Continued major customer rise fuels strong second quarter for Zoom

After becoming the breakout conferencing star of Covid, many have predicted a drop-off for Zoom Video Communications, but for the second quarter of its current financial year, the firm has delivered its fifth straight quarter with revenue of over $1bn, with continued momentum with its enterprise customers.

For the three-month period ending 31 July, Zoom posted total revenue of $1.0995bn, up 8% year on year. Revenue was impacted by the strengthening of the US dollar, performance of the online business, and the company noted that, to a lesser extent, sales were weighted to the back end of the quarter.

Zoom’s GAAP income from operations for the second quarter stood at  $121.7m, compared with GAAP income from operations of $294.6m in the second quarter of fiscal year 2022. After adjusting for stock-based compensation expense and related payroll taxes, and acquisition-related expenses, non-GAAP income from operations for the second quarter was $393.7m, down $31m from the second quarter a year ago.

For the second quarter, Zoom’s GAAP operating margin was 11.1% and non-GAAP operating margin 35.8%. Net income fell considerably year on year, however. It dropped from $316.9m in the second quarter of fiscal year 2022 to its current level of $45.7m. Total cash, cash equivalents and marketable securities, excluding restricted cash, was $5.5bn as of 31 July 2022.

Looking at key customer metrics over the quarter, Zoom noted that the drivers of total revenue included acquiring new customers and expanding across existing subs. At the end of the second quarter, Zoom had about 204,100 enterprise customers, up 18% from the same quarter a year earlier. The company showed a trailing 12-month net dollar expansion rate for enterprise customers of 120% and had 3,116 customers contributing more than $100,000 in trailing 12 months revenue, up about 37% from the same quarter last year.

Assessing the financial results for the second quarter, Zoom founder and CEO Eric Yuan said the company continued to gain traction as the platform of choice for enterprises looking to deliver flexible, productive solutions for collaboration and customer engagement.

“Businesses are drawn to the Zoom platform because of our innovation and modern architecture,” he said. “Our recently launched Zoom Contact Center and Zoom IQ for Sales products saw some great early wins, while Zoom Phone delivered milestone results, hitting a record number of licences sold in the quarter and reaching nearly four million seats, up more than 100% year over year.”

Going forward, Zoom now expects to deliver FY23 revenue in the range of $4.385-4.395bn and non-GAAP operating margin of about 33%. Total third-quarter revenue is expected to range from $1.095-1.100bn and non-GAAP income from operations is projected to be between $325m and $330m. Non-GAAP diluted EPS is expected to be between $0.82 and $0.83, with about 306 million weighted average shares outstanding.