Earnings call: Zoom’s Q3 FY ’24 earnings beat guidance, eyes on AI and hybrid work solutions

In its Q3 FY ’24 earnings release, Zoom (NASDAQ:ZM) reported revenue of $1.137 billion, surpassing guidance, and shared an optimistic outlook on its AI and hybrid work solutions. The company’s CFO, Kelly Steckelberg, and CEO, Eric Yuan, discussed the success of new innovations, customer wins, and financial highlights during the earnings call. They also provided Q4 revenue guidance of $1.125 billion to $1.13 billion and raised their full-year revenue outlook to $4.506 billion to $4.511 billion.

Key takeaways from the call include:

The Zoom AI Companion, which offers features like meeting summaries, has been enabled by over 220,000 accounts, with 2.8 million meeting summaries created in less than three months.
Major customer wins like Dropbox (NASDAQ:DBX), Amynta Group, and Virgin Group have adopted various Zoom solutions.
Zoom Phone reached approximately 7 million paid seats.
Non-GAAP operating income for FY ’24 is expected to be $1.74 billion to $1.745 billion, with an operating margin of approximately 39%.
AI features, including the AI Companion, Zoom Phone, Zoom Contact Center, and Zoom Virtual Agent, will contribute to reaccelerating the enterprise expand metric.
The company is excited about Zoom Contact Center, highlighting its modern architecture, scalability, and AI features.
The cost impact of AI innovation is manageable and the quality is good, according to CEO Eric Yuan.
The company has set accelerated bookings targets for Workvivo, an operating unit that has shown great adoption and momentum.
Zoom’s executives also highlighted the company’s focus on retention and free-to-pay conversion, and expressed confidence in their solutions for medium-sized companies as well as large enterprises. The company is also actively transitioning customers to other Zoom One bundles that include Zoom Phone. They are optimistic about the potential for Zoom Rooms as a stand-alone product and its role in supporting hybrid work and workplace management.

The company’s CFO, Kelly Steckelberg, addressed concerns about churn and downgrades among large enterprise customers, stating that while there has been some downselling and rightsizing of meeting licenses, the company has not seen significant logo churn. Steckelberg also highlighted the company’s ongoing evaluation of potential mergers and acquisitions, stating that they have a high bar and have yet to find the right match.

The call concluded with the CEO of Zoom discussing the potential for growth in FY ’25, citing factors such as growth in Zoom Phone and the contact center, and the positive feedback received on the AI companions.