Executive Summary
Zoom Video Communications Inc (ZM) reported a solid performance in Q1 2025, achieving a revenue of $1.141 billion, an increase of 3.25% year-over-year. The company's focus on expanding its AI-driven product offerings, particularly through its newly launched Zoom Workplace, has enabled it to enhance productivity and engagement among customers. Despite slight increases in churn rates attributed to stricter grace periods for payments, Zoom continues to bolster its enterprise segment, which accounts for 58% of total revenue. Management remains positive on future growth, raising guidance for the full fiscal year and emphasizing AI as a critical driver for customer engagement and satisfaction.
Key Performance Indicators
QoQ: 63.89% | YoY:3 598.97%
QoQ: -27.62% | YoY:1 300.60%
QoQ: -28.57% | YoY:1 238.43%
Key Insights
**Revenue:** $1.141 billion, up 3.25% YoY, down 0.46% QoQ\n**Gross Profit:** $806.9 million, gross profit margin at 70.70%\n**Operating Income:** $276.2 million, up 3,598.97% YoY\n**Net Income:** $216.3 million, up 1,300.60% YoY\n**EPS:** $0.70, compared to $0.052 in Q1 2024\n**Cash Flow:** Operating cash flow grew 41% YoY to $588 million; free cash flow rose 44% YoY to $570 million.\n**Deferred Revenue:** $1.35 billion, down 1% YoY; RPO increased 5% to $3.67 billion.\n**Churn Rate:** Online ave...
Financial Highlights
Revenue: $1.141 billion, up 3.25% YoY, down 0.46% QoQ\nGross Profit: $806.9 million, gross profit margin at 70.70%\nOperating Income: $276.2 million, up 3,598.97% YoY\nNet Income: $216.3 million, up 1,300.60% YoY\nEPS: $0.70, compared to $0.052 in Q1 2024\nCash Flow: Operating cash flow grew 41% YoY to $588 million; free cash flow rose 44% YoY to $570 million.\nDeferred Revenue: $1.35 billion, down 1% YoY; RPO increased 5% to $3.67 billion.\nChurn Rate: Online average monthly churn increased to 3.2%, attributed to tighter grace period policies.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.14B |
3.25% |
-0.46% |
| Gross Profit |
806.90M |
-4.10% |
-7.27% |
| Operating Income |
276.20M |
3 598.97% |
63.89% |
| Net Income |
216.31M |
1 300.60% |
-27.62% |
| EPS |
0.70 |
1 238.43% |
-28.57% |
Key Financial Ratios
operatingProfitMargin
24.2%
operatingCashFlowPerShare
$1.91
freeCashFlowPerShare
$1.85
Management Commentary
AI Initiatives: Eric Yuan emphasized, "Our rapid innovation over the years has taken us far beyond video conferencing...We have very deliberately created a communication and collaboration powerhouse with AI infused natively across the platform."\nCustomer Engagement: Kelly Steckelberg highlighted Q1 achievements, stating, "We saw additional traction in Zoom Contact Center, as we reached 90 customers with over $100,000 in ARR, representing 246% year-over-year growth."\nFuture Outlook: Kelly also indicated they expect Q2 to be the low point from a year-over-year growth perspective, reinforcing, "We now expect revenue to be in the range of $4.61 billion to $4.62 billion, which represents approximately 2% year-over-year growth."
Eric Yuan: "Our rapid innovation over the years has taken us far beyond video conferencing...We have very deliberately created a communication and collaboration powerhouse with AI infused natively across the platform."
â Eric Yuan
Kelly Steckelberg: "We are pleased to raise our top-line and profitability outlook for the full year of FY2025," indicating confidence in their growth trajectory.
â Kelly Steckelberg
Forward Guidance
For Q2, Zoom anticipates revenues between $1.145 billion to $1.15 billion, reflecting about 1% year-over-year growth. The company forecasts non-GAAP operating income in the range of $415 million to $420 million, with the non-GAAP EPS expected to be $1.20 to $1.21. Management anticipates Q2 will be a low point, with an expectation of recovery in the latter half of FY2025. They underline growth in enterprise and AI-relevant services as key drivers moving forward.