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California-based communications company Zoom reported results for the second quarter of fiscal year 2024. The results were above expectations and the company raised its outlook for fiscal year 2024. Analysts are positive on the results. Citi was expecting a stronger outlook and Piper Sandler is concerned about continued optimization and high competition.

2Q results

The company's revenue grew 3.6% year-over-year. Total revenue was comprised of revenue from corporate ($659.5 million) and online operations ($479.2 million). Adjusted earnings from operations were $177.6 million in the second quarter. This represents an increase of USD 55.9 million year-on-year. USD 55.5 MILLION. The company's free cash flow in 2Q was $289.4 million. USD 258.6 million vs. USD 250 MILLION. The company reported cash of USD 1.38 billion against an estimate of USD 1.27 billion.

Outlook for full fiscal year 2024

The company raised its revenue outlook to a range of $4.47 billion to $4.49 billion to $4.50 billion. Analysts had estimated USD 4.48 billion.

Just as the company raised its revenue guidance, it decided to raise its expectations for adjusted earnings per share. Previously forecasting $4.25 to $4.31, it now forecasts $4.63 to $4.67. Analysts are sticking with the $4.32 estimate.

CEO's statement

"Our mission of endless human connection remains our core strategy. At the same time, we are innovating and expanding our platform to drive value and productivity with new capabilities in our AI, such as Zoom IQ Meeting Summary, Team Chat Compose and Intelligent Director. I am excited to reinvent the modern customer experience with Zoom Virtual Agent and Zoom Contact Center, which surpassed 500 customers in 2Q," said CEO and Founder, Eric S. Yuan.

Analytical Recommendations

Morgan Stanley, with a target price of $78 and an equal-weight recommendation, said Zoom's positive 2Q results were due to higher sales across the sectors in which the company operates, and operating margins were also better than expected.

Piper Sandler, with a $76 price target and a "neutral" recommendation, says that while Zoom's results were better than expected, they have concerns about continued optimization and high competition.

Citi, with a target price of $66-65 and a "sell" recommendation, says the results ended above forecasts and show improvement in both the Enterprise and Online segments. The outlook, on the other hand, was weaker according to Citi.

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