder and CEO of Zoom, commented on this progress. Yuan noted that they expected a substantial rise in AI Companion usage following the launch of their artificial intelligence assistant, AI Companion 3.0, in this quarter. He made these remarks after acknowledging rapid growth in Custom AI Companion and its AI-first Customer Experience suite. 

Meanwhile, reports from sources indicated that the company’s shares surged approximately 4% in after-hours trading. This increase occurred after the stock closed at $78.60 in New York on Monday of this week. The stocks, on the other hand, dropped drastically by 3.7% this year, following general concerns raised in the market regarding application software. 

Revenue collected from enterprise clients surged by 6.1% to reach  $741.4 million. This figure exceeded analysts’ earlier prediction of  $731.6 million.  When reporters inquired about these impressive results, Zoom stated that it had a total of 4,363 clients at the time who had contributed more than $100,000 each within the past year.

In the last quarter, the average monthly churn rate for individuals and small businesses was 2.7%. This percentage reflected a decline from 2.9% in the previous quarter. Sources explained that this decrease was observed after many casual users decided not to renew their Zoom licenses as pandemic restrictions eased.

Rishi Jaluria admits that Zoom’s enterprise business continues to be a major strength

During a call with analysts after Zoom’s revenue results were made public, Michelle Chang, the Chief Financial Officer (CFO) of the company, confessed that they have implemented several processes to increase revenue while maintaining strong profitability and minimizing dilution.

In the meantime, apart from increasing its revenue, Zoom also raised its total share buyback limit by $1 billion.

The company, based in San Jose, California, stated that its revenue for this period would be approximately $1.23 billion following this achievement. Profit (excluding specific items) is estimated to be around $1.49 per share. Analysts, on the other hand, expected $1.23 billion in sales and adjusted earnings of $1.45 per share. 

Rishi Jaluria, analyst at RBC Capital Markets, acknowledged Zoom’s enterprise business as a major strength. According to Jaluria’s argument, investors are paying attention to the progress of the new AI companion tool, the stabilization of churn among casual users, and expected long-term profit margins.

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