Zoom posted its first quarter of a billion dollars in revenue, but signaled a faster-than-expected decline in demand for its video conferencing service after a pandemic-induced boom, which plunged its stock by 11 percent.
The company Monday forecast third-quarter revenue of between $1,015 billion (approximately Rs. 7,415 crores) and $1,020 billion (approximately Rs. 7,450 crores), compared to the analysts’ average estimate of $1,013 billion (approximately Rs. 7,400). crores), according to Refinitive data.
That points to an increase of only about 31.2 percent from a year earlier, compared to multiple growth rates in 2020 when the COVID-19 crisis had made Zoom a household name with the rise of remote working and learning.
“We expected that (the slowdown) towards the end of the year, but it just happened a little faster than we expected,” Chief Financial Officer Kelly Steckelberg said during an earnings call.
Zoom has been under pressure this year as vaccinations encourage schools to reopen and more companies to return employees to offices.
Competition from legacy platforms such as Cisco’s Webex and Microsoft Teams has also dented his efforts to win larger contracts from companies.
Zoom expects a drop in revenue from customers with 10 or fewer employees. This group consists mainly of small and medium-sized companies that pay monthly bills.
It forecast adjusted earnings for the third quarter of between $1.07 (approximately Rs. 78.20) and $1.08 (approximately Rs. 78.93) per share, compared to expectations of $1.09 (approximately Rs. 79.66) per share.
Analysts said the company would try to stop the slowdown by spending aggressively on expanding and ramping up its platform and Zoom Phone – the cloud-calling product for businesses.
Zoom recently announced the acquisition of call center software maker Five9 for $14.7 billion (approximately Rs. 1,07,465 crores) in its largest deal, and Kites GmbH, a company that assists in real-time language translation.
It posted second-quarter earnings of $1.04 (approximately Rs. 76.02) per share on revenue of $1.02 billion (approximately Rs. 7,460 crores), both of which exceeded estimates.
© Thomson Reuters 2021