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Zoom jumps on AI bandwagon, forecasts upbeat 2024 profit targets

Published 02/27/2023, 04:17 PM
Updated 02/27/2023, 11:05 PM
© Reuters. FILE PHOTO: Small toy figures are seen in front of Zoom logo in this illustration picture taken March 15, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

By Tiyashi Datta

(Reuters) -Zoom Video Communications Inc said on Monday it will integrate more artificial intelligence into its products and forecast annual profit above Wall Street estimates, sending the company's shares up 8% in extended trading.

Analysts predict the AI tech will be a major driver for future growth for the tech industry, which has been grappling with slowing demand amid recessionary fears.

The AI race picked up pace after Microsoft-backed OpenAI's ChatGPT last year prompted heavyweights from Alphabet (NASDAQ:GOOGL) Inc to China's Baidu Inc (NASDAQ:BIDU) to announce their own offerings.

"I like that Zoom is proactively talking about these opportunities today and I honestly believe it's necessary, especially given Microsoft (NASDAQ:MSFT) is already including ChatGPT as part of Teams Premium," said RBC analyst Rishi Jaluria.

San Jose, California-based Zoom forecast fiscal 2024 profit between $4.11 and $4.18 per share, compared with analysts' average estimate of $3.66 per share, according to Refinitiv data.

"The age of AI and large language models has arrived," said Chief Executive Eric Yuan during a call with analysts, adding that AI can "truly help" the company.

Zoom is also benefiting from steady demand for its video-conferencing service from the ongoing shift to hybrid work models and cost cuts. Earlier this month, it announced an about 15% reduction in its workforce.

On an adjusted basis, Zoom earned $1.22 per share for the fourth quarter ended Jan. 31, compared with estimates of 81 cents per share.

Revenue grew 4% to $1.12 billion, above analysts' average expectation of $1.10 billion.

Finance chief Kelly Steckelberg said the growth was primarily driven by strength in Zoom's enterprise business.

© Reuters. FILE PHOTO: Small toy figures are seen in front of Zoom logo in this illustration picture taken March 15, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

The company, however, expects 2024 revenue between $4.44 billion and $4.46 billion, below average Street estimate of $4.60 billion.

"The revenue outlook is softer than initially expected, partly due to macro pressures and especially given declining online business," Jaluria said.

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