Zoom sinks on weakening sales

Zoom stock slumps 16% in Tuesday trading

Zoom Video Communications stock sank on Tuesday, despite the company’s second-quarter earnings beating expectations. 

Instead of the $1.16 per share profit predicted by analysts polled by Refinitiv, the video-calling software firm reported earnings of $1.36 per share in the three months to July 31. 

It generated revenue of $1.02bn (£740m) instead of the $991m forecast, with Zoom predicting 31% revenue growth in the next quarter. Although this represented a 54% year-on-year increase, it constituted a marked decline from the 191% gain seen in the previous quarter. 

The rise in working from home as a result of the government-imposed coronavirus restrictions propelled the company to new heights. However, anxiety as to how the company can grow in a post-COVID world has only grown.

In October 2020, the Zoom stock traded at $588, an all-time high. 

Struggle to maintain position post-COVID

While only 1% of Zoom’s workforce has returned to the office, the company cannot be said to be representative of most firms.

Although hybrid working is now more accepted, leading corporations have begun to demand that workers return to the office. Some, such as Google, have even announced that those who wish to remain at home can do so but will have to take a pay cut. 

In addition to anxiety about demand, Zoom is also contending with supply issues – namely, increased competition. Established telecommunication and software firms such as Cisco and Microsoft have stepped up their investment in the video-conferencing field.  

Pivot towards larger-enterprise customers

Part of the company’s attempt to maintain its foothold has been a pivot away from free users towards larger-enterprise customers.

Chief financial officer Kelly Steckelberg stated that free users accounted for “about 30% of our minute usage today as compared to, like, 10% pre-pandemic.”

By early afternoon (EDT), Zoom shares had traded down 16.1% at $291.34, 19% below its 2021 starting level. 

Zoom Video Communications, Inc.
Daily change
269.7
Low: 269.7
High: 272.09

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