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Leading video conferencing software company Zoom Video Communications report fiscal second-quarter earnings, its first comparing results to a full-blown pandemic quarter boosted by stay at home demand from the COVID lockdown. Investors will want to hear updates on the Five9 transaction.

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Zoom Video Communications Inc NASDAQ: ZM Report Earnings After Close Monday

 $1.36 Beat $1.16 EPS AND $1.02Billion  Beat $991.70 Billion Revenue Forecast


Zoom reported fiscal second-quarter net income of $316.9 million, or $1.04 a share, compared with net income of $185.7 million, or 63 cents a share, in the year-ago quarter. The company’s adjusted net income was $1.36 a share. Revenue soared 54% to $1.02 billion from $663.5 million a year ago. This was the company's first billion-dollar quarter.

Zooms sales growth of 54% was the smallest year-over-year growth in revenue for Zoom in its recorded history, according to FactSet, which tracks its revenue growth back to April 2018, a year before the company’s initial public offering. The previous low was 77.9% in the quarter ended January 2020, just before the effects of the COVID-19 pandemic.


Guidance for third-quarter earnings was lowered. Zoom gave guidance for between $1.07 and $1.08 a share of adjusted earnings, while analysts polled by FactSet anticipated $1.10 a share. Zoom’s forecast calls for growth to slow more. The top of its guidance range for the third quarter would reflect year-over-year sales growth of 31.2% from the same quarter in 2020.

Zoom Video Communications Inc NASDAQ: ZM

Reaction After hours $310.90 ▼$36.60 ( ▼10.53%)


Earnings Expectations

Earnings Expectations: Of the 21 analysts surveyed by FactSet, Zoom on average is expected to post adjusted earnings of $1.16 a share. That’s up from the 96 cents a share expected at the beginning of the quarter, and the 92 cents a share reported last year. Zoom forecast earnings of $1.14 to $1.15 a share. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of $1.27 a share.

Revenue Expectations: Of the 20 analysts surveyed, Zoom is expected to report revenue of $991.2 million. That up from the $934.9 million estimated at the beginning of the quarter and $663.5 million reported last year. Zoom predicted revenue of $985 million to $990 million for the second quarter. Estimize expects revenue of $1.01 billion.

Analyst Notes

28 analysts cover Zoom Video,

  • 15 have buy or overweight ratings,
  • 11 have hold ratings 
  • 2 have sell or underweight ratings
  • Average price target of $415.40, 

via FactSet data.

Morgan Stanley

Morgan Stanley analyst Meta Marshall upgraded Zoom to overweight from equal-weight on Thursday August 27 and raised her price target to $400 from $360. She expects that a 5% or greater revenue beat from the company “would cause a positive reaction for the stock.”

Marshall also sees Zoom’s plan to buy Five9 Inc. for $14.7 billion as a positive.

“While valuation continues to credit durable growth at ~22x EV/FY23e revenue, we hear fewer concerns over churn in FY22, particularly as return to work initiatives have slowed,” Marshall said.

Zoom’s enterprise value-to-sales ratio ( EV-to-sales) is at  29.5,  this compared to a ratio of 49 when ZM first went public.  Zoom then had the highest EV-to-sales of a U.S. tech company valued at more than $500 million.  Since then CrowdStrike Holdings Inc. and Zscaler Inc.both have EV-to-sales ratios exceeding 60, according to FactSet data.

J.P. Morgan

JPM analyst Sterling Auty has a neutral rating and noted Zoom’s daily active users and downloads have been declining since their peak in September.  In the note “it is too difficult to determine how many users have reduced activity enough to move either to a free offering or cancel some seats within an account.” “We believe business users that are paying for a license will likely maintain it if they are still using video meetings a couple times per week or more,”

Auty said. “The one area that is likely to be more volatile in terms of churn are the accounts with less than 10 employees that also include consumer use cases.”


JMP analyst Patrick Walravens has a hold rating  and said Zoom’s smaller customers are likely to be the biggest source of churn, and that the company’s biggest threat comes from Microsoft Corp.’s Teams product.

“Prior to the pandemic, the revenue from customers with one to 10 employees represented around 20% of the total business,” Walravens said. “As of F1Q22, this customer segment represented 37% of total revenue. While we do not expect elevated levels of churn in the customer with more than 10 employees segment, it is likely that the one to 10 segment will experience churn.”

Piper Sandler

Piper Sandler analyst James Fish has an overweight rating on Zoom and a price target of $464, said he expects revenue to come in higher than $1 billion for another quarter of 50% or more growth.

“Investors will likely be focused on Zoom Phone success, with +0.5M net-adds anticipated or >2M Zoom Phone licenses in the market,” Fish said.

“However, most investors forget this attach will potentially drive higher Meetings seats.”

 KeyBanc Capital Markets

Keybanc analyst Steve Enders has a buy rating and a $428 price target,  noted Zoom’s revenue beats “appear to have begun normalizing from outsized levels in FY21,” so its more a question of how big the beat is.

Enders expects that investors will be more focused on how Zoom plans to grow past its core videoconferencing and how management comments on the adoption of Zoom Phone, Zoom Apps, Zoom Events, as well as the pending Five9 acquisition.

Zoom Video aquisition of Cloud Contact Center Software Provider Five9

Zoom Video announced a deal to to acquire Five9 a provider of for contact centers for $14.7 bln in an all-stock transaction. $ZM was down 4% and $FIVN up 4% on the deal.

The aquistion puts ZM into the contact center space. Read More Here.


About Zoom

Zoom is for you. We help you express ideas, connect to others, and build toward a future limited only by your imagination. Our frictionless communications platform is the only one that started with video as its foundation, and we have set the standard for innovation ever since. That is why we are an intuitive, scalable, and secure choice for individuals, small businesses, and large enterprises alike.

Founded in 2011, Zoom is publicly traded (NASDAQ: ZM) and headquartered in San Jose, California. Visit zoom.com and follow @zoom.

Source: Zoom

From The TradersCommunity Research Desk

From The TradersCommunity News Desk

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