Zoom’s Fiscal Second Quarter Revenue Falls Below Estimates As Revenue Growth Slows To Single Digit

Shares of Zoom Video Communications were down 9 percent in Monday’s extended trading after the company reported its fiscal second-quarter earnings results and trimmed its full-year forecast for earnings and revenue.

The company reported adjusted earnings of $1.05 for the fiscal second quarter compared to the 94 cents that analysts had expected, according to Refinitiv. Quarterly revenue came in at $1.10 billion, falling below the expectation of $1.12 billion that analysts had expected, according to Refinitiv.

According to a statement, for the quarter ended July 31^st, the company saw revenue grow 8 percent year-over-year, down from the 12 percent recorded in the previous quarter. Net income reported for the quarter came in at $45.7 million, far below the $316.9 million recorded in the same period a year ago. The company increased its spending on sales and marketing.

According to Kelly Steckelberg, Zoom’s Chief Finance Officer, factors such as the strong US dollar, reduced performance in its online business, and sales towards the end of the quarter affected revenue negatively. “We have implemented initiatives focused on driving new online subscriptions, which have shown early promise but were not enough to overcome the macro dynamics in the quarter,” the CFO said while on a call with analysts.

Zoom noted that at the end of the quarter, it had about 204,100 enterprise customers, up almost 3 percent from the 198,900 enterprise customers recorded in the last quarter.

The company now expects between 82 cents to 83 cents for its fiscal third quarter adjusted earnings, and revenue of between $1.095 billion and $1.1 billion. Analysts expect adjusted earnings of 91 cents per share and revenue of $1.15 billion, according to Refinitiv.

The company also trimmed its full 2023 fiscal year expectation and now expects between $3.66 and $3.69 for adjusted earnings per share and revenue of between 44.385 billion and $4.395 billion. The company had formerly issued guidance of adjusted earnings per share of between $3.70 and $3.77 and revenue of between $4.530 billion and $4.550 billion. On the other hand, analysts expect adjusted earnings per share of $3.76 and revenue of $4.54 billion. “As the majority of our revenue has shifted back to the enterprise and we have moved beyond the pandemic buying patterns, we are returning to more normalized enterprise sales cycles with linearity weighted towards the backend of the quarter. This contributed to higher than expected deferred revenue in Q2, and as we believe this customer behavior will persist, we have factored it into our outlook,” Zoom’s CFO said on the earnings call. Zoom also expects its online business to drop between 7 percent to 8 percent in the full fiscal year. It had earlier said that it expects no growth in the category.