In response to fierce competition from Microsoft (MSFT.O) Teams and Cisco (CSCO.O) WebEx, Zoom Video Communications Inc. (ZM.O) on Monday lowered its year profit and sales expectations. Demand for the video-conferencing platform has fallen from pandemic highs.
After reporting its worst quarterly revenue growth on record at 8% as people shifted away from virtual interactions, shares of the industry darling dropped 7% in extended trading The company’s internet business was likely to decline by 7% to 8% in fiscal 2023, according to to finance head Kelly Steckelberg.
Zoom was a little-known startup when the pandemic struck in early 2020; yet, it achieved triple-digit sales growth at the height of the crisis as people stranded at home turned to video conferencing for communication. Zoom was founded by a former Cisco executive.
Zoom’s expenses have increased as a result of spending more money to entice customers who have been cutting down on their spending due to high inflation. Zoom now faces the difficult task of acquiring high-paying clients to sustain its growth.
In the three months leading up to July, operating expenses increased by 51% to $704 million.
In contrast to its previous projection of $4.53 billion to $4.55 billion, the company now expects yearly revenue of between $4.39 billion and $4.40 billion.
Instead of expecting $3.70 to $3.77 in annual adjusted profit per share, it now anticipates $3.66 to $3.69.
“Zoom remains a “show-me” story, where the company believes there’s a lot of potentials and higher growth ahead, but Wall Street clearly doesn’t believe it yet,” Rishi Jaluria, managing director of software at RBC Capital Markets said.
