Zoom Video Communications, Inc. has announced its financial results for the second fiscal quarter ending July 31, 2024.
The company exceeded its Q2 guidance, attributing its performance to high demand for its AI-powered collaboration tools. The results underscore Zoom’s strategic investment in artificial intelligence to support the evolving needs of hybrid and remote work environments.
Zoom’s CEO, Eric S. Yuan, noted the company’s achievements in key areas, highlighting a 33.7% increase in operating cash flow and a 26.2% rise in free cash flow year over year. Yuan also pointed out the company’s success in securing significant deals, particularly with large accounts, and emphasised the resilience of its Online business, which saw a record low in average monthly churn.
Q2 Financial Highlights
Zoom reported total revenue of $1,162.5 million for the second quarter of FY2025, marking a 2.1% increase from the previous year. When adjusted for currency fluctuations, revenue was up 2.4%, amounting to $1,166.1 million. Enterprise revenue grew by 3.5% to $682.8 million, while Online revenue remained stable at $479.7 million.
The company’s GAAP income from operations for Q2 was $202.4 million, an increase from $177.6 million in the same quarter last year. The non-GAAP income from operations, which excludes certain expenses such as stock-based compensation and acquisition-related costs, was $455.5 million. This is slightly down from $461.7 million reported in the previous year. Zoom’s GAAP operating margin stood at 17.4%, while the non-GAAP operating margin was 39.2%.
GAAP net income for the quarter was $219.0 million, or $0.70 per share, up from $182.0 million, or $0.59 per share, in Q2 of FY2024. Non-GAAP net income reached $436.4 million, translating to $1.39 per share, compared to $409.6 million, or $1.34 per share, in the same period last year.
Continued Focus on Cash Flow and Share Repurchases
Zoom’s strong cash position was reinforced by a net operating cash flow of $449.3 million for Q2, representing a 33.7% increase year over year. Free cash flow, defined as net operating cash flow minus capital expenditures, was $365.1 million, up 26.2% from the previous year. As of July 31, 2024, Zoom held $7.5 billion in cash, cash equivalents, and marketable securities, excluding restricted cash.
The company also repurchased approximately 4.8 million shares of common stock during the quarter, continuing its commitment to returning value to shareholders.
Zoom’s revenue growth was partly driven by acquiring new customers. By the end of Q2 FY2025, the company had 3,933 customers contributing more than $100,000 in trailing 12-month revenue, a 7.1% increase from the previous year. Additionally, Zoom reported approximately 191,600 enterprise customers, with a trailing 12-month net dollar expansion rate of 98% for this segment.
Zoom also achieved its lowest ever Online average monthly churn rate, which stood at 2.9% for the quarter, down by 30 basis points from the same period last year. The percentage of total Online monthly recurring revenue (MRR) from customers with a continuous service term of at least 16 months rose to 74.4%, up 160 basis points year over year.
Financial Outlook for Q3 and Full Fiscal Year 2025
Looking ahead, Zoom has provided guidance for the third quarter and full fiscal year 2025. For Q3 FY2025, the company expects total revenue to range between $1.160 billion and $1.165 billion, with non-GAAP income from operations projected between $438.0 million and $443.0 million. Non-GAAP diluted earnings per share (EPS) are anticipated to be between $1.29 and $1.31, based on approximately 314 million weighted average shares outstanding.
For the full fiscal year 2025, Zoom forecasts total revenue to be between $4.630 billion and $4.640 billion, with non-GAAP income from operations estimated to range from $1.790 billion to $1.800 billion. The company expects non-GAAP diluted EPS to fall between $5.29 and $5.32, with a full fiscal year free cash flow projection of between $1.580 billion and $1.620 billion.
These forecasts do not account for the impact of $1.062 billion of authorised share repurchase remaining as of July 31, 2024. Further details on Zoom’s financial performance, including reconciliations of non-GAAP to GAAP measures, can be found on the company’s investor relations website.
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