Zoom is struggling to convince users to pay, and shares are falling

Zoom Video Communications Inc. has struggled to convince people to pay for its video conferencing service in the third year of the COVID-19 pandemic, contributing to a lowered forecast and a drop in its share price on Monday.


executives cut their earnings and revenue guidance for the fiscal year on Monday afternoon, with Zoom Chief Financial Officer Kelly Steckelberg blaming the stronger U.S. dollar — a problem many global technology companies cried foul in recent earnings reports — but also a decline in the “online business,” or the more casual Zoom user.

“Our revenue was impacted by the strengthening of the U.S. dollar, the performance of the online business and, to a lesser extent, sales weighted toward the end of the quarter,” Steckelberg said in a statement included in the results.

In an interview with MarketWatch and a conference call Monday afternoon, Steckelberg acknowledged that people and small businesses have changed their habits. Many are not flocking to the service as often or for as long as they did during the peak of the pandemic, when many Americans worked almost exclusively from home and socialized with friends on the service. The rise of in-person meetings, vacations and hybrid work schedules have changed the post-pandemic business cycle for Zoom, executives admit, and that it’s harder to get users to pay.

“The big challenge is adding new customers,” she said.

Zoom recently installed a 40-minute limit for users with a basic or free subscription, which Mizuho Securities analyst Siti Panigrahi said could be a way to get more users to become paying subscribers. Steckelberg told MarketWatch that the time limit has had a “significantly positive impact” so far, but acknowledged on the conference call that it is “not enough to overcome the macro dynamics.”

The news wasn’t all bad — Zoom’s enterprise business, which sells subscriptions to larger organizations, grew 27% to $599 million. Corporate customers improved 18% to 204,100 over the past year through deals with UCLA, Warner Bros. Discovery Inc.

and others as well as longer trades. Zoom Phone licenses reached a record of nearly 4 million, up more than 100% year over year.

“It was a mixed quarter, with the enterprise performing strongly,” Steckelberg told MarketWatch.

The ongoing friction between employees who want to continue working from home and employers like Apple Inc.
Alphabet Inc


The parent company of Google and Facebook Meta Platforms Inc.

— all of them sitting on acres of unused commercial real estate and asking workers to come in at least twice a week — could have a profound impact on Zoom. A group of Apple employees on Monday launched a petition asking CEO Tim Cook for a more flexible working policy.

The company also faces stiff competition from Microsoft Corp.
Cisco Systems Inc.
Google and many other angles.

M Science software analyst Charles Rogers believes that users are not switching to other platforms, but cutting back on service due to inflation and more relaxed pandemic guidelines. It also posted more troubling results internationally than in the US, with a second straight quarterly decline in the European region and consistently solid sales in the Asia-Pacific quadrant.

Read more: Zoom faces a threat from Microsoft Teams, but how big is the risk?

scaling published fiscal second-quarter net income of $45.7 million, or 15 cents per share, on revenue of $1.1 billion, up from $1.02 billion a year ago. After adjusting for stock compensation and other effects, Zoom reported earnings of $1.05 per share, down from $1.36 per share last year. Analysts polled by FactSet expected adjusted net income of 94 cents per share on revenue of $1.12 billion.

Zoom executives said they now expect full-year adjusted earnings of $3.66 to $3.69 per share on revenue of roughly $4.39 billion, down from $3.70 to $3.77 per share on sales of 4 .53 to $4.55 billion. For the third quarter, they expect 82 to 83 cents per share on revenue of about $1.1 billion, while analysts on average had forecast 92 cents per share on sales of $1.15 billion, according to FactSet.

Shares of Zoom fell nearly 9% in after-hours trading after the results were released, having closed down 2.1% at $97.44. Zoom shares are down 47% so far in 2022. The broader S&P 500

is down 13% this year.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *