Zoom Video Communications Inc’s third-quarter revenue growth rate slowed to 35 percent as demand for its video-conferencing tools eased from the pandemic-fueled heights last year, sending its shares down about 6 percent.
Revenue was at $1.05 billion in the quarter ended October 31, Zoom said, after rising 54 percent in the previous quarter and surging 360 percent a year earlier. The stock, a pandemic winner, fell to $227.5 in extended trading after losing about 28 percent this year.
Competitors mar the dream run
The stiff competition posed by Cisco’s conferencing tool Webex and Microsoft’s Teams has made it challenging for Zoom to win over enterprise customers.
Zoom reported an adjusted profit of $1.11 per share, beating Wall Street’s estimates of $1.09 per share, according to Refinitiv data. The company also forecasted current-quarter revenue and earnings above expectations and raised its full-year revenue estimate to around $4.08 billion from about $4.01 billion earlier.
To retain its users, the company launched various new offerings such as the Events platform, where businesses can host large-scale conferences, cloud-calling service Zoom Phone and in-office meetings feature Zoom Rooms.
“Their Rooms and Phone businesses are 5 percent penetrated or below and that seems to imply plenty of remaining runway for growth even within their existing capabilities only,” said Joe McCormack, senior analyst at Third Bridge said.
Experts are wary about growth
Investment bankers and analysts have warned that Zoom faces several hurdles in sustaining growth after its $14.7 billion bid to buy call center software firm Five9 fell through.
Zoom stock moved swiftly higher last year as the company expanded from a contender in a narrow category of business software to a fabric of culture.
Millions of people adopted its software to remotely attend classes and meet after the coronavirus pandemic made those types of gatherings difficult if not impossible. However, with the pandemic-induced exigencies easing out, the company is striving hard to keep itself afloat in a fiercely competitive market.