Zoom posts strong Q2 results with robust AI-driven growth
Zoom Video Communications has reported financial results for its fiscal second quarter, ending 31 July 2024, showing performance that exceeded the company’s own guidance.
The growth was attributed to a strong demand for its Artificial Intelligence (AI)-powered collaboration tools, aligning with the company’s investments made to cater to the hybrid and remote work environments.
The company’s total revenue for the second quarter reached USD $1,162.5 million, marking a 2.1% increase year-over-year. In constant currency terms, revenues increased by 2.4%. Specifically, Zoom’s Enterprise revenue amounted to USD $682.8 million, growing 3.5% compared to the same period last year. Conversely, Online revenue was flat year-over-year at USD $479.7 million.
Zoom's GAAP income from operations stood at USD $202.4 million for the quarter, compared to USD $177.6 million in the corresponding quarter of fiscal year 2024. The GAAP operating margin for Q2 was 17.4%, while the non-GAAP operating margin was significantly higher at 39.2%. Adjusted for various costs, including stock-based compensation and acquisition-related expenses, non-GAAP income from operations was USD $455.5 million, just slightly down from USD $461.7 million unique periods in the prior fiscal year.
The net operating cash flow in Q2 reached USD $449.3 million, a notable 33.7% increase from USD $336.0 million in the previous fiscal year's second quarter. Free cash flow, defined as operating cash flows minus capital expenditures, was USD $365.1 million, climbing 26.2% from the year-ago period.
Zoom also reported a GAAP net income of USD $219.0 million, or USD $0.70 per share, for the quarter, an increase from the previous year's net income of USD $182.0 million, or USD $0.59 per share. After adjusting for other specific financial items, non-GAAP net income was USD $436.4 million, translating to USD $1.39 per share, up from USD $409.6 million or USD $1.34 per share in the second quarter of fiscal year 2024.
Responding to the results, Zoom Founder and CEO Eric S. Yuan commented, "In Q2, we outperformed our guidance across the board and grew operating cash flow and free cash flow by 33.7% and 26.2% year over year, respectively, demonstrating our continued commitment to efficient growth. We also saw strength in large accounts, with customers contributing more than USD $100,000 in trailing 12 months revenue increasing by 7.1% year over year, and resilience in our Online business, with Online average monthly churn reaching its lowest ever rate.”
Reflecting on customer metrics, Zoom recorded 3,933 customers contributing more than USD $100,000 in trailing 12-month revenue, an increase of approximately 7.1% from the same period last year. The company had around 191,600 Enterprise customers and a trailing 12-month net dollar expansion rate for Enterprise customers of 98%. It also noted an online average monthly churn rate of 2.9% for the second quarter, down 30 basis points from the same quarter in the previous fiscal year. The percentage of total Online Monthly Recurring Revenue (MRR) from customers with a service term of at least 16 months was 74.4%, up 160 basis points year-over-year.
Zoom also disclosed that it had repurchased around 4.8 million shares of common stock during the second quarter. The company’s cash and marketable securities, excluding restricted cash, totalled USD $7.5 billion as of 31 July 2024.
Looking forward, Zoom provided financial guidance for the third quarter and full fiscal year 2025. It expects third-quarter revenue to fall between USD $1.160 billion and USD $1.165 billion, and non-GAAP income from operations is projected between USD $438.0 million and USD $443.0 million. For the full fiscal year, revenue is anticipated to be in the range of USD $4.630 billion to USD $4.640 billion. Full fiscal year non-GAAP income from operations is expected to range between USD $1.790 billion and USD $1.800 billion, and free cash flow is projected to be between USD $1.580 billion and USD $1.620 billion.
