Revenue gain of 54% during quarter marks deceleration of growth, sending stock down
Zoom Video Communications Inc.’s quarterly revenue surpassed $1 billion for the first time in the company’s history, though the strong demand for its video-conferencing services that made it ubiquitous during the pandemic is showing signs of easing as regular activities resume.
The roughly 54% revenue increase, while slightly better than Wall Street expected, couldn’t match the massive growth Zoom saw in the prior-year period, when revenue surged fourfold compared with a year earlier as companies relied more heavily on remote working.
While the company guided for revenue of more than $1 billion for the current quarter, its adjusted-earnings guidance came in lower than expected. And Zoom officials said smaller customers were starting to spend less as opportunities for in-person meetings expand.
Zoom officials also said some metrics supercharged by the pandemic had begun to normalize as customers returned to “more thoughtful, measured buying-patterns.”
Shares of Zoom fell nearly 12% in after-hours trading, after closing up 2% on Monday during regular hours.
Research firm International Data Corp. projects that collaboration applications—including the types offered by Zoom and its rivals—will become a roughly $51 billion market by 2025, nearly double the 2020 levels.
Microsoft Corp. in its most recent earnings report said that use of Teams, its group conferencing and collaboration software, had reached record levels, with nearly 250 million monthly active users and nearly 80 million monthly active Teams Phones users with total calls surpassing 1 billion in one month.
Zoom Phone, which the company sells as a telephone option for huddle rooms and executive offices, in August reached 2 million seats sold and the number of Phone customers that generated more than $100,000 in revenue over the previous 12 months more than tripled from the comparable period a year earlier, company executives said.
As offices start to reopen, analysts are raising questions about Zoom’s ability to retain paying customers and sustain the kind of growth rate it has enjoyed during the coronavirus pandemic, which forced many people to work from home and collaborate over the Internet.
On Monday, Zoom said it now had about 504,900 customers with more than 10 em- ployees, up from about 497,000 in the April quarter, and said about 2,278 customers generated more than $100,000 in revenue over the past 12 months, up from about 1,999 in the previous quarter.
Zoom has been adding features and services and in July agreed to buy cloud-based customer-service software provider Five9 Inc., a deal that Zoom said would allow it to tap into a $24 billion contact-centermarket. “Today we are a global brand counting over half a
million customers with more than 10 employees, which we believe positions us extremely well to support organizations and individuals as they look to reimagine work, communications, and collaboration,” Zoom founder and Chief Executive Eric S. Yuan said in prepared remarks.
Zoom’s profit in the second-quarter grew to about $317 million from around $186 million a year earlier, while revenue increased to $1.02 billion, up from $663.5 million a year ago. The California-based company said it now expects annual revenue to reach $4.01 billion to $4.02 billion, compared with its earlier view of $3.98 billion to $3.99 billion, and $4.75 to $4.79 a share in adjusted profit.
12 %
Drop in the company’s shares in after-hours trading.
By MARIA ARMENTAL