Yahoo Finance Zoom’s Sales Growth Slows Even as Enterprise Business Stays Steady
(Bloomberg) -- Zoom Video Communications Inc. declined about 6% in extended trading after reporting its slowest quarterly sales growth on record and slightly reduced its full-year revenue forecast.
Most Read from Bloomberg
Binance’s Zhao Flags Possible $1 Billion for Distressed Assets
Malaysia PM Anwar Plans Confidence Vote to Prove to Rival He Commands a Majority
China Covid Cases Jump to Record High, Topping Shanghai Outbreak
Revenue increased 5% to $1.1 billion, in line with analysts’ average estimate. For the full year, the software company reduced its sales forecast to as much as $4.38 billion from its August projection of as much as $4.4 billion.
The full-year sales guidance issued Monday assumes that Zoom’s enterprise business will grow more than 20% while revenue from online consumer and small business customers will decline about 8%, Chief Financial Officer Kelly Steckelberg said on a conference call with analysts. In a sign the enterprise business remains steady, Zoom reported quarterly profit that exceeded Wall Street estimates and raised its full-year earnings forecast.
Zoom, which burst into public consciousness during the height of the pandemic, is fighting to reverse a slowdown in growth for its video communications service by expanding its tools for business. At its annual user conference earlier this month, it unveiled email and calendar services, which it hopes will keep more workers on the platform.
“We drove revenue above guidance with continued momentum in enterprise,” Chief Executive Officer Eric Yuan said in a statement, highlighting better-than-expected profit. But the company continues to be affected by currency fluctuations and “heightened deal scrutiny for new business,” he said on the call.
Tyler Radke, an analyst at Citigroup Inc., was skeptical the company’s growth would return anytime soon. “Despite some modest revenue upside, the leading indicators suggested signs of incremental deterioration,” he wrote after the results were released.
Zoom shares, which have been hovering close to pre-pandemic prices, declined to a low of $74.73 in extended trading after closing at $80.26 in New York. The stock has dropped 56% this year.
In the period ended Oct. 31, the company said it had 209,300 enterprise customers, an increase of 14% from a year earlier. Analysts, on average, projected Zoom would report 210,105. Large businesses make up a growing share of Zoom’s revenue as it loses consumers and small businesses.
Churn among consumers and small businesses has begun to stabilize in the quarter. Average monthly churn among those online customers was 3.1% in the fiscal third quarter, down from 3.7% in the same period last year.
The online business is still having “a dampening affect on the overall growth rate of the company,” Steckelberg said on the call.
As for potential acquisitions, Zoom is looking “every day,” Steckelberg said. “The compression in valuations is not lost on us.”
Zoom said it had 3,286 customers contributing more than $100,000 in trailing 12 month revenue, an increase of 31% from the period a year earlier. Sales in the Americas region grew 11% while Europe, the Mideast and Africa sank 9% due to currency fluctuations and the impact of the war in Ukraine. Revenue in the Asia-Pacific region declined 3%, Steckelberg said.
Fiscal third-quarter profit, excluding some items, was $1.07 a share, the San Jose, California-based company said in a statement. Analysts, on average, projected 83 cents a share. Full-year earnings will be as much as $3.94 a share, the company said, an increase from Zoom’s August forecast of as much as $3.69 a share.
(Updates with comments from analyst in the sixth paragraph.)
Most Read from Bloomberg Businessweek
Apple’s Reliance on China Grows Perilous With Chaos in iPhone City
The Robot Tractors Are Coming, Just as Soon as We Crush a Few Bugs
Crypto’s Crash Is Helping a Few Couples Rekindle Their Relationships
©2022 Bloomberg L.P.
