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Zoom Shares Gain as Earnings, Guidance Boost Ease Return-to-Work Impact

Zoom CEO Eric Yuan told investors Tuesday that hybrid work will become "mainstream" in the coming months, providing a solid backdrop for the video conferencing group's product suite.

Zoom Video Communications  (ZM) - Get Report shares moved higher Wednesday after the video conferencing group posted stronger-than-expected first quarter earnings while issuing a robust near-term outlook that eased concerns over a slump in revenues as workers look to return to office life following a year of pandemic-imposed restrictions. 

Zoom said non-GAAP for the three months ending in April were pegged at $1.32 per share, a five-fold increase from the same period last year as revenues surged 191% to $956.2 million as its customer base of companies with more than 10 employers rose 87% to just under 500,000.

Looking into the 2022 financial year, which ends in January. Zoom said it sees revenues in the range of $3.975 billion to $3.99 billion, up 5.5% at the higher end of its last forecast, with earnings of between $4.56 and $4.61 per share.

"As parts of the world reopen, a few things are clear. First, many customers I talk to are looking to create hybrid solutions, and they seek to cautiously reopen some offices; and second, each industry, company, and individual varies in their optimal working model," founder and CEO Eric Yuan told investors on a conference call late Tuesday.

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"Many companies are redesigning the workplace to enhance the hybrid work experience. So to meet this need, we announced Zoom's features such as Smart Gallery, which puts in-room and remote participants on equal footing, Virtual Receptionist, participant accounting, and environmental sensors," he added. "We have begun to deliver on our platform strategy."

Zoom  shares were marked 1% higher in pre-market trading Wednesday to indicate an opening bell price of $331.00 each, a move that would leave the stock with a year-to-date decline of around 1%.

"The focus for investors remains Zoom's ability to backfill a revenue base transitioning to hybrid work environments with Zoom Phone (50% user growth over last 5 months) a key enterprise expansion opportunity and what this means for steady-state growth," said KeyBanc Capital Markets analyst Steve Enders, who carries a 'sector weight' rating on the stock.  

"The margin guide assumes no improvement in gross margins from free tiers like K-12 going back to in-person and could see further expansion with more Zoom use shifted back to its DCs from cloud providers," he added.