Zoom Video Communications Inc.’s transition from a typically covid-era tool to an enterprise business platform is getting delayed, as seen in its results.
The company’s revenue percentage from enterprise customers has been growing though it has fallen short of analysts’ estimates. Zoom has cut its forecast, citing losing sales faster than anticipated from its consumers and other small businesses.
According to Tyler Radke, an analyst at Citigroup, the results were worse than expected. The shares of Zoom fell by more than 8% in extended trading.
As offices reopened after the cooling of the pandemic and competition increased from Teams video communications platform from Microsoft Corp., Zoom’s speedy growth cooled considerably. After the results, Kelly Stackelberg, Chief financial officer, said that online sales to small businesses and consumers are expected to fall 7% to 8% this year.
Zoom has responded to the developments by increasing its focus on larger corporate clients, offering them an expanded line of products, including software for customer contact centers. In June, the company unveiled a new Zoom One product that offered physical conference rooms and internet-connected phones. Analysts who are optimistic about these secondary offers, especially the Zoom Phone, feel that they will take time to take off. According to Steckelberg, sales are expected to grow by 20% in the enterprise customer category.
CEO Eric Yuan is confident about the new products, such as Zoom IQ and Zoom Contact Centre. Both saw excellent early wins while Zoom Phone achieved milestone results; the number of licenses sold in the quarter was a record high.
Keeps Slipping
Zoom has forecasted $1.1. billion revenues for the period ending October 2022. As per Bloomberg data, analysts expect an average of $1.6 billion with a growth of 10% over the previous year. Profit is projected at 82 cents to 83 cents a share after excluding some items, while the average analysts’ earnings are estimated at 91 cents a share.
The company has revised its annual sales forecast from $4.55 billion to $4.4 billion projected in May. According to Stackelberg, a $35 million reduction is due to a stronger dollar, while $115 million has been cut due to an uncertain economic environment.
Zoom share declined to $ 87 in extended trading after it closed at $ 97.44.th stock is down 47% this year and missed out on the big rally in tech stocks since mid-June.
Revenue declined 8% in Europe in the second quarter due to weak consumer sentiment, a strong dollar, and the Russia – Ukraine war.
The company had 204,100 customers at the end of July 31, showing a growth of 18% in the enterprise segment from the previous year but lower than 24% in the last quarter. The average analyst estimate was 205,854 customers.
Though the enterprise segment saw steady growth in the second quarter, the customer addition was poor, indicating headwinds ahead, according to Radke of Citigroup.
