Zoom Video Communications reported a revenue surge in Q3 2023, exceeding its financial forecast. The company’s total revenue increased by 3.2% YoY to $1,136.7 million, driven by new features such as the Zoom AI Companion and higher customer retention.
The GAAP net income rose to $141.2 million, up from $48.4 million in the same quarter last year. Despite a 2.4% decrease in Online revenue, Zoom’s Enterprise sector saw a 7.5% increase. The company also expects its full-year free cash flow to be between $1.34 billion and $1.35 billion, marking a 13% YoY increase.
- Zoom’s revenue for the third quarter of fiscal year 2024 was $1,136.7 million, up 3.2% year over year.
- GAAP income from operations for the same period was $169.4 million, compared to $66.5 million in the third quarter of fiscal year 2023.
- Zoom’s full-year outlook for revenue and non-GAAP profitability has increased, with free cash flow expected to be in the range of $1.34 billion to $1.35 billion, up approximately 13% year over year.
Zoom’s Stellar Q3 Performance
Zoom has released its financial results for the third quarter, ending October 31, 2023. The figures illustrate a powerful performance with revenues surpassing the company’s projections. The strong results are attributed to Zoom’s intelligent collaboration platform, which has been strengthened with the introduction of advanced features.
Financial Highlights
Zoom’s total revenue for the third quarter clocked in at $1,136.7 million, marking a 3.2% year-over-year increase. When adjusted for foreign currency impact, this figure rises to $1,140.7 million, up 3.5% year over year.
Enterprise and Online Revenue
In terms of business segments, enterprise revenue stood at $660.6 million, up 7.5% year over year. In contrast, online revenue totalled $476.1 million, down 2.4% year over year. Despite the decrease in online revenue, Zoom has reported improved retention rates and increased usage of its AI capabilities.
Operating Income and Margin
GAAP income from operations for the third quarter reached $169.4 million, a significant increase from the $66.5 million reported in the third quarter of 2023. The GAAP operating margin for the quarter was 14.9%.
Net Income and Diluted Net Income Per Share
GAAP net income attributable to common stockholders was $141.2 million, or $0.45 per share, compared to $48.4 million, or $0.16 per share in the same quarter of 2023.
Free Cash Flow and Customer Metrics
Free cash flow, a critical indicator of financial health, is expected to be in the range of $1.34 billion to $1.35 billion, up approximately 13% year over year. The company’s customer metrics have also shown positive trends, with new customer acquisitions and expansions driving total revenue.
Zoom’s Outlook
Looking ahead, Zoom has increased its full-year outlook for revenue, non-GAAP profitability, and free cash flow. For the fourth quarter, the company expects total revenue to be between $1.125 billion and $1.130 billion.
“In Q3, revenue came in ahead of guidance as we bolstered Zoom’s all-in-one intelligent collaboration platform with advanced new capabilities like Zoom AI Companion and continued to evolve our customer and employee engagement solutions. We are also pleased with our Online business where we drove higher retention and saw usage of our new AI capabilities, enhancing the value of our platform,” said Eric S. Yuan, Zoom founder, and CEO.
Final Thoughts
Zoom’s strong third-quarter performance is a testament to the company’s robust business model and its ability to adapt to the evolving needs of its customers. The introduction of advanced capabilities like Zoom AI Companion demonstrates the company’s commitment to innovation and customer satisfaction.
As we look ahead, Zoom’s enhanced guidance for the full fiscal year signals confidence in its strategic direction and ability to deliver sustained growth.
FAQ
Q: What were Zoom’s revenue and financial highlights for the third fiscal quarter of 2024?
A: In the third fiscal quarter of 2024, Zoom’s total revenue was $1,136.7 million, up 3.2% year over year. Adjusting for foreign currency impact, revenue in constant currency was $1,140.7 million, up 3.5% year over year. Enterprise revenue was $660.6 million, up 7.5% year over year, and Online revenue was $476.1 million, down 2.4% year over year.
Q: What were Zoom’s income from operations and operating margin for the third quarter?
A: GAAP income from operations for the third quarter was $169.4 million, compared to $66.5 million in the third quarter of fiscal year 2023. Non-GAAP income from operations for the third quarter was $447.1 million, compared to $380.9 million in the third quarter of fiscal year 2023. GAAP operating margin was 14.9%, and non-GAAP operating margin was 39.3%.
Q: What were Zoom’s net income and diluted net income per share for the third quarter?
A: GAAP net income attributable to common stockholders for the third quarter was $141.2 million, or $0.45 per share, compared to $48.4 million, or $0.16 per share in the third quarter of fiscal year 2023. Non-GAAP net income for the third quarter was $401.2 million, with a non-GAAP net income per share of $1.29. In the third quarter of fiscal year 2023, non-GAAP net income was $323.2 million, or $1.07 per share.
Q: What was Zoom’s cash and marketable securities as of October 31, 2023?
A: Zoom had total cash, cash equivalents, and marketable securities of $6.5 billion as of October 31, 2023.
Q: How did Zoom’s cash flow perform in the third quarter?
A: Net cash provided by operating activities was $493.2 million in the third quarter, up 67.0% year over year. Free cash flow was $453.2 million, up 66.2% year over year.
Q: What were Zoom’s customer metrics at the end of the third quarter?
A: Zoom had approximately 219,700 Enterprise customers, up 5.0% from the same quarter last fiscal year. The trailing 12-month net dollar expansion rate for Enterprise customers was 105%. 3,731 customers were contributing more than $100,000 in trailing 12 months revenue, up approximately 13.5% from the same quarter last fiscal year. The Online average monthly churn was 3.0% for the third quarter, down 10 bps from the same quarter last fiscal year. The percentage of total Online MRR from Online customers with a continual term of service of at least 16 months was 73.2%, up 250 bps year over year.
Q: What is Zoom’s financial outlook for the fourth quarter and full fiscal year 2024?
A: For the fourth quarter of fiscal year 2024, Zoom expects total revenue to be between $1.125 billion and $1.130 billion. Non-GAAP income from operations is expected to be between $409.0 million and $414.0 million. Non-GAAP diluted EPS is expected to be between $1.13 and $1.15 with approximately 312 million weighted average shares outstanding.
For the full fiscal year 2024, Zoom expects total revenue to be between $4.506 billion and $4.511 billion. Non-GAAP income from operations is expected to be between $1.740 billion and $1.745 billion. Non-GAAP diluted EPS is expected to be between $4.93 and $4.95 with approximately 308 million weighted average shares outstanding.
