Yahoo Finance Zoom Raises Annual Sales Forecast in Sign Pandemic-Era Customers Here to Stay
(Bloomberg) -- Zoom Video Communications Inc. shares slid after the company reported that a plan to grow sales with enterprise customers may not proceed as quickly as expected.
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The company, which came to prominence as the video-conferencing tool of choice during the Covid-19 pandemic, didn’t add as many large corporate customers as analysts’ anticipated. These business customers are now Zoom’s focus and are vital to demonstrating the company can revive its sales growth.
Still, Zoom raised its sales forecast for the full year, a positive sign for the software maker’s effort to continue growing in a post-pandemic world. Sales for the fiscal year ending in January 2025 will be $4.47 billion to $4.49 billion, Zoom said Monday in a statement. That’s up from an earlier outlook of about $4.44 billion. The company also improved its forecast for annual adjusted profit, projecting $4.25 to $4.31 a share, compared with a previous forecast of $4.11 to $4.18 a share.
The stock fell about 6% at the start of trading Tuesday in New York. The stock had gained 5.4% this year through Monday’s close, lagging behind most software peers amid continued concerns about customer churn and competition from Microsoft Corp. The ousting of high-profile sales President Greg Tomb in March fueled questions about the success of the company’s sales operation.
Consumers and small businesses that flocked to Zoom during the pandemic had been dropping off the platform in recent quarters, denting profitability and sales growth. That group of customers is now stabilizing, Chief Financial Officer Kelly Steckelberg said in remarks prepared for a conference call after the results were released. The online segment should generate about $480 million in the current period and remain relatively unchanged thereafter, she said.
The San Jose, California-based company said it had 215,900 enterprise customers in the period ended April 30, an increase of 9% from a year earlier. Of those customers, 3,580 contributed more than $100,000 in trailing 12-month revenue, an increase of 23% from the period a year earlier.
While growing, those enterprise customer numbers were shy of analysts’ expectations. The share of revenue from large businesses in the quarter — 57% — was unchanged from the previous period. “While we’re encouraged by Online stabilizing ahead of schedule, we would prefer to see more resiliency out of the Enterprise business,” wrote Rishi Jaluria, an analyst at RBC Capital Markets.
In the fiscal first-quarter, Zoom reported sales increased about 3% to $1.11 billion, topping estimates. Profit, excluding some items, was $1.16 a share. Analysts, on average, estimated 99 cents a share.
The results showed “good execution in an uncertain economy, progress toward more stable growth and strong cost management,” said John Butler, an analyst at Bloomberg Intelligence.
Chief Executive Officer Eric Yuan touted the importance of AI to its new enterprise offerings. Last week, the company announced an investment in startup Anthropic, and said it will begin layering Anthropic’s artificial-intelligence assistant, Claude, into its products, beginning with the contact center.
Steckelberg acknowledged that the sales teams experienced “some distraction” due to a reduction in headcount. The company announced in February that 1,300 workers would lose their jobs as part of a restructuring.
(Updates with stock move and additional reporting starting in the first paragraph.)
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