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Zoom Stock Leaps After Q1 Earnings Beat, Outlook Boost; Cathie Wood Adds More Shares

Zoom said enterprise revenue will become an increasingly larger portion of its overall sales as businesses continue to make hybrid work structures more permanent.

Updated at 9:40 am EST

Zoom Video Communications  (ZM) - Get Zoom Video Communications Inc. Report shares powered higher Tuesday after the video conferencing specialists posted better-than-expected first quarter earnings, while boosting their full-year profit forecast, citing robust demand from businesses looking to extend hybrid work models.

Zoom said adjusted profits for the three months ending in April were pegged at $1.03 per share, down 22% from last year but firmly ahead of the Street forecast of 87 cents, with revenues rising 12% to $1.074 billion. Margins improved, as well, to 37.2% 

Looking ahead, Zoom said it sees adjusted profits in the region of $3.70 and $3.77 per share -- representing net income of between $1.48 billion to $1.5 billion -- with CFO Kelly Steckelberg telling investors that the group expects "revenue from enterprise customers to become an increasingly higher percentage of total revenue over time" as businesses continue to make hybrid work structures permanent.

"And as companies look to empower hybrid workforces, Zoom can drive further efficiency gains through our robust Zoom Rooms offering. And there are intangible benefits as well," said CEO Eric Yuan. 

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"A new study from Gartner found that employees with more flexibility in terms of workstyle and location felt more connected to their organization’s culture," he added. "We have found this to be true at Zoom, and are working to help our customers realize similar goals by enabling productivity and belonging across their teams, whether they be in-person, remote, or hybrid."

Zoom shares were marked 4% higher in early Tuesday trading to change hands at $92.62 each, boosted also in part by news that Cathie Wood's Ark Innovation ET  (ARKK) - Get ARK Innovation ETF Report added around $8.88 million worth of shares to its portfolio yesterday.

"On the positive side, Zoom is effectively cross-selling Zoom Phone and Zoom Chat into its extensive customer base and should see success with new products, like Zoom IQ for Sales, Zoom Whiteboard, and Zoom Contact Center," said JMP Securities analyst Patrick Walravens, who carries a 'market outperform' rating on the stock.

"On the negative side we view competition from Microsoft as Zoom’s biggest challenge and, in the end, we think the best solution is probably for Zoom to end up as part of Salesforce which we think would be a very nice combination," he added.