Zoom just reported its mixed financial reports for its fiscal third-quarter earnings that concluded last October 31st. According to the company, they are losing ground in late trading and have reported the slowest sales growth despite enterprise business remains to be steady in the market.  

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NEW YORK, NY - APRIL 18: People pass walk by the Nasdaq building as the screen shows the logo of the video-conferencing software company Zoom after the opening bell ceremony on April 18, 2019 in New York City. The video-conferencing software company announced it's IPO priced at $36 per share, at an estimated value of $9.2 billion.

Zoom's Third Quarter Earnings

After reporting its slowest quarterly sales growth on recording with a small reduction for its whole-year revenue forecast, Zoom Video Communications Inc. reports a 6% decline in extended trading. According to a report from Bloomberg, 5% to $1.1 billion was reported for its revenue, which is not surprising because it is in line with the estimate of the analysts. This is much lower than the previous quarter as its revenue grew 8%. 

Meanwhile, the company reduced its sales forecast for the full year to $4.38 billion from its $4.4 billion projection last August. As the company released its full-year guidance, Zoom expects that the enterprise business will increase by more than 20%, while 8% is expected to decline for small business customers. CNBC reported that this was presented by Chief Financial Officer Kelly Steckelberg as she reports to analysts in the call. She added that competitors are not as close to what the company is achieving as they are taking longer to close. 

The company also adjusted its earnings from $3.91 a share to $3.94 a share, much higher than the estimates and above the prior call of the company, according to Barron's report. 

During the earnings call, Chief Executive Officer Eric Yuan stated that "the company is seeing heightened deal scrutiny for new business." He added that the company drove revenue above guidance as they maintain in enterprise Zoom has also been trying to reverse a slowdown to its growth as the company expands its platform for business for the reason that large businesses are making up a growing share of Zoom's revenue while loses to its consumers and small businesses.

Also Read: Zoom Launches 'Zoom One' With Six-Tiered Plan

Analysts' Take

Some analysts are very skeptical regarding the company's state in the upcoming years and how it would return to its growth soon. Citigroup Inc. Analyst Tyler Radke is one of them and stated, "Despite some modest revenue upside, the leading indicators suggested signs of incremental deterioration." 

During the quarter, Zoom reported 209,300 enterprise customers, an increase of 14% from the previous year. However, analysts projected that the company would report 210,105 customers. For 2024, the management did not provide any guidance but the CFO stated that she, along with other executives, has been working on the company's plan for that period. She added, "we are being very, very thoughtful about prioritization of investments."  

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Written by Inno Flores