Eric Yuan, CEO, Zoom Video Communications
zoom Shares tumbled more than 7% in extended trading on Monday after the video chat company issued a weaker-than-expected full-year sales guidance.
Here’s how the company did it:
- Merits: $1.07 per share, adjusted, vs. 84 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $1.10 trillion vs. $1.10 billion as expected by analysts, according to Refinitiv.
At that time two years ago, the challenge for Zoom was keeping up with demand as pandemic-driven usage boosted revenue by more than 300% in 2020.
Since then, Zoom’s fight has adapted to a non-pandemic reality. The stock has lost more than 85% of its value since its October 2020 peak, including a drop of over 50% this year.
Revenue for the most recent quarter, ended 10/31/, rose 5% year-on-year, according to a statement. In the prior quarter, revenue rose 8%. Net income fell to $48.4 million from $340.3 million in the same quarter last year.
After the stock skyrocketed in 2020, Zoom faced the twin woes of a reopening of the economy and increased competition, particularly from Microsoft, which invested money in its video and collaboration service teams. More business and face-to-face meetings happen in real life, and those that happen online don’t necessarily happen over Zoom.
The company sees “increased deal review for new deals,” Zoom CEO Eric Yuan said during Zoom’s conference call. Competitors don’t win the deals Zoom discusses with prospects, but they take longer to close, said Kelly Steckelberg, the company’s chief financial officer.
Zoom is still adding large corporate clients. At the end of the quarter, Zoom had 209,300 enterprise customers, up from 204,100 the previous quarter. The company said its online business — including customers who sign up directly through its website — was down 9%.
Zoom lowered revenue guidance, mainly due to the stronger US dollar.
The company expects revenue of $4.37 billion to $4.38 billion this fiscal year, down slightly from its August guidance and below the median analyst estimate of $4.4 billion. Adjusted earnings will be between $3.91 and $3.94 per share, ahead of estimates and ahead of the company’s previous guidance.
Zoom’s guidance implies revenue growth of 5% in the fiscal fourth quarter.
Management didn’t provide guidance for fiscal 2024, but Steckelberg said as she and her other executives work on the plan for that period, “we’re being very, very thoughtful about prioritizing investments.”
The company will hire fewer employees as it approaches the new fiscal year, she said.
CLOCK: Zoom CFO says customers are willing to pay for the company’s products