Zoom Stock Rises After Earnings Beat Estimates, Signs of More AI Adoption

Zoom stock has fallen 86% from its pandemic highs. (David Paul Morris/Bloomberg)

Key Points

• Zoom reported third quarter adjusted earnings of $1.52 a share and revenue of $1.23 billion, beating expectations.
• The company’s AI Companion 3.0 offers advanced AI capabilities, with a Custom AI Companion add-on costing $12 per user, per month.
• Zoom’s shares have dropped 86% from their all-time closing high of $568.34 in October 2020.

Zoom Communications stock was rising after the videoconferencing company reported better-than-expected financial results and touted continued adoption of its artificial intelligence updates.

Zoom posted third-quarter adjusted earnings of $1.52 a share on revenue of $1.23 billion. Analysts surveyed by FactSet were expecting earnings of $1.44 a share on revenue of $1.21 billion.

Shares were rising 3.8% to $81.60 in after-hours trading following the results.

Zoom also said it expects fourth-quarter earnings to be between $1.48 a share and $1.49 a share, compared to analyst expectations of $1.45 a share. Revenue is expected to be between $1.23 billion and $1.24 billion, which is just above the Wall Street estimate of $1.23 billion.

For the full fiscal year, Zoom said earnings are expected to be between $5.95 a share and $5.97 a share on revenue of $4.85 billion to $4.86 billion, while Wall Street was anticipating earnings of $5.84 a share on revenue of $4.83 billion.

Investors also wanted to see continued customer adoption of Zoom’s AI tools. CEO Eric Yuan said in the earnings release that there has been “broad AI adoption across major deals.”

Zoom has launched AI tools for customers to help with tasks—like note-taking and meeting summaries—during virtual meetings. And in September, the company unveiled an update to its AI tech. Zoom’s AI Companion 3.0 offers more advanced and personalized AI capabilities for users. Zoom also launched its Custom AI Companion add-on, which offers even more advanced AI features and costs $12 per user, per month.

Monetizing AI is an important step for tech companies that investors want to see. Wall Street is concerned about a possible AI bubble as businesses spend big on AI, but aren’t yet seeing a major return on those investments.

“This quarter we announced AI Companion 3.0, and we’re thrilled to see AI Companion adoption grow meaningfully. We’re also seeing strong momentum with Custom AI Companion and our AI‑first Customer Experience suite,” Yuan said in Monday’s earnings release.

Monetizing on AI is especially important to Zoom as it looks to drive future growth. The company became incredibly popular at the height of the pandemic as businesses, schools, and everyday people turned to videoconferencing for human connection. Now that staying home is no longer a necessity, its stock has fallen from pandemic peaks. Shares have dropped 86% from their all-time closing high of $568.34 on Oct. 19, 2020, according to Dow Jones Market Data.

Write to Angela Palumbo at angela.palumbo@dowjones.com