On Monday, Zoom Video Communications cut down its annual profit forecasts as demand for the video-conferencing platform cools off from pandemic highs impacting the revenue growth amid stiff competition from Microsoft Teams and Cisco WebEx. Shares of the company fell 7% in extended trade after it reported its slowest quarterly revenue growth on record at 8%, as people switched to in-person meetings from virtual conversations.
Zoom Posted a Triple-Digit Revenue Growth During Peak Pandemic Times
Finance chief Kelly Steckelberg informed analysts that the firm’s online business was likely to plunge by 7% to 8% in fiscal 2023. Founded by a former Cisco executive, Zoom was a little-known company when the pandemic hit in early 2020, but posted triple-digit revenue growth at the peak of the crisis as people stuck at home took to video-conferencing to communicate.
Zoom now faces the laborious task of onboarding high-paying clients to sustain its growth, and has seen expenses rise as it spends more dollars to attract customers which have been reining in spending amid high inflation. Operating expenses grew 51% to $704 million in the three months to July. The company forecast annual revenue between $4.39 billion and $4.40 billion, compared with its earlier outlook of $4.53 billion to $4.55 billion.
Zoom Has Reduced its Expected Annual Profit Forecast Per Share Between $3.66 and $3.69
The company now expects the annual adjusted profit per share between $3.66 and $3.69, compared with the $3.70 to $3.77 forecast earlier. “Zoom remains a “show-me” story, where the company believes there’s a lot of potential and higher growth ahead, but Wall Street clearly doesn’t believe it yet,” Rishi Jaluria, managing director of software at RBC Capital Markets said.