Zoom stock gains on beat-and-raise quarter; reactions mixed

Zoom (NASDAQ:ZM) shares rose more than 2% in premarket Tuesday after the company reported its Q2 results.

EPS of $1.34 came in better than the consensus estimate of $1.06. Revenue grew 3.6% year-over-year (up 4.5% on constant currency basis) to $1.14 billion, beating the consensus estimate of $1.11B.

Enterprise revenue increased 10.2% year-over-year to $659.5 million, while Online revenue fell 4.3% to $479.2M.

At the end of Q2, the company had approximately 218,100 Enterprise customers, representing a 6.9% year-over-year growth. The number of customers contributing more than $100,000 in trailing 12 months revenue grew 17.8% year-over-year to 3,672.

“Our mission of delivering limitless human connection remains core as we continue to innovate and expand our platform to help bring value and enhanced productivity to our customers with new AI features like Zoom IQ Meeting Summary and Team Chat Compose, as well as Intelligent Director,” said CEO Eric S. Yuan.

For Q3/24, the company expects EPS in the range of $1.07-$1.09, compared to the consensus of $1.03, and revenue in the range of $1.115B-$1.12B, compared to the consensus of $1.13B.

For the full year, the company sees EPS at $4.63-$4.67, compared to the consensus of $4.30, and revenue at $4.485B-$4.495B, compared to the consensus of $4.48B.

Needham & Company analysts reiterated a Hold rating on ZM stock.

"With top-line growth stalled, we are cautious on meaningful re-acceleration until product diversification improves. Given the macro and saturation of Teams in the enterprise, we are skeptical that Phone can meaningfully contribute to revenue acceleration. We look to new products such as Contact Center, Workvivo, new AI applications or an acquired product to make strong progress before getting more constructive on the stock," the analysts said.

William Blair analysts added:

"We believe that Zoom offers differentiated solutions in a massive market that is still in the early days of penetration. Furthermore, we view the company’s platform vision as compelling and expect that execution toward this vision will drive long-term value for the company. Risks to our thesis include increased competition from new and existing competitors and potential competition from partners, slower-than-expected adoption of new offerings, and potential execution missteps on expanding into international markets."

(Additional reporting by Senad Karaahmetovic)

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