By Wallace Witkowski
Zoom Video Communications Inc. shares rose in the extended session Monday, walking back a big initial jump when the videoconferencing company topped Wall Street’s earnings expectations and said it expects to be more profitable this year than it had initially expected.
Zoom /zigman2/quotes/211319643/composite ZM +8.52% shares closed the after-hours session up 5%, following an initial 20% surge when the company released its earnings report. That followed a 0.5% decline in the regular session to close at $89.33.
For the year, Zoom hiked its forecast earnings to a range of $3.70 to $3.77 a share, while keeping its revenue forecast the same. Back in February , Zoom had forecast earnings of $3.45 to $3.51 a share and revenue of $4.53 billion to $4.55 billion for the year. Analysts surveyed by FactSet expect $3.60 a share on revenue of $4.55 billion for the year.
“Given the improvements we are seeing so far this year, we expect gross margins to be in the range of 76% to 78% for the remainder of the year, which is higher than our previous view of the mid-70s,” said Kelly Steckelberg, Zoom’s chief financial officer, on the call with analysts.
That outlook assumes that the company’s enterprise business “will grow substantially faster” than its online business, and that the company’s year-over-year revenue growth “will modestly accelerate in the fourth quarter of FY ’23,” Steckelberg told analysts.
“We continue to see strength in our enterprise business and that’s both on new bookings as well as renewals,” Steckelberg said. “And then when you think about the opportunity coming with all of these new product introductions…that’s what we think is going to drive the growth continue through the rest of this year.”
“In Q1, we launched Zoom Contact Center, Zoom Whiteboard and Zoom IQ for Sales, demonstrating our continued focus on enhancing the customer experience and promoting hybrid work,” said Eric Yuan, Zoom chief executive, in a statement. “We believe these innovative solutions will further expand our market opportunity for future growth and expansion with customers.”
For the second quarter, Zoom forecast earnings of 90 cents to 92 cents a share on revenue of about $1.12 billion , while analysts expected 88 cents a share on revenue of $1.11 billion.
The company reported first-quarter net income of $113.6 million, or 37 cents a share, compared with $227.4 million, or 74 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.03 a share, compared with $1.32 a share in the year-ago period.
Revenue rose to $1.07 billion from $956.2 million in the year-ago quarter.
Analysts had forecast earnings of 88 cents a share on revenue of $1.07 billion, based on Zoom’s forecast of 86 cents to 88 cents a share on revenue of $1.07 billion to $1.08 billion.
Read: Zoom is returning to the office, but most workers aren’t coming back
Over the past 12 months, Zoom’s stock has dropped 72%, compared with a 5% decline by the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.16% , and a 16% fall for the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +1.75% .