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Zoom Video (ZM) to Report Q2 Earnings: What's in the Cards?

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Zoom Video Communications ZM is set to report second-quarter fiscal 2022 results on Aug 30.

For the quarter, the company expects non-GAAP earnings between $1.14 and $1.15 per share. The Zacks Consensus Estimate for earnings stayed at $1.16 per share over the past 30 days. The company had reported earnings of 92 cents per share in the year-ago quarter.

Total revenues are expected between $985 million and $990 million. The consensus mark for revenues is pegged at $990.2 million, suggesting 49.2% growth from the figure reported in the year-ago quarter.

Zoom’s earnings beat the Zacks Consensus Estimate in all the past four quarters, the average surprise being 57.2%.

Let’s see how things have shaped up for this announcement.

Factors to Watch

Zoom’s fiscal second-quarter performance is expected to reflect growing demand for its cloud-native video-first platform owing to the work-from-home and online-learning wave despite the vaccination campaigns.

An expanding portfolio of solutions is expected to have aided customer growth in the fiscal second quarter. Launch of Zoom Phone Appliances, all-in-one desk phones that combine Zoom’s platform with hardware from Yealink and Poly, and capable of HD video meetings, phone calls and interactive whiteboarding is expected to have been a growth driver.

Moreover, Zoom launched Zoom Events, an all-in-one platform with the power to produce interactive and engaging virtual experiences. Zoom Events combines the reliability and scalability of Zoom Meetings, Chat, and Video Webinars in one comprehensive solution for event organizers, with the ability to produce ticketed, live events for internal or external audiences of any size.

The company’s freemium business model helps it win customers rapidly, whom it can later convert into paying customers. Markedly, Zoom’s trailing 12-month net dollar-expansion rate in customers with more than 10 employees was above 130% for the 12th consecutive quarter in first-quarter fiscal 2022. The momentum is expected to have continued in the to-be-reported quarter.

Further, the general availability of its latest innovations, Zoom Apps and Zoom Events is expected to have been a key catalyst.

Additionally, the company’s strong partner base that includes the likes of Atlassian TEAM, ServiceNow NOW and Dropbox is expected to have benefited the company in winning enterprise customers in the fiscal second quarter.

However, this Zacks Rank #4 (Sell) company continues to face significant competition from the likes of Cisco CSCO, Microsoft and Google Meet. This might have led to loss in small and medium-sized business customers, which is likely to have hurt top-line growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Q2 Highlights

In the to-be-reported quarter, Zoom announced that it has entered into a definitive agreement to acquire Five9, Inc., a leading provider of the intelligent cloud contact center, in an all-stock transaction valued at around $14.7 billion.

On Jun 29, Zoom announced it has signed a definitive agreement to acquire Karlsruhe Information Technology Solutions - Kites GmbH (Kites), a start-up dedicated to developing real-time Machine Translation solutions.

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