Zoom to use more AI in product, stock up 8% after upbeat 2024 profit targets
Analysts predict the AI tech will be a major driver for future growth for the tech industry.
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 Inc to China's Baidu Inc to announce their own offerings.
Also read | Snapchat introduces ‘My AI’ chatbot: All you need to know
"I like that Zoom is proactively talking about these opportunities today and I honestly believe it's necessary, especially given Microsoft 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.
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.