Zoom (NASDAQ:ZM) reported adjusted earnings of $1.05 per share in the second quarter of fiscal 2023, which was above the Zacks Consensus Estimate by 14.13% but below the year-ago period by 22.8%.
The $1.09 billion in revenue was 1.5% below expected. After reporting its worst quarterly revenue growth (7.6% year over year), almost $16 million below the lower end of quarterly projections, the company’s stock dropped 7% in extended trading.
The major factors leading to the revenue miss were a more robust U.S. currency, which had an impact of about $8 million, poorer new online sales, and, to a lesser extent, backend linearity in the quarter.
Breakdown by Quarter
From the second to the third quarter of fiscal 2022, revenue from Enterprise clients increased by 27%, accounting for 54% of overall revenue. Over the past year, Enterprise’s customer base expanded by 18%, reaching over 204,100 users. As a percentage, Enterprise clients accounted for 120% of the company’s net dollar growth during the last twelve months.
Revenue from customers who contributed more than $100,000 to Zoom (NASDAQ:ZM) in the past 12 months increased by 37% year over year to 3,116 in the company’s second fiscal quarter. This group of buyers contributed 26% of total sales, up from 20% in the same period a year ago.
In the United States, sales increased by 12% yearly, while sales in Asia and the Pacific grew by 10%.
The Fine Print on Operations
The non-GAAP gross margin increased by 270 bps, reaching 78.9% in Q2 FY2023.
Zoom (NASDAQ:ZM) has seen its expenses rise as it spends more money to recruit customers, and it now has the challenging task of onboarding high-paying clientele to sustain its development.
The amount spent on R&D reached $97.8 million, an increase of 80.8% from the previous year. Total sales and marketing costs rose by 37.3 percent to $289.7 million, while G&A costs rose by only 1.7% to $90.3 million.
In the same period, revenue from operations calculated without GAAP fell 7.3% to $393.3 billion. According to non-GAAP measures, the operating margin fell by 580 basis points to 35.8 percent.
Zoom’s Cash Flow Statement and Balance Sheet
As of July 31, 2022, there was a total of $5.5 billion in liquid assets (cash, cash equivalents, and marketable securities minus restricted cash). There was $5.7 billion in liquid assets (cash, equivalents in cash, and marketable securities) as of April 30, 2022.
We saw an adjusted free cash flow of $222.1 million. Amounting to $501.1M as of April 30, 2022, free cash flow after adjustments.
Guidance
In the third quarter of fiscal 2023, Zoom anticipates sales of $1.095 billion to $1.1 billion.
Earnings per share, excluding items that would typically be considered “normal,” are projected to fall between 82 and 83 cents.
The company has reduced its annual profit, and sales estimates as competition from Microsoft Teams and Cisco WebEx cools demand for Zoom’s video conferencing software.
As a result, Zoom (NASDAQ:ZM) has revised its revenue forecast for fiscal 2023 from $4.53 billion to $4.55 billion to $4.385 billion to $4.395 billion. This drop of almost $150 million from the prior full-year forecast. Nearly $35 million of the drop can be attributed to the higher dollar, while another $115 million can be attributed to the broader macroeconomic climate.
Previously predicted non-GAAP EPS of $3.70 to $3.77 had been revised downward to $3.66 to $3.39.
Featured Image: Megapixl @Julioricco
Author Shariq Khan 
