Zoom Communications dropped the most in 18 months after it gave a revenue outlook that disappointed investors expecting a bigger boost from the company’s expanded suite of products.
The software company, known for its videoconferencing service, has introduced more tools for corporate clients, including phone systems, a contact centre application and artificial intelligence assistants.
To emphasise its broader view of the business, Zoom announced Monday that it has dropped “video” from its official name and would now be known as Zoom Communications.
“Our new name more accurately reflects our expanding scope and plans for long-term growth,” CEO Eric Yuan wrote in a post announcing the change.
Those new businesses are finding an audience, executives said, but added that the outlook for 2.7% sales growth in the current quarter may continue at the same pace into early 2025.
Investors were looking for more, wrote Michael Funk, an analyst at Bank of America. “We question if the commentary is simply setting a low bar for new CFO Michelle Chang,” Funk wrote.
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In October, Zoom named Chang, a former Microsoft executive, as chief financial officer to replace Kelly Steckelberg, who left to join closely-held design firm Canva.
The shares declined 6.7% to US$83.08 ($111.81) at 12.43pm Tuesday in New York, the biggest intraday slide since May 2023. While Zoom’s forecast met estimates, the stock had gained 48% since the company’s last earnings report in August through Monday’s close on optimism about the new products.
Revenue will be about US$1.18 billion in the period ending in January, Zoom said Monday in a statement. Profit, excluding some items, will be US$1.29 to US$1.30 a share. Analysts, on average, projected adjusted earnings of US$1.28 a share on sales of US$1.17 billion, according to data compiled by Bloomberg.
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Zoom has seen a 59% increase in monthly active users of its AI assistant since the prior quarter, the company said in a presentation to supplement its earnings statement. It also topped 1,250 customers of its contact centre application.
While there were “no major issues” with the results, the steep gain for the shares headed into the earnings meant the results might not attract new investors, wrote Tyler Radke, an analyst at Citigroup.
In the fiscal third quarter, sales increased 3.6% to US$1.18 billion, compared with analysts’ average estimate of US$1.16 billion, according to data compiled by Bloomberg. Profit, excluding some items, was US$1.38 a share in the period ended Oct 31.
Enterprise revenue increased 5.8% to US$699 million. Zoom said it had 3,995 customers who contributed more than US$100,000 over the past year.
An ongoing loss of consumers and small businesses from Zoom has concerned investors, particularly since these customers are typically higher-margin than corporate clients.
Average monthly churn in this segment was 2.7% in the quarter, which was better than analysts’ estimates. Sales in the segment was little changed at US$479 million. That was Zoom’s lowest-ever online churn, Chang said, according to remarks prepared for the company’s earnings conference call.
Zoom said it’s adding US$1.2 billion to its existing share buyback program, raising the total repurchase authorisation to US$2 billion.
