Zoom Inc. (ZM: NASDAQ) reported a swing to profit in the fiscal 2024 fourth quarter. The company’s top and bottom lines also surpassed Wall Street estimates. However, the video communication platform provider issued an FY25 revenue outlook below market expectations, signaling sluggish demand for its offerings as companies shift away from hybrid work environments. The stock of Zoom ended Tuesday’s trading session at $68.17, up $5.05, or 8% from the prior close.
The San Jose, California-based company reported four-quarter revenues of $1.15 billion, up 2.60% from $1.12 billion in the similar quarter of fiscal 2023.
For the fourth quarter, which ended January 31, 2024, Zoom posted a net income of $298.83 million, or $0.95 per share, compared with a net loss of $104.05 million, or $0.36 per share, in the quarter that ended January 31, 2023.
Excluding stock-based compensation expense and related payroll taxes, litigation settlements, acquisition-related expenses, and restructuring expenses, among others, Zoom’s 4Q 2024 non-GAAP net income was $443.97 million, or $1.42 per share, an increase from $366.55 million, or $1.22 per share in 4Q 2023.
Analysts surveyed by LSEG anticipated Zoom to report earnings of $1.15 per share on revenues of $1.13 billion.
Commenting on the quarterly earnings, Eric Yuan, Zoom’s founder and CEO, stated, “While delivering innovation for our customers, we also drove robust profitability and grew free cash flow.”
The growth in Q4 2023 could have been quicker if there hadn’t been a sales reorganization. Kelly Steckelberg, Zoom’s finance chief, pointed out during a conference call with analysts that the reorganization took a long time for the organization to bounce back from.
Zoom, which experienced a peak in its performance during the COVID-19 pandemic with revenue increasing by over 100% for five consecutive quarters due to a surge in remote workers, is currently facing a slowdown with growth stuck in the single digits.
Nevertheless, during a recent discussion, the CEO mentioned that the Team Chat migration tool has recorded a fourfold growth in downloads over the past six months. He also acknowledged that Zoom has yet to promote its chat capabilities in an effective manner.
The company had 220,400 enterprise clients at the end of the latest quarter, an increase from 219,700 in 3Q 2024. Zoom ended the January 2024 quarter with cash, cash equivalents, and marketable securities, excluding restricted cash, of $7.0 billion. Free cash flow was $332.7 million in 4Q 2024, an increase of 81.50% from $183.3 million in 4Q 2023.
Looking ahead, the company projects fiscal 2025 first-quarter revenues of $1.125 billion, implying growth of less than 2% on a y-o-y basis. Zoom also forecasts Q1 non-GAAP earnings in the range of $1.18 to $1.20 per share. Analysts surveyed by LSEG anticipate the company to report non-GAAP earnings of $1.13 per share on revenues of $1.13 billion.
For FY25, Zoom expects revenues of $4.60 billion, implying growth of 1.60% year-on-year. The company also forecasts adjusted earnings of between $4.85 and $4.88 per share. Wall Street analysts expect Zoom to report adjusted earnings of $4.71 per share on revenues of $4.65 billion.
Furthermore, the company’s board has approved a stock repurchase program of $1.5 billion.
The swing to profit and solid Q1 outlook are expected to keep Zoom’s stock slightly bullish in the short term.
The historical price chart indicates that the stock of Zoom is ascending after testing support at $65. The next resistance is anticipated to be only near $72. Additionally, the stock is trading above its 50-day moving average, while the stochastic indicator is rising toward the bullish zone. Therefore, we anticipate Zoom’s stock to remain in an uptrend in the near term.
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