Eric Yuan, CEO, Zoom Video Communications
scaling shares tumbled more than 7% in extended trading Monday after the video chat company issued weaker-than-expected revenue guidance for its full fiscal year.
Here’s how the company fared:
- Earnings: $1.07 per share adjusted, versus 84 cents per share, as expected by analysts, according to Refinitiv.
- Income: $1.10 billion, versus the $1.10 billion analysts were expecting, according to Refinitiv.
Two years ago, Zoom’s challenge was to keep up with demand as pandemic-fueled usage increased revenue by more than 300% in 2020.
Since then, however, Zoom’s struggled to adapt to the non-pandemic reality. The stock has lost more than 85% of its value since peaking in October 2020, including a drop of more than 50% year-to-date.
Revenue in the latest quarter, which ended Oct. 31, was up 5 percent from a year earlier, according to a statement. In the previous quarter, revenue was up 8%. Net income fell to $48.4 million from $340.3 million in the year-earlier quarter.
After shares soared in 2020, Zoom faced the twin challenges of a resurgent economy and increased competition, most notably from Microsoft, which has been pouring money into its video and collaboration service Teams. Now, more business and personal meetings happen in real life, and those that happen online are not necessarily over Zoom.
The company sees “increased scrutiny of the new business deal,” CEO Eric Yuan said on the earnings call. Rivals aren’t winning the deals Zoom is discussing with potential customers, but they’re taking longer to close, said Kelly Stackelberg, the company’s chief financial officer.
However, Zoom is still adding large enterprise customers. At the end of the quarter, the company had 209,300 corporate customers, compared to 204,100 in the previous quarter. The company said its online business – including customers who subscribe directly through its website – was down 9%.
Zoom lowered its revenue guidance, mainly due to the strengthening US dollar.
The company expects sales this fiscal year of $4.37 billion to $4.38 billion, down slightly from its August forecast and below the average analyst estimate of $4.4 billion. Adjusted earnings are forecast to be $3.91 to $3.94 per share, higher than estimates and above the company’s previous call.
Zoom’s forecast suggests 5% revenue growth in the fiscal fourth quarter.
Management did not provide guidance for fiscal 2024, but Steckelberg said that while she and her other executives work on the plan for that period, “we are very, very careful about prioritizing investments.”
The company will hire fewer people as the new fiscal year approaches, she said.
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