The post-pandemic woes of Zoom Video Communications continued as the company reported mixed July-quarter results. ZM stock plunged on Tuesday as third-quarter guidance missed Wall Street estimates amid weakness in consumer and small business sales.
Zoom Video reported second quarter earnings after the market close on Monday. Updated fiscal 2023 revenue guidance now calls for 7% year-over-year growth, down
from earlier guidance of 11% growth.
Zoom earnings fell 23% to an adjusted $1.05 per share from a year earlier but topped estimates amid lowered expectations.
Revenue rose 8% to $1.09 billion, slowing from 54% growth in the year-earlier quarter. A year earlier, Zoom earned $1.36 a share on sales of $1.02 billion.
Zoom Stock: Enterprise Business Holding Up?
Zoom stock analysts projected earnings of 94 cents a share on sales of $1.12 billion for the period ended July 31.
"While Enterprise remains strong, online continues to disappoint due to slower customer adds," said Mizuho Securities analyst Siti Panigrahi in a report. "We continue to view fiscal 2023 as a transition year as Zoom invests to build a durable, post-pandemic growth profile."
Zoom stock tumbled 14.8% to 82.96 in afternoon trading on the stock market today.
"Zoom argued that the macro economic impact was largely confined to its Online (consumer and small business) segment and that the Enterprise segment (54% of revenue) seems 'resilient', with no signs of delayed deals or share losses to Microsoft Teams," said UBS analyst Karl Keirstead in a report.
He added that Zoom Video "reaffirmed its 20% to 25% growth guidance" for the Enterprise business.
ZM Stock: Large Customer Growth
The San Jose, Calif.-based software maker said it had 3,116 customers contributing more than $100,000 each annually, up 37% from a year earlier.
For the current quarter ending in September, Zoom Video forecast earnings per share in a range of 82 cents to 83 cents, compared with analyst estimates for 92 cents. Zoom Video said it expects revenue in a range of $1.095 billion to $1.1 billion vs. estimates of $1.15 billion.
On the plus side, Zoom Video had $5.5 billion in cash on its balance sheet as of July 31.
Zoom stock has retreated 27% in 2022. While the coronavirus pandemic sparked demand for its videoconferencing software, investors now expect elevated turnover of small business customers as the economy normalizes and more in-person meetings and events resume.
Heading into its earnings report, ZM stock owned an IBD Relative Strength Rating of only 15 vs. a best-possible 99, according to IBD Stock Checkup.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
