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What to Expect From Zoom’s Earnings on Monday?
Zoom's sales should exceed $1 billion for the second straight quarter.

It’s worth following how quickly customers are taking up new offerings like the Zoom phone. It nearly tripled its annual recurring revenue base last quarter. Investors will want to see further gains in the enterprise market, too, given that large contracts (with over $100,000 in annual revenue) more than doubled last quarter.

Zoom’s sales and profitability have benefited significantly from the COVID-related closures. In fiscal Q2, the company performed magnificently, with revenue surpassing $1 billion for the first time, in addition to strong profitability and cash flow.

Result Expectations

According to ZACKS Research, Zoom expects revenues between $1.015 billion and $1.020 billion for the third quarter of fiscal 2022. The non-GAAP income from operations is expected to be between $340 million and $345 million.

Additionally, non-GAAP earnings are expected to be in the range of $1.07-$1.08 per share. Zoom expects its fiscal 2022 revenues to range between $4.005 billion and $4.015 billion. The company expects non-GAAP income from operations to range between $1.5 billion and $1.51 billion. In addition, ZACKS analysts noted that non-GAAP earnings are expected to range between $4.75 and $4.79 per share.

The operating margin should continue rising despite Zoom’s extra spending on development and sales and marketing. That profitability metric sat at 25% of sales in Q2 and shareholders are hoping to see a modest boost this week. Zoom should also announce good news on the cash flow front.

Free cash flow is at $909 million through the first half of this fiscal year compared to $625 million for the same period in 2020.

Sales in the online segment “will be a headwind in the coming quarters as smaller customers and consumers adjust to the evolving environment,” CFO Kelly Steckelberg said at the time. Zoom’s lagging stock returns this year mostly reflect expectations for a sharp slowdown in that part of the business.

But Zoom might still issue an optimistic update to its fiscal year outlook. Assuming consumers and businesses stayed engaged in its communication platform. Heading into Monday’s report, that forecast targets sales of just over $4 billion, or roughly 51% growth for the full year.

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