Zoom Q1 beat: Analysts wary of future demand

Zoom Video Communications (ZM) reported first quarter earnings, surpassing Wall Street's expectations on both the top and bottom lines. The video conferencing platform reported revenue of $1.14 billion, beating the estimated $1.13 billion, while its adjusted earnings per share (EPS) of $1.35 surpassed the projected $1.19.

Despite the first quarter beat and the company's upbeat guidance, analysts remain cautious about Zoom's demand prospects.

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This post was written by Angel Smith

Video transcript

Well, Zoom reporting first quarter results that beat Wall Street expectations helped by a broader artificial intelligence roll out across its products.

But while Zoom's longer term forecast was more upbeat, nearer term expectations for the second quarter were a bit below analysts forecasts here and there.

You're taking a look at the earnings results for the last quarter beat on top and bottom line there.

But it was the earnings call perhaps that the investors are continuing to try and figure out where the demand cycle still remains for Zoom and where they're gonna have to spend further into really growing out some of the services that are gonna entice even more potential clients uh to hop onto this platform.

Yeah, I think when you take a look at the streets reaction city not convinced that Zoom is out of the woods just yet talking about that they are encouraged to see limited, limited headwinds.

But I think that question that you were just talking about just in terms of that longer term growth where that demand is coming from.

That is something that's top of mind for analysts and investors right now.

And then also Morgan Stanley calling out that small amount of upset from the enterprise segment.

So there are reasons to be optimistic about this report.

I think that's why you're looking at shares up just about 6/10 of a percent.

So the takeaway was more positives than negatives.

But there's still reason to be concerned, still reason to question some of that future growth and especially when you take a look at that outlook here for the second quarter earnings coming below what the street had been anticipating.

You can see still challenges here for Zoom on the horizon.

When they try to figure out and try to boost demand more for the longer term of their product.

The the company really does point to this RPO as the best indicator of the guidance and go forward strategy and performance for them and that's the remaining performance obligation that RPO and that actually increased by about 5% year over year to $3.67 billion.

So expecting to recognize about 59% of that total revenue as revenue over the next 12 months.

That's kind of consistent with what they saw in the first quarter of last year as well.