JPMorgan analysts say Zoom’s customer-service segment has emerged as a ‘key growth area’
Videoconferencing platform Zoom Video Communications Inc. on Monday offered up third-quarter results and an outlook that came in above Wall Street’s expectations, helped by growth in its key segment geared toward businesses.
The company reported third-quarter net income of $207.1 million, or 66 cents a share, compared with $141.2 million, or 45 cents a share, in the same quarter last year. Adjusted for stock-based compensation, taxes and other costs, Zoom ZM3.67% earned $1.38 a share.
Sales rose 3.6% year over year to $1.18 billion.
Analysts polled by FactSet expected Zoom to report adjusted earnings per share of $1.31, on $1.16 billion in sales.
Management forecast fiscal fourth-quarter revenue of $1.175 billion to $1.18 billion, with adjusted earnings per share of $1.29 to $1.30. Wall Street expected adjusted earnings per share of $1.28, with revenue of $1.17 billion.
Zoom forecast full fiscal-year sales of $4.656 billion to $4.661 billion, with adjusted earnings per share of $5.41 to $5.43. Analysts expected adjusted earnings per share of $5.33, on revenue of $4.64 billion.
Shares slipped 5.5% after hours.
Zoom has tried to expand beyond video calls into areas like AI-supported customer service and other offerings intended to help businesses boost productivity.
JPMorgan analysts, in a research note on Sunday, said that Zoom’s customer-service segment, known as Contact Center, has emerged as a “key growth area,” and said that the sales it gets from businesses were an area of focus, after sales growth in that segment slowed slightly in the second quarter. Third-quarter sales in that segment were up 5.8%, compared with a 3.5% gain in the second quarter.
As of Monday’s close, Zoom’s stock was up around 24% so far this year. Those gains, and Monday’s results, come as some Wall Street analysts reassess companies that boomed during the pandemic, as restrictions kept many people working from home.
“We’ve discussed the concept that some of these stocks have washed-out valuations and are approaching the phase where it might be more possible to show growth rates stabilizing or picking up,” the JPMorgan analysts said.
Some of those companies, they added, have “been in the process of righting the ship for longer than the names that have seen smoother sailing in 2023/24 and experienced share appreciation while the pandemic pull-forward names performed terribly.”