Zoom announced at its Q3 2024 earnings call that Zoom Phone now has seven million paid seats, while Zoom AI Companion has already gained over 220,000 accounts.
These product successes are mirrored by some of the communication platform’s financial results, including the headline figure of 3.2 percent year-over-year revenue growth that puts Zoom roughly 17 million dollars above its high end of guidance.
Nevertheless, the company’s modest revenue growth rate, the decline in online revenue, the pace of customer acquisition, and more point to challenges too.
Eric S. Yuan, Zoom’s Founder and CEO, summarised some of the positive results from the past quarter: “In Q3, revenue came in ahead of guidance as we bolstered Zoom’s all-in-one intelligent collaboration platform with advanced new capabilities like Zoom AI Companion and continued to evolve our customer and employee engagement solutions.
“We are also pleased with our online business, where we drove higher retention and saw usage of our new AI capabilities, enhancing the value of our platform.
Our strong performance across a number of metrics has enabled us to increase our full year outlook for revenue and non-GAAP profitability, as well as for free cash flow, which we now expect to be in the range of $1.34 billion to $1.35 billion, up approximately 13% year over year.”
Zoom’s Q3 2024 Successes
On top of achieving the new milestone of seven million paid seats, which is an increase of 1.5 million seats since Q4 2023. Moreover, the number of Zoom One bundles that include Zoom Phone rose around 330 percent year over year.
Zoom AI Companion hit 220,000 accounts with 2.8 million meeting summaries created, nearly triple the number of meeting summaries announced last month.
The global manufacturing and supply chain leader, Flex, which connected Zoom to its distributed workforce of 170,000 employees, was exemplified during the earnings call.
Zoom’s CEO reported to investors that since Flex first began using Zoom in 2017, it has increased Team Chat users by 200 percent and Zoom Rooms by 245 percent, as well as created more than 13,000 whiteboards.
Yuan also mentioned various customer wins from the quarter in the form of Dropbox, Amynta, and the Virgin Group, which he believes demonstrates its progress in boosting customer and employee experience features in its offerings.
From a financial perspective, Zoom’s positive revenue growth was accompanied by an enterprise revenue increase of 7.5 percent.
It also achieved a 13.5 percent customer base increase, a strong cash flow that was up 67 percent, plus healthy cash reserves of $6.5 billion to help weather any potential storms ahead.
Room for Improvement
Zoom has built on some of the successes of its previous quarter, in which Zoom Phone and AI also stole the limelight, but this quarter’s year-over-year revenue growth has dropped by 0.4 percent, which may be the result of operating in a maturing market or an increase in competition.
Perhaps for the same reasons, online revenue also declined by 2.4 percent year over year.
Zoom’s five percent growth in acquisition is relatively slow, considering the enormous investments it has made to expand and innovate.
Finally, a degree of uncertainty can be inferred by the company’s susceptibility to currency fluctuations, as well as its lack of market clarity when it comes to trends and its own position.
In spite of these implicit challenges, Kelly Steckelber, Chief Financial Officer at Zoom, revealed an increase in the company’s earnings expectations: “We are also pleased to raise our top-line and profitability outlook for the full year of FY ’24.
“We now expect revenue to be in the range of $4.506 billion to $4.511 billion, which at the midpoint represents approximately 3% year-over-year growth.
“We expect our non-GAAP operating income to be in the range of $1.74 billion to $1.745 billion, representing an operating margin of approximately 39%.
“Our outlook for non-GAAP earnings per share for FY ’24 is $4.93 to $4.95, based on approximately 308 million shares outstanding.”
It was only last quarter that Zoom’s results were outstripping Cisco’s UCC revenues, which should make it easier for Zoom to isolate the causes of this recent financial drag.
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