Zoom issued a weaker-than-expected revenue forecast for the first quarter and full fiscal year on Monday. Shares of the video-chat software maker, which posted its fiscal fourth-quarter results. It initially sinks as much as 13% in extended trading before rebounding.
The video conferencing platform, which derives a large portion of its revenue from smaller organizations, has been hit by slowing growth as schools and workplaces reopen, as well as competition from Cisco’s (CSCO.O) conferencing tool Webex, Microsoft’s (MSFT.O) Teams and Salesforce’s (CRM.N) Slack.
Zoom said it had 509,800 customers with over 10 employees at the end of January, down from 512,100 in October. It plans to stop reporting that number as of this quarter, though the figure will still show up in its investor deck through the end of the year.
However, Zoom said it would continue to focus on expanding internationally to boost growth.
“The one silver lining from the guidance is there is some implied acceleration in the second half of the fiscal 2023, which suggests that growth rates will trough before reaccelerating,” said RBC Capital Markets analyst Rishi Jaluria.
“The outlook isn’t as bad as it looks, especially given how beaten down the stock is.”
Financial Highlights
Zoom earnings for the fourth quarter were $1.29 a share on an adjusted basis, up 6% from a year earlier.
Revenue jumped 21% to $1.071 billion for ZM stock. A year earlier, the San Jose, Calif.-based company earned $1.22 cents a share on sales of $883 million.
Net income rose 88% in the quarter to $490.5 million as the gross margin widened to 76% from 74.2% in the prior period.
Zoom Video announced a $1 billion buyback. The company has a strong balance sheet with $5.4 billion in cash
Net cash provided by operating activities was $209.4 million for the quarter, compared to $399.4 million in the fourth quarter of the fiscal year 2021.
Future Outlook
Zoom guidance assumes that fiscal 2023 revenue growth will likely trough in the July quarter and reaccelerate through the back half of the year.
For the current fiscal year, the company sees $4.53 billion to $4.55 billion in revenue, implying 10.7% growth. Analysts polled by Refinitiv had been looking for a bigger figure: $4.71 billion.
Zoom’s business took off in the early months of the pandemic as workers, students, and consumers adjusted to life at home and communications over video. The company’s market cap peaked in October 2020 at about $159 billion.
Analysts expected decelerating earnings and revenue growth for Zoom stock as economies normalize and in-person meetings rebound from the coronavirus pandemic. In addition, one problem for Zoom stock has been an elevated turnover of small-business customers.
Zoom stock analysts projected earnings of $1.07 a share on sales of $1.054 billion for the period ended Jan. 31. A year earlier, Zoom earned $1.22 per share on revenue of $883 million.
