Zoom Reports Its First Billion Dollar Quarterly Revenue, But Forecasts Growth Slowdown

Despite posting its first quarter where it made revenues of more than a billion dollars, the video conferencing firm ta shot to fame and became a household name during the Covid-19 pandemic - Zoom Video Communications Inc, forecast a decline in demand for its services that was higher than expected by analysts in the near future which pushed down the share price of the company by as much as 11 per cent.
 
The company forecast revenue for the third quarter to be between $1.015 billion and $1.020 billion whereas the average estimates of analysts was of $1.013 billion, according to Refinitiv data.
 
That translates into a growth of about 31.2 per cent for the same period a year ago while the company had reported multiple-fold growth rates in the same quarter last year when the pandemic was at its peak – promoting a huge rise in the use of Zoom conferencing services by people who were forced to stay back home, imposed to curb the spread of the pandemic, and hence work from home.
 
"We had expected that (the slowdown) towards the end of the year, but it's just happened a little bit more quickly than we expected," Chief Financial Officer Kelly Steckelberg said on an earnings call.
 
With schools being encouraged to reopen and with more companies allowing employees to return to offices because of the roll out of Covid-19 vaccines, there has been pressure on Zoom this year.
 
This trend has also impacted rivals and legacy platforms such as Cisco's Webex and Microsoft Teams with winning bigger contract from companies getting more difficult.
 
There will be lesser revenue from companies that have 10 or lesser number of employees, Zoom forecast. This customer segment of the company primarily comprises of small and medium businesses and those that pay their bills on a monthly basis.
 
Zoom’s forecast for its adjusted earnings for the third quarter to be between $1.07 and $1.08 per share, slightly lower than analysts’ expectations of $1.09 a share.
 
Zoom would try and compensate for the slowdown in growth by increased spending n on expansion and boosting its platform and Zoom Phone – the cloud based calling product of the company for businesses, said analysts.
 
In a recent announcement, Zoom declared its decision to acquire the call-center software maker Five9 in a deal worth $14.7 billion – the largest such deal the company so far. It also announced buying out of Kites GmbH, a company that helps in real time language translation.
 
For the second quarter, Zoom reported a profit of $1.04 per share on revenue of $1.02 billion, both of which were higher than analysts’ estimates.
 
(Source:www.usnews.com)