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Zoom Delivered, But Its Meteoric Rise Appears To Be Slowing Down

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Zoom Video Communications (NASDAQ: ZM) continues to defy Wall Street forecasts as it managed to beat expectations for third-quarter earnings and guidance for the undergoing quarter.

This fall, Zoom has made its way to smart-home devices made by Amazon.com Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOG). But investors were not dazzled as the guidance shows that Zoom's meteoric growth appears to be slowing down. Consequently, shares fell about 5% in extended trading on Monday after the results.

Q3 Results

Adjusted earnings of $0.99 per share topped the Refinitiv estimate of $0.76 per share with revenue of $777.2 million also exceeding estimates of $694 million. The pandemic is still making Zoom to be the place for work, school, and even family meetings. Revenue grew 367% on an annualized basis in the quarter which ended October 31st, which is more than 355% and 169% achieved in the prior two quarters.

But Zoom's gross margin is shrinking as it went from 67.3% in the previous quarter to 66.7% this time around. The gross margin suffered as teachers and students boosted the platform's free subscribers userbase as school resumed followed by Zoom's higher-than-usual reliance on public cloud resources.

Kelly Steckelberg, the company's chief financial officer revealed that more than 80% of the fiscal third-quarter revenue gain came from new customers' subscriptions. Revenue in the Asia Pacific and Europe, Middle East and Africa grew 629%, compared with over 300% growth in the Americas. There were 433,700 customers with over 10 employees over the quarter which marks a 485% YoY increase, exceeding the growth of 355% from the prior quarter.

Premium Zoom Phone cloud-phone service had also expanded to over 40 countries and territories. OnZoom was also revealed as a tool for organizing live virtual events that can be attended by paying a fee.

Q4 Guidance

Zoom called for fiscal Q4 adjusted earnings in the range between $0.77-$0.79 per share on $806-$811 million in revenue, implying 329% revenue growth at the middle of the range and therefore a slowdown that investors were not pleased with. Analysts polled by Refinitiv had been expecting Zoom to come out with guidance of $0.66 in adjusted earnings per share and revenue of $730.1 million.

Until the earnings release, Zoom's stock had skyrocketed 591% since the start of this unprecedented year, leaving the S&P 500 index far behind with its 12% rise over the same timeframe.

Outlook

This was another blowout quarter for the video chat software provider with revenue jumping 367% YoY. But Zoom raised the bar with this year's mind-blowing performance, and the revenue growth of 329% in the quarter ahead is not good enough as it means the astronomical growth is slowing down. Therefore, investors appear to be cautious about the company's continued trajectory, despite its Q4 forecast-beating expectations. On the other hand, if this year has taught us anything is that future is promised to no one, especially amid the current dynamic of the crisis and its underlying uncertainty.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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