Zoom Video Communications (ZM) shares slumped lower Tuesday after the video conferencing specialists forecast softer-than-expected near-term revenues that clouded a solid third quarter earnings report.
Zoom said adjusted profits for the three months ending in October were pegged at $1.07 per share, firmly ahead of Street forecasts, as revenues rose 5% to a Street-beating 1.1 billion.
Sales from enterprise customers were up 20% from last year, Zoom said, and now comprise around 56% of total revenues, with many purchasing the whole of the Zoom platform. Operating margins improved to 34.6%, with free-cash flow rising to $272.6 million, Zoom said,
Looking into the final months of 2022, however, Zoom said it sees revenues in the region of $1.095 billion and $1.105 billion, just shy of Refinitiv estimates, with a lower-than-expected tally of between $4.37 billion and $4.38 billion for the coming fiscal year.
"We still face the backdrop of a challenging macroeconomic environment," CEO Eric Yuan told investors on a conference call late Monday. "We continue to see FX pressure and heightened deal scrutiny for new business but remain focused on delivering happiness to our customers by innovating our platform and expanding our go-to-market capabilities."
Zoom shares were marked 7% lower in early Tuesday trading to changed hands at $74.69 each, a move that would extend the stock's year-to-date decline to around 60%.
"When the pandemic hit in (early 2020), Zoom’s super-easy-to-use solution saved the day, Zoom penetrated the video conferencing market with record speed and the company quickly ramped to a $4 billion revenue run rate," said JMP Securities analyst Patrick Walravens, who carries a 'market perform' rating on the stock.
"But today Zoom’s challenges include fending off competition from Microsoft Teams in the enterprise, identifying the right value proposition to stabilize its $2 billion Online business, and finding the next big growth driver to change the “commoditization” narrative and drive its second act," he added.
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