Zoom Boosts Outlook With Move Beyond Video Calls

Zoom Video Communications Inc. raised its annual forecasts, a sign of progress on its effort to sell more products to large enterprise customers. The shares gained about 4% in extended trading.

Zoom’s plan to resuscitate growth hinges on expanding its tools for large businesses, such as phone platforms, customer service systems, calendar applications and chat features. (REUTERS)

Zoom Video Communications Inc. raised its annual forecasts, a sign of progress on its effort to sell more products to large enterprise customers. The shares gained about 4% in extended trading.

Revenue for the year ending in January 2024 will be as much as $4.5 billion, the company said Monday in a statement. In May, Zoom projected annual sales of about $4.48 billion. Annual earnings, excluding some items, will be $4.63 to $4.67 a share, compared with a previous forecast of $4.25 to $4.31.

Investors have been concerned about the stagnation of Zoom's once-explosive sales as the company's central videoconferencing software is challenged by major rivals, such as Microsoft Corp. Zoom's plan to resuscitate growth hinges on expanding its tools for large businesses, such as phone platforms, customer service systems, calendar applications and chat features, fueled by advancements in artificial intelligence. It has invested in AI startup Anthropic and announced it would acquire workplace communication tool Workvivo.

Fiscal second-quarter enterprise revenue increased 10% to $659.5 million, topping analysts' estimates. This outperformance bodes well for Zoom's plan to offer more services to large companies, said Bloomberg Intelligence's John Butler. Online sales to consumers and small business declined 4.3% to $479.2 million.

“Our increased total revenue guidance reflects a consistent view on Enterprise, with tempered expectations for Online for the remainder of the year,” Chief Financial Officer Kelly Steckelberg said during a conference call on the results.

The San Jose, California-based company said it had 218,100 enterprise customers in the period ended July 31, an increase of 6.9% from a year earlier. Of those customers, 3,672 contributed more than $100,000 in trailing 12-month revenue, a gain of almost 18% from a year earlier.

Steckelberg also touted demand for Zoom's new non-video products. Zoom Phone reached roughly $500 million in annualized run rate revenue while its contact center tool passed 500 customers, she said. While some customers have reduced their workforces, which affected spending on Zoom, the company has been successful in cross-selling new products to “replace that revenue,” Steckelberg said.

In the fiscal second quarter, Zoom reported total revenue increased 3.6% to $1.14 billion. Profit, excluding some items, was $1.34 a share. Both topped analysts' average estimate, according to data compiled by Bloomberg.

Shares jumped to a high of $74.50 in extended trading after closing at $67.27 in New York. The company has missed out on a major tech rally, with the stock declining about 1% this year.