Eric Yuan, the founder and CEO of Zoom Communications Inc., addressed the company’s ongoing transformation at the annual Concordia Summit in New York on September 25, 2024. The video conferencing giant, formerly known as Zoom Video Communications, has reported solid financial results for its fiscal third quarter, yet its stock slid 4% in extended trading on Monday due to mixed investor sentiment surrounding its future guidance.
Zoom posted results that exceeded Wall Street expectations, showcasing steady growth amid an evolving market for its services. According to financial data from LSEG, the company outperformed analysts’ projections in both earnings per share and revenue. Adjusted earnings per share came in at $1.38, higher than the anticipated $1.31, while quarterly revenue reached $1.18 billion, surpassing the $1.16 billion forecast.
The company reported a 4% year-over-year increase in revenue for the quarter ending on October 31. While this marked continued single-digit growth for the past two and a half years, it represents a stark contrast to the explosive expansion Zoom experienced during the height of the COVID-19 pandemic in 2020 and 2021, when its revenue tripled as remote work and virtual communication tools became indispensable.
Net income for the quarter rose to $207.1 million, or 66 cents per share, up from $141.2 million, or 45 cents per share, during the same period last year. The company also reported steady growth in its enterprise customer base, adding 800 new business accounts to reach a total of 192,400 enterprise customers.
Looking ahead, Zoom provided guidance for its fiscal fourth quarter, projecting adjusted earnings per share in the range of $1.29 to $1.30 with revenue expected between $1.175 billion and $1.180 billion. Analysts had anticipated $1.29 per share and $1.17 billion in revenue, meaning the company’s outlook came in slightly above expectations. For the full fiscal year 2025, Zoom raised its guidance, forecasting adjusted earnings per share of $5.41 to $5.43 on revenue ranging from $4.656 billion to $4.661 billion, representing an expected growth rate of around 3%. This was an improvement from its previous forecast of $5.29 to $5.32 per share on revenue between $4.63 billion and $4.64 billion.
Eric Yuan highlighted the company’s strategic moves to diversify its offerings and adapt to a rapidly changing tech landscape. During the quarter, Zoom announced plans to release a premium Custom AI Companion in the first half of 2025. This AI tool will integrate with business platforms such as ServiceNow and Workday, offering organizations enhanced capabilities for collaboration and productivity. Additionally, the company introduced single-use webinar options designed to accommodate events with up to one million participants, an effort to expand its appeal to larger-scale audiences and businesses.
Zoom’s rebranding, which includes shortening its corporate name to Zoom Communications Inc., underscores the company’s broader ambitions. Yuan explained that the change reflects Zoom’s evolution into a comprehensive workplace platform powered by AI, aimed at fostering human connection and driving long-term growth. “This rebranding is a significant step in our journey to become a leader in the AI-driven workplace of the future,” Yuan stated during a call with analysts.
Despite these developments, investors seemed cautious. Zoom’s shares, which have risen about 24% this year, fell 4% in after-hours trading, even as the broader S&P 500 index gained 25% over the same period. The company’s steady but modest revenue growth contrasts with the exponential gains it experienced during its pandemic heyday, raising questions about its ability to sustain momentum in a competitive market.
Zoom’s ability to innovate and expand its offerings remains central to its strategy as it navigates the challenges of a post-pandemic world. By integrating artificial intelligence and offering scalable solutions for businesses, the company is positioning itself as more than just a video conferencing provider. However, the pressure to deliver consistent growth in a slower market environment continues to weigh on investor confidence.
As Zoom moves forward in its mission to redefine the future of work, all eyes will be on its ability to execute its vision and deliver on its promises, particularly as it rolls out new AI-driven features and services in the coming year. Whether this transformation will be enough to rekindle the enthusiasm of the market remains to be seen.
