Zoom earnings exceed expectations but pandemic surge is slowing %

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The company’s latest quarterly earnings exceeded analyst predictions, but growth is slowing after a pandemic-fuelled surge in 2020.

Zoom continues to beat analyst expectations with its quarterly earnings, but slower revenue growth compared to last year is impacting its stock price.

The company recorded revenue of $1.05bn for the quarter ending 31 October, a 35pc increase on the same period last year and exceeding analyst expectations from Refinitiv of $1.02bn. It also recorded a massive increase in net income to $340.3m, up from last year’s $198.4m.

The online video conference platform continued to see a rise in customers, according to various metrics. It now has more than 512,000 customers with more than 10 employees using the service, an increase of roughly 18pc on the same quarter last year. At the end of the third quarter, it had 2,507 customers contributing more than $100,000 in revenue annually, nearly a 94pc increase.

Despite this growth, Zoom is facing a slowdown after its rapid rise at the beginning of the Covid-19 pandemic.

Last quarter saw the company top $1bn in earnings for the first time, with year-on-year growth of 54pc. In the first quarter this year, which ended on 31 April, Zoom posted 191pc year-on-year revenue growth, a slowdown from 369pc the quarter before.

With its growth continuing to slow each quarter, the company’s shares have fallen by around 28pc this year.

Laura Petrone, principal analyst at GlobalData, said Zoom has to redefine itself as the Covid-19 pandemic subsides and employees return to work.

“In its latest results, the company reported a lower-than-expected increase in the number of large customers, raising doubts about the company’s future in the highly competitive collaboration tools market,” Petrone said.

But the company remains confident about its growth for the rest of the year as remote and hybrid work look set to continue.

Zoom founder and CEO Eric Yuan said it expects to end the year with between $4.07bn and $4.08bn in total revenue, representing 54pc growth from last year.

“We are well on our way to becoming an indispensable platform for enterprises, individuals and developers to connect, collaborate and build in the flexible hybrid world of work. We believe our global brand, innovative technologies and large customer base position us well for the future,” Yuan added.

The company has forecasted more than $1.05bn in revenue for the next quarter, with a predicted net income between $361m and $363m.

During the last quarter, Zoom cancelled its planned $14.7bn acquisition of cloud contact centre software provider Five9. Petrone called this a “a missed opportunity for Zoom to integrate contact centres into its portfolio”.

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