October 1, 2022

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Zoom’s stock falls on weak revenue forecast, then rebounds

4 min read

Zoom Video Communications Inc. saw its stock fall as much as 13% in extended trading today before recovering almost all of the ground it lost.

The stock gyration came in the wake of the fourth-quarter earnings results that saw the videoconferencing provider beat expectations and offer a weak outlook for the next period and full year.

The company reported net income in the quarter of $ 490.5 million, up 88% from one year ago. Earnings before certain costs such as stock compensation came to $ 1.29 per share, while revenue rose 21% from a year ago, to $ 1.071 billion.

Wall Street had been expecting Zoom to report earnings of $ 1.05 per share on revenue of $ 1.05 billion. The results were solid enough, but investors will have noted that they pale compared with the astronomical growth the company saw at the outset of the COVID-19 pandemic.

For the full year fiscal 2021, Zoom delivered total revenue of $ 4.09 billion, up 55% from a year ago.

Zoom founder and Chief Executive Eric Yuan (pictured) said the company showed increased profitability over the year and also saw strong growth in its operating cash flow and customer base.

“Looking forward, we are addressing a great opportunity as we expect customers to continue to transform how they work and engage with their customers,” Yuan said. “It is apparent that businesses want a full communications platform that is integrated, secure and easy to use. To sustain and enhance our leadership position, in fiscal year 2023 we plan to build out our platform to further enrich the customer experience with new cloud-based technologies and expand our go-to-market motions, which we believe will enable us to drive the future growth. ”

Zoom has been doing exactly that. Just last week, it announced the launch of a major new offering called Zoom Cloud Contact Center that will see it push to become a major player in the customer support and services segment. Zoom is also expected to expand its virtual events platform at some point following its recent acquisition of Liminal.

Zoom was keen to highlight how it has grown more popular with larger organizations. It said it had 191,000 enterprise customers at the end of the quarter, up 35% from a year ago. However, its overall customer base is actually declined sequentially. Zoom said it had 509,800 customers with 10 or more employees at the end of January, down from 512,100 in October.

Regarding that decline, Zoom Chief Financial Officer Kelly Steckelberg told analysts on a call this was because the company has seen “tremendous growth in online as a channel.”

“It started to kind of overlap there, which is why we don’t think it’s really the appropriate metric to use any longer going forward,” she added.

As for Zoom’s enterprise business, Steckelberg said the company expects this to grow by about 20% year-over-year in the current fiscal year, while online business growth will be flat. She noted that many of Zoom’s smaller customers tend to leave and come back.

Steckelberg’s optimism over Zoom’s enterprise growth couldn’t hide that its overall prospects for the next quarter and full year are likely not quite as strong as Wall Street had been hoping for. The company said it’s expecting revenue of $ 1.07 billion to $ 1.075 billion in the current quarter, which would represent growth of around 12%. Wall Street had an earlier forecast first-quarter revenue of $ 1.1 billion.

Zoom’s fiscal 2022 prediction wasn’t much better. The company said it sees full-year revenue of between $ 4.53 billion and $ 4.55 billion, implying growth of just over 10%. That compares with the consensus estimate of $ 4.71 billion.

Constellation Research Inc. analyst Holger Mueller told SiliconANGLE that for all the fuss over the stock’s after-hours move, the fact was that Zoom grew its revenue by 50%, a remarkable feat for any major tech company.

“Zoom also managed to control its costs well, doubling its profit to well over a billion dollars,” Mueller said. “The question now is how can Zoom keep up its momentum? It has already seen revenue growth slow by around 20% in the last quarter. The next year will be key to see where Zoom’s future lays. “

Zoom saw its business blast off into the stratosphere during the early days of the pandemic and businesses, consumers and students all flocked to its platform as they adjusted to life indoors. The company saw its market cap hit a peak of $ 159 billion in October 2020. However, the company has since lost almost three-quarters of its value, with its market cap sitting at just $ 39.5 billion today.

Photo: Zoom / Twitter

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