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Zoom's (ZM) Q1 Earnings Top Estimates, Revenues Jump Y/Y

Zacks Equity Research
·4-min read

Zoom’s ZM first-quarter fiscal 2023 adjusted earnings of $1.03 per share beat the Zacks Consensus Estimate by 17.05% but decreased 22% year over year.

Revenues of $1.07 billion surpassed the consensus mark by 0.12% and increased 12.3% year over year.

In the reported quarter, Zoom Video revenues benefited from growth in enterprise business, which saw a steady increase in customers as well as improved renewal rates year over year.

Revenues from Enterprise customers grew 31% year over year and represented 52% of total revenues, up from 45% in first-quarter fiscal 2022. The number of Enterprise customers grew 24% year over year to over 198,900.

Strong demand for Zoom Phone impacted the growth of revenues positively. In the fiscal first quarter, Zoom Phone reached 3 million paid seats.

Zoom Video Communications, Inc. Price, Consensus and EPS Surprise

Zoom Video Communications, Inc. Price, Consensus and EPS Surprise
Zoom Video Communications, Inc. Price, Consensus and EPS Surprise

Zoom Video Communications, Inc. price-consensus-eps-surprise-chart | Zoom Video Communications, Inc. Quote

Quarter in Detail

Expanding customer base was a major contributor to earnings in the reported quarter. In the fiscal first quarter, Zoom customers contributing more than $100,000 in revenues in the trailing 12 months, grew 46%. These customers accounted for 24% of revenues, up from 19% in the year-ago quarter.

Renewals in Online business improved sequentially but growth was impacted mainly by international headwinds, including the strengthening of the dollar and the Russia-Ukraine war.

This business is an attractive model from the profitability and cash flow perspective. Thus, slower growth in this business model slightly hampered bottom-line growth.

Revenues grew 14.5% in America while international market revenues from APAC grew 20.2% year over year.

Operating Details

Non-GAAP gross margin contracted from 88.3% in the year-ago quarter to 65.8% in the fiscal first quarter of 2023.

Research and development expenses declined 51.2% year over year to $41.4 million. Sales and marketing expenses declined 28.5% to $190.9 million, while general and administrative expenses decreased 20.8% to $73.4 million.

Non-GAAP operating income increased 0.3% to $400.9 million year over year. Non-GAAP operating margin contracted 450 basis points (bps) to 37.3%.

Balance Sheet and Cash Flow

Total cash, cash equivalents, and marketable securities, excluding restricted cash, as of Apr 30, 2022 was $5.7 billion. As of Jan 31, 2022, cash, cash equivalents and marketable securities were $5.4 billion.

Adjusted free cash flow was $501.1 million. As of Jan 31, 2022, adjusted free cash flow was $274 million.

Guidance

Zoom expects second-quarter fiscal 2023 revenues in the range of $1.115 billion to $1.120 billion.

Non-GAAP earnings per share are expected in the range of 90 cents to 92 cents.

For fiscal 2023, Zoom expects revenues in the range of $4.53 billion to $4.55 billion.

Non-GAAP earnings per share are expected in the range of $3.70 to $3.77.

Zacks Rank & Other Key Picks

Currently, Zoom Video carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader Computer and Technology sector are Avnet AVT, Axcelis Technologies ACLS and Analog Devices ADI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Avnet's fourth-quarter fiscal 2022 earnings has been revised 55 cents northward to $1.96 per share over the past 30 days. For 2022, earnings estimates have moved 20.5% north to $6.83 per share in the past 30 days.

Avnet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 21.2%. Shares of AVT have gained 4.5% in the past year.

The Zacks Consensus Estimate for Axcelis' second-quarter 2022 earnings has been revised 3 cents upward to 99 cents per share over the past 30 days. For 2022, ACLS' earnings estimates have moved 41 cents north to $4.40 per share in the past 30 days.

Axcelis' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 23.5%. Shares of ACLS have jumped 42.5% in the past year.

The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised 4 cents upward to $2.18 per share over the past 60 days. For fiscal 2022, earnings estimates have moved 11 cents north to $8.43 per share in the past 60 days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have climbed 0.9% in the past year.


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