An Improved Fourth-Quarter Performance Boosts Zoom Shares

After Zoom reported its fiscal fourth-quarter earnings that exceeded analysts' expectations and provided optimistic earnings guidance for the year, Zoom shares climbed 8% on Monday in extended trading after the video chat company reported its fiscal fourth-quarter earnings that exceeded analysts' expectations.

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As a result of the company's efforts, the following outcomes were achieved:

• Earnings: Refinitiv estimates that the company earned $1.22 per share, adjusted, compared to 81 cents as expected by analysts.
• Revenue: The company earned $1.12 billion, compared to the $1.10 billion expected by analysts, according to Refinitiv.

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There was a 4% growth in Zoom's revenue over the same period last year in the quarter that ended Jan. 31, according to a statement released by the company. Zoom's revenue has shrunk dramatically from the quadrupling of revenue it enjoyed in the years 2020 and 2021 when businesses and consumers flocked to the video service during the Covid pandemic to watch videos.

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This is the first time the company has suffered a loss since the second quarter of 2018, in which it lost $104 million as compared to a net income of about $491 million in the second quarter of 2018. As a result of stock-based compensation costs, the company suffered a loss.

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CEO Eric Yuan told analysts on a conference call that Zoom faced the same issues it encountered earlier in the fiscal year 2023, including executives looking carefully before paying the company for services.

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Kelly Steckelberg, Zoom's finance chief, said on the conference call that, as part of the organization's broader cost reduction strategies, some organizations have reduced the number of seats for which they purchase Zoom's software.

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It is expected that growth will continue to slow this year. According to Zoom, revenue for the year will range from $4.435 billion to $4.455 billion, meaning that they will grow by 1.1%, while analysts were expecting sales to total $4.6 billion. According to the company, adjusted earnings per share will be between $4.11 and $4.18, above the $3.66 average estimate based on a survey of analysts.

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Based on revenue of $1.080 billion to $1.085 billion for the first quarter of the fiscal year, adjusted earnings per share are expected to range from 96 cents to 98 cents per share. Refinitiv surveyed 84 analysts who were expected to report 84 cents in adjusted earnings per share and $1.11 billion in revenue for the quarter.

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The stock price of Zoom has gained 8% for the year, excluding the after-hours move, while the price of the S&P 500 has gained 3% over the same period.

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Zoom announced that it would launch email and calendar services in the fourth quarter of its fiscal year, along with the introduction of a virtual agent chatbot that would handle any inquiries from customers.

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Earlier this month, Zoom announced that it would be laying off 1,300 employees, which represents 15% of the company's workforce. “During our restructuring, we are optimizing our go-to-market strategy in order to better support our enterprise customers and drive additional productivity as a result of the restructuring,” Steckelberg said.