ZOOM Video Communications Fails to Impress Investors with Sales Forecast
ZOOM Video Communications gave a sales forecast for the current quarter that failed to impress investors who were expecting a bigger boost from the company’s expanded suite of products.
Revenue and Profit Projections
Revenue will be about US$1.18 billion in the period ending in January, Zoom said on Monday (Nov 25). Profit, excluding some items, will be US$1.29 to US$1.30 a share. Analysts, on average, projected adjusted earnings of US$1.28 a share on sales of US$1.17 billion, according to data compiled by Bloomberg.
Stock Reaction
The shares, which initially declined about 9 per cent in extended trading, had recovered and were little changed at 5 pm in New York. While Zoom’s outlook met estimates, the stock had gained about 48 per cent to close at US$89.03 since the company’s last earnings report in August on optimism about the new products.
Company Expansions
The software maker known for videoconferencing has expanded its suite of tools to offer phone systems, a contact centre application and artificial intelligence (AI) assistants. In October, Zoom named former Microsoft executive Michelle Chang as chief financial officer to replace Kelly Steckelberg, who left to join design startup Canva.
User Growth and Product Adoption
Zoom has seen a 59 per cent increase in monthly active users of its AI assistant since the prior quarter, the company said in a presentation to supplement its earnings statement. It also topped 1,250 customers of its contact centre application.
Company Name Change
Separately, the company announced it has dropped “video” from its official name and would now be known as Zoom Communications. “Our new name more accurately reflects our expanding scope and plans for long-term growth,” chief executive officer Eric Yuan wrote in a post announcing the change.
Financial Results
In the fiscal third quarter, sales increased 3.6 per cent to US$1.18 billion, compared with analysts’ average estimate of US$1.16 billion, according to data compiled by Bloomberg. Profit, excluding some items, was US$1.38 a share in the period ended Oct 31.
Enterprise Revenue and Customer Growth
Enterprise revenue increased 5.8 per cent to US$699 million. Zoom said it had 3,995 customers who contributed more than US$100,000 over the past year.
Churn Rate
An ongoing loss of consumers and small businesses from Zoom has concerned investors, particularly since these customers are typically higher-margin than corporate clients. Average monthly churn in this segment was 2.7 per cent in the quarter, which was better than analysts’ estimates. Sales in the segment was little changed at US$479 million. That was Zoom’s lowest-ever online churn, Chang said, according to remarks prepared for the company’s earnings conference call.
Share Buyback
Zoom said it’s adding US$1.2 billion to its existing share buyback programme, raising the total repurchase authorisation to US$2 billion.
Conclusion
Despite meeting revenue estimates, Zoom’s sales forecast failed to impress investors, who were expecting a bigger boost from the company’s expanded suite of products. The company’s stock reaction was mixed, with shares initially declining before recovering. Zoom’s focus on expanding its product offerings and increasing user growth may help to drive long-term growth, but the company will need to continue to address concerns about churn rates and customer acquisition.
FAQs
Q: What was Zoom’s sales forecast for the current quarter?
A: Revenue will be about US$1.18 billion in the period ending in January, and profit, excluding some items, will be US$1.29 to US$1.30 a share.
Q: How did Zoom’s stock react to the news?
A: The shares initially declined about 9 per cent in extended trading, but recovered and were little changed at 5 pm in New York.
Q: What are the key areas of focus for Zoom’s future growth?
A: The company is focusing on expanding its product offerings, increasing user growth, and addressing concerns about churn rates and customer acquisition.
Q: What is the new name of the company?
A: The company has dropped “video” from its official name and will now be known as Zoom Communications.
