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Don’t believe the hype: we’re all still Zooming

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Zoom is set to buy Five9

Zoom has reported a significant revenue beat in its second-quarter earnings, exceeding expectations and raising its revenue outlook for the current fiscal year.

The company unveiled these impressive results during its latest earnings report, released after the closing bell on Monday.

Zoom’s Q2 revenue reached $1.14 billion, slightly surpassing analysts’ estimates of $1.11 billion. Additionally, the company adjusted its revenue guidance for the fiscal year 2024, which is the current fiscal year, projecting it to be in the range of $4.49 billion to $4.5 billion. This updated forecast represents an increase from the previous range of $4.47 billion to $4.49 billion and exceeded analyst estimates of $4.48 billion.

Robust performance

The market responded positively to Zoom’s robust performance, with the company’s stock surging over 5% in after-hours trading. Prior to this earnings announcement, Zoom’s shares had experienced relatively flat year-to-date performance.

Zoom entered this earnings cycle with a strategic focus on leveraging artificial intelligence (AI) trends. The company aimed to harness AI-driven advantages after the initial surge in demand during the pandemic subsided.

Q2 results

Here’s a summary of Zoom’s Q2 results in comparison to estimates:

– **Revenue**: Actual – $1.14 billion vs. Estimated – $1.11 billion
– **Adjusted EPS**: Actual – $1.34 vs. Estimated – $1.05
– **Free Cash Flow**: Actual – $289.4 million vs. Estimated – $258.6 million
– **Number of Enterprise Customers**: Actual – 218,000 vs. Estimated – 219,350
– **Q3 Revenue Forecast**: Actual – $1.12 billion vs. Estimated – $1.12 billion

Zoom had high expectations for AI to bolster its performance this year, especially in terms of profit margins. CEO Eric Yuan expressed this sentiment in his prepared remarks, stating, “For the full year, we expect non-GAAP gross margin to be approximately 79.7%, as we make additional investments in new AI technologies.”

To enhance its AI capabilities, the company welcomed XD Huang as its new Chief Technology Officer, who brought valuable AI experience from his previous role at Microsoft as the head of Azure AI.

Yuan emphasized the importance of trust in technology development, particularly regarding AI, by assuring customers that Zoom does not use their content for training its AI models or third-party AI models.

 

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Australian Treasurer and RBA chief clash over economy

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A rare dispute has emerged between Australia’s Treasurer Jim Chalmers and Reserve Bank Governor Michele Bullock over the nation’s economic trajectory.

Governor Bullock argues the economy remains overheated, even as growth data shows recent slowdowns.

Treasurer Chalmers, however, warns that sustained high interest rates are “smashing the economy.”

This debate is critical for Australians, as it will influence the future of interest rates and inflation.

Data shows a mixed economic picture: while inflation is down, it’s still above target, and the jobs market remains historically strong.

Ultimately, deciding who’s right may come down to theory and perspective on economic health.

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Central bank expected to ease interest rates as election nears

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The Federal Reserve is expected to cut interest rates again this week, a move aimed at cooling inflation.

This quarter-point rate cut would bring the benchmark rate to about 4.6%, the second reduction this year.

Analysts expect that additional cuts could come in December, which would benefit borrowers by reducing loan costs.

If Trump were to win the election, economists say his proposals on trade and immigration could reignite inflation.

The Fed is balancing a strong economy and low unemployment with its inflation-calibrated rate cuts.

As Election Day approaches, all eyes are on both the Fed and the presidential race.

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Big Tech pushes AI investments

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Tech giants like Microsoft and Meta are accelerating AI data center spending, with massive capital pouring into these projects.

Microsoft and Meta reported on Wednesday that AI investments are spiking their expenses, while Alphabet announced similar trends.

Amazon, due to report earnings shortly, is expected to mirror these projections, foreseeing further pressure on profit margins.

Wall Street is getting wary of the financial strain, as each company’s stock took a hit this week despite strong quarterly numbers.

Shares of Meta fell over 3%, and Microsoft saw a 6% drop, underscoring Wall Street’s jitters.

“It’s expensive to keep up with AI technology demands,” says GlobalData’s Beatriz Valle, emphasising a competitive race in AI capacity.

The high-stakes investments are starting to test investor patience in Big Tech’s ambitious AI journey.

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