Zoom Video Communications Inc. (Nasdaq: ZM) reported better-than-anticipated fiscal 2022 second-quarter earnings and revenues. Notably, the company also achieved the milestone of $1 billion quarterly revenue. Still, the stock performed poorly as the full-year revenue projections, despite the upward revision, just met analysts’ expectations. Full-year earnings guidance, however, surpassed analysts’ estimates. Furthermore, the slowdown in user growth also fueled the stock sell-off. Eventually, the stock ended Tuesday’s trading session at $289.50, down $58.00 or 16.69% from the prior close.
The San Jose, California-based company posted second-quarter revenues of $1.021 billion, an increase of 54% from $663.52 million in the second quarter last year. Analysts surveyed by Refinitiv had anticipated the company to post revenues of $991 million for the quarter.
The increase in revenue was led by the arrival of new clients and expansion of product subscriptions by prevailing ones. Specifically, at the end of the June quarter, the video-conferencing facility provider had 2,278 clients paying subscription fees of over $100,000 (trailing twelve months), an increase of roughly 131% from the comparable period last fiscal year.
For the quarter ended July 31st, 2021, net income increased to $316.90 million, or $1.04 per share, from $185.742 million, or $0.63 per share in the quarter ended July 31st, 2020.
Excluding stock-based compensation expenditures and associated payroll levies, litigation settlements, net Gains on strategic investments, acquisition-related expenses, and undistributed incomes attributable to contributing securities, among others, the Q2 2022 non-GAAP net income was $415.07 million, or $1.36 per share, up from $274.85 million, or $0.92 per share, in Q2 2021. Analysts polled by Refinitiv had forecast the company to report earnings of $1.16 per share for the reported quarter.
Commenting on the results, Zoom founder and CEO, Eric Yuan, said: “In Q2, we achieved our first billion-dollar revenue quarter while delivering strong profitability and cash flow.”
On a y-o-y basis, the gross margin widened to 74.40% in the June 2021 quarter, from 72.30% in the March 2021 quarter. The increase was primarily aided by the unveiling of a new data center and a drop in usage due to the absence of school sessions.
Kelly Steckelberg, Zoom’s CFO, highlighted that the company currently has two million seats for the cloud-based phone facility (Zoom Phone), an increase from 1.5 million at the end of the March quarter.
During 2Q 2022, the number of clients with ten or above employees surged 36% y-o-y to 504,900. However, in 2Q 2021, the figure was 370,200, reflecting an increase of 458% on a y-o-y basis. The slow pace of growth encouraged traders to sell the stock.
Moving forward, Zoom anticipates Q3 revenues of approximately $1.015 billion to $1.020 billion, which translates to roughly 31% y-o-y growth. Furthermore, non-GAAP earnings are projected to be between $1.07 and $1.08 per share. Analysts currently anticipate earnings of $1.09 per share on revenues of $1.01 billion.
For FY 2022, Zoom forecasts revenues of approximately $4.005 billion to $4.015 billion. Adjusted earnings are expected to be between $4.75 and $4.79 per share. Earlier, the company had issued revenue guidance in the range of $3.97 billion to $3.99 billion. Zoom had also issued a non-GAAP earnings outlook of between $4.56 and $4.61 per share. Analysts are currently forecasting earnings of $4.67 per share on revenues of $4.01 billion. The CFO also expects non-GAAP margins to increase when students start coming to school.
Notably, in mid-July, the company revealed its plans to take over Five9, a cloud contact center software provider, in an all-stock deal worth $14.7 billion.
The quarterly earnings beat and upward revision of the FY 2022 outlook are expected to keep the stock slightly bullish in the short term.
The historical price chart indicates that the stock has closed below its 50-day moving average. The next support is anticipated only between 250 and 260. Furthermore, the MACD indicator’s reading has turned negative. Therefore, we are anticipating the stock to stay in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
