Zoom Video Communications Inc. has given a glimpse to its investors about expanding to new products beyond its video software which was consumer-friendly during the pandemic and made the company boom. The investors who are pessimistic about this stock are not convinced entirely.
Though the software maker had projected a 10% revenue growth for the current quarter and better than estimates by analysts, it is still the slowest quarterly growth. The Zoom shares jumped 21% after the company declared its results though most of the gains were given up by Monday night.
Zoom was ubiquitous during the pandemic lockdown and became a crucial tool for family and friends to stay in touch. CEO Eric Yuan is now focusing on the business customers who are expected to contribute to a larger revenue share. Yuan has mentioned new products aimed at enterprise customers, which increased to 198,900, a growth of 24% for the period ending April 20.
Mathew Harrigan of Benchmark Co, in a note before the results were announced, said that investors are overlooking the potential of Zoom as a crucial tool that hybrid workplaces will require as more and more industries are opting for remote work.
Enterprise offerings include product addition for analytics and customer service contact centers. Zoom announced its recent acquisition of Solvi, an AI startup, and launched Zoom IQ, a tool for call analytics for the sales department.
Growth Slowdown
In a conference call, Yuan said that new product launches are the company’s strategy to expand vertically and horizontally and ensure that customers get more out of the company.
He also talked about the customers for the phone system launched by Zoom, including Avis Budget Group Inc., Humana Inc., and Franklin Covey Co.
As analysts Hoa Nguyen and John Buttler at Bloomberg Intelligence, Zoom is making progress in its product portfolio diversification.
Zoom could not maintain the triple-digit growth it saw during the pandemic as the office reopened. Also, competition from rival Microsoft in the video communication segment increased. The first-quarter sales this fiscal increased 12% to $1.07 billion, the slowest year-on-year growth to date.
The quarter ending July is expected to see revenue of $1.12 billion in a statement by the San Jose-based Zoom. Profits are projected at 92 cents per share. Zoom has forecast earnings of $3.77 a share for the full fiscal year, up from its February estimates of $3.51 a share.
According to Global X research analyst Tejas Dessai, the market wants to see Zoom as more than a Covid stock. Global X has Zoom as one of its top holdings in its cloud-focused ETF. Dessai said before the results were announced that they would like more consumption from larger organizations, especially those which spend $100k plus on the platform.
Zoom shares increased to $93.46 in New York Monday, up by 4.6% from the previous closing of $89.33. The stock has plummeted by 51% in a broad base decline in software stocks this year.
