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Zoom Q2 Results Beat Street View; But Shares Slip 10% As User Growth Slows

Zoom Video Communications Inc. (ZM) Monday reported a second-quarter profit that surged from last year driven by 54% growth in revenues. Both earnings and revenues for the quarter trumped Wall Street estimates. However, shares slipped 10% as the video-conferencing service provider's user growth slowed down.

Net income for the quarter rose to $316.9 million or $1.04 per share, up from $185.7 million or $0.63 per share last year.

Adjusted net income for the quarter was $415.1 million or $1.36 per share, up from $274.8 million or $0.92 per share last year. Analysts polled by Thomson Reuters expected earnings of $1.16 per share for the quarter. Analysts' estimates typically exclude one-time items.

Revenues for the second quarter was $1.02 billion, up 54% from last year's revenue of $663.5 million. Analysts had a consensus revenue estimate of $990.96 million.

Revenue growth was driven by new customer and expansion across existing customers. At the end of the second quarter of fiscal year 2022, Zoom had 2,278 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 131% from the same quarter last fiscal year.

User growth, however, has slowed down compared to the sharp rise recorded during the pandemic. In second quarter of 2021, the number of customers with 10 or more employees soared 458% to 370,200 from 66,300 a year ago. However, the growth slowed in the second quarter of 2022 to 36%, with the company reporting 504,900 customers with more than 10 employees.

"In Q2, we achieved our first billion dollar revenue quarter while delivering strong profitability and cash flow," said Zoom founder and CEO, Eric Yuan. "Q2 also marked several milestones on our expansion beyond the UC platform. We launched Zoom Apps, bringing over 50 apps directly into the Zoom experience, and Zoom Events, an all-in-one digital events service."

Looking forward to the third quarter, Zoom expects revenues of $1.015 billion to $1.020 billion and adjusted earnings of $1.07 to $1.08 per share. Analysts currently estimate earnings of $1.09 per share and revenues of $1.01 billion.

For the full year 2022, the company expects revenues between $4.005 billion and $4.015 billion and adjusted earnings of $4.75 to $4.79 per share. Previously, the company expected earnings of revenues of $3.97 billion to $3.99 billion and adjusted earnings of $4.56 to $4.61 per share. Analysts currently estimate earnings of $4.67 per share on revenues of $4.01 billion.

ZM closed Monday's trading at $347.50, down $6.69 or 1.96%, on the Nasdaq. The stock further slipped $37.74 or 10.86%, in the after-hours trading.

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