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Zoom shares fall as more people return to work; investor concern

Published by

July 25, 2024 2:51 PM
(GMT+2)

Zoom Video Communications (NASDAQ:ZM) Inc.’s third-quarter revenue growth slowed as the extra demand for remote work and the company’s videoconferencing application eased along with Covid-19 pandemic pullback.

The stock fell to $227.50 in extending trading, sending its shares down about 6% on Monday.

The company has been unable to maintain the heady growth it experienced when organizations leaned heavily into remote work during the onset of COVID-19.

Zoom’s sales shot up fourfold to more than 360% amid the pandemic compared to the previous year. Net income for Zoom’s fiscal third quarter rose to $340 million, more than 70% from the year earlier.  

Wall Street analysts projected a net income of $337 million for the quarter, and total sales of $1.018 billion, are expected for the current quarter ending in January. Zoom anticipates better-than-expected total sales of between $1.051 billion and $1.053 billion.

Moreover, Zoom faces stiff competition from the likes of Microsoft Corp.’s Team application, which combines videoconferencing and other collaboration features.

Microsoft (NASDAQ:MSFT) also intends to bring Teams to every Windows user as part of its next-generation operating system, posing one of the biggest challenges to Zoom’s market share.

To retain users, Zoom launched the Events platform that allows businesses to host large-scale conferences. Other new offerings include cloud-calling service Zoom Phone, and in-office meetings feature Zoom Rooms.

“We are working hard to develop and deploy the technologies of the future to address current business needs and reimagine how we communicate and work in a flexible hybrid world.” – Chief Executive Eric Yuan, Zoom.

Some investors and Investment bankers are concerned that Zoom’s best days are behind it unless it finds new business.  

Plans for Zoom’s diversification seem impeded after the $14.7 billion offer to buy the cloud call-center business Five9 Inc. was abandoned over price differences.

The value of Zoom’s shares is down more than 40% compared to a year ago.

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