Categories Analysis, Technology

Here are a few factors that work in favor of Zoom Video Communications (ZM)

Zoom expects revenues to range between $3.97-3.99 billion for FY2022

Shares of Zoom Video Communications Inc. (NASDAQ: ZM) have gained 31% over the past 12 months. The stock dropped on Monday following the company’s announcement that it has decided to acquire call center software company Five9 Inc. (NASDAQ: FIVN) for $14.7 billion. Shares were down 2.2% in afternoon trade. Despite the dive, there are a few factors that work in favor of the video conferencing company. Here’s a look at few of them:

Strong results

Zoom delivered strong results for fiscal year 2021 buoyed by a spike in demand for its services amid the rapid shift to remote work during the pandemic. Total revenues grew 326% year-over-year in FY2021 to reach approx. $2.7 billion while adjusted EPS increased to $3.34 from $0.35 a year ago.

The momentum continued as the company reported total revenues of $956.2 million for the first quarter of 2022, reflecting a growth of 191% YoY. Adjusted EPS rose to $1.32 in Q1 from $0.20 in the prior-year quarter. Zoom expects revenues to range between $3.97-3.99 billion for FY2022. Adjusted EPS is projected to be between $4.56-4.61.

Growth potential

It appears that the trend of hybrid work is more or less here to stay and this will benefit Zoom in the long run. At its earnings call last month, Zoom mentioned that 80% of people believe there will be a virtual aspect to all interactions even after the pandemic subsides. The company’s efforts to launch new products that support this trend will help drive growth.

At the end of Q1, Zoom had 1,999 customers generating over $100,000 in trailing 12-months revenue. The company also saw strong growth in its international markets with revenue from the APAC and EMEA regions growing 288% YoY in Q1 on a combined basis. Zoom sees vast opportunity globally and is setting itself up to take advantage of the same.

New products

Zoom has been rolling out new products that will help diversify its revenue base. Last month, the company launched Zoom Phone Appliances, a cloud phone offering aimed at the hybrid workforce that provides audio and video capabilities for HD video meetings and phone calls. In May, the company rolled out Zoom Events, a platform for hosting interactive virtual events and conferences. These efforts will help attract more customers and generate more revenue in the long run.

Acquisitions

Zoom’s strategy of making acquisitions that will help expand its capabilities is a prudent one. The company’s acquisition of Five9 Inc. will allow it to tap the $24 billion contact center market. This combined with Zoom’s total addressable market of $62 billion gives the company a consolidated opportunity of $86 billion to explore.

Zoom also announced the acquisition of Kites GmbH, a provider of machine translation solutions, last month. Although the terms were not disclosed, the deal is expected to help Zoom make meetings more productive by offering multi-language translation capabilities for its users.

Click here to read the full transcript of Zoom Q1 2022 earnings conference call

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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