Zoom Video Communications stocks gained during the closing hours of trading after forecasting a positive financial outcome for the quarter. This positive forecast reflects that the company’s cost-reduction initiatives have effectively balanced the decreased revenue.
The software producer expects its fiscal first-quarter earnings to range from 96 to 98 cents. This excluded certain items, and Monday’s statement revealed it exceeds analysts’ prior estimate of 87 cents.
Stable Outlook
After an explosive cycle of growth and decline during the pandemic, zoom video communications appear to be finding stability again. Last year, its stock soared as office workers and consumers flocked to the platform amid lockdown restrictions. However, Zoom shares plummeted over 2021 and 2022, giving up much of the ground gained.
Zoom has faced difficulty maintaining growth and customer retention, resulting in a workforce reduction of 15% earlier this month. This job cut was more significant than the reductions done by most of its competitors in the tech industry.
To optimize its cloud budget, Zoom implemented a round of layoffs. CFO Kelly Steckelberg, in her remarks, expressed that it led to an improvement in their margins. She further said Zoom is devoted to achieving an equilibrium between expansion and profitability.
During the fourth quarter, sales totaled $1.12 billion, an increase of 4.3% compared to the same period of the previous year. This exceeded analysts’ predictions of $1.1 billion.
Steady Client Growth
At the end of the quarter, the company had 213,000 enterprise clients, representing a 12% increase from the same period last year. Although it fell short of the projected 216,587, Zoom witnessed a considerable boost in customer spending by over $100,000 last year. Clients increase surged a staggering 27% surge to 3,471.
Over the last few quarters, Zoom has lost some casual customers, primarily small businesses. Their average churn rate for the quarter was 3.4%, 0.4% lower than a year ago.
Morgan Stanley’s Keith Weiss noted that bigger corporate customers may still be in danger of abandoning Zoom, especially since numerous agreements expire in the coming months. However, Zoom has been striving to keep those customers by offering non-video services, like a contact center and internet phone features.
On Monday, Zoom CEO Eric Yuan praised the recently developed AI-driven tools like transcription, translation, and sales analytics.
Focus on AI Boost for Existing Products
During the earnings call, Yuan remarked that additional AI technologies would be implemented to maximize return on investment for customers. This news prompted the shares to rise an additional two percent.
Zoom’s forecasted revenue for the April quarter was less than Wall Street had predicted. Its revenue is estimated to be between $1.08 billion and $1.09 billion, below the analyst forecast of $1.11 billion. For the year, the company’s sales outlook was also shy of the analyst’s prediction, estimated to be around $4.45 billion instead of the estimated $4.59 billion.
Eric Yuan, the founder of Zoom, having previously departed from Cisco Systems Inc.’s WebEx division, launched the company in 2011. Steckelberg has been searching for acquisition prospects as part of the firm’s strategy for the current financial year. Yuan has decided to reduce his base salary by 98% and forego bonus considering the job cuts announced.
