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Zoom (ZM) earnings Q2 2023


Eric Yuan, founder and chief executive officer of Zoom Video Communications Inc., speaks in the course of the BoxWorks 2019 Conference on the Moscone Center in San Francisco, California, U.S., on Thursday, Oct. 3, 2019.

Michael Short | Bloomberg

Zoom Video Communications shares fell as much as 9% in prolonged trading on Monday after the video-calling software maker pared back its full-year forecast for earnings and revenue.

Here’s how the corporate did:

  • Earnings: $1.05 per share, adjusted, vs. 94 cents per share as expected by analysts, in response to Refinitiv.
  • Revenue: $1.10 billion, vs. $1.12 billion as expected by analysts, in response to Refinitiv.

Zoom’s revenue within the second fiscal quarter grew 8% 12 months over 12 months, slowing from 12% growth in the prior quarter, in response to a statement. The second fiscal quarter ended on July 31. Zoom’s net income fell to $45.7 million within the quarter from $316.9 million within the year-ago quarter as the corporate increased spending on sales and marketing.

The strong U.S. dollar, performance in the corporate’s online business and sales that got weighted toward the top of the quarter negatively impacted revenue within the quarter, Kelly Steckelberg, Zoom’s finance chief, said within the statement.

“We’ve got implemented initiatives focused on driving recent online subscriptions, which have shown early promise but weren’t enough to beat the macro dynamics within the quarter,” Steckelberg said on a Zoom call with analysts.

The corporate said at the top of the quarter it had about 204,100 enterprise customers, that are business units that Zoom’s direct sales teams, resellers or partners work with. That is up lower than 3% from 198,900 three months earlier. Enterprise customers deliver 54% of total revenue. Online business customers are Zoom customers that do not work directly with Zoom salespeople, resellers or partners.

With respect to guidance, Zoom called for adjusted fiscal third quarter earnings of 82 cents per share to 83 cents per share on $1.095 billion to $1.100 billion in revenue. Analysts polled by Refinitiv had been searching for 91 cents in adjusted earnings per share and $1.15 billion in revenue.

Management lowered its projections for the complete 2023 fiscal 12 months, calling for $3.66 to $3.69 in adjusted earnings per share and $4.385 billion to $4.395 billion in revenue, implying 7% growth at the center of the revenue range. Analysts whom Refinitiv surveyed had expected $3.76 per share in adjusted earnings and revenue of $4.54 billion. The view three months ago was $3.70 and $3.77 in adjusted earnings per share and revenue starting from $4.530 billion to $4.550 billion. Economic conditions primarily caused executives to revise their view.

“As the vast majority of our revenue has shifted back to the enterprise and we have now moved beyond the pandemic buying patterns, we’re returning to more normalized enterprise sales cycles with linearity weighted towards the backend of the quarter,” Steckelberg said on the Zoom call. “This contributed to higher than expected deferred revenue in Q2, and as we imagine this customer behavior will persist, we have now factored it into our outlook.”

The corporate expects the net business to be down 7% to eight% in the complete fiscal 12 months, compared with its forecast for no growth in that a part of the business earlier. Zoom has modified its spending expectations for the second half to prioritize areas with a high return on investment, akin to research and development and sales operations, Steckelberg said.

Zoom might give you the option to spice up its revenue by being more disciplined about pricing.

“I believe we’re slightly too nice in how we sell our product from a discounting perspective, right?” Greg Tomb, Zoom’s president and a former Google cloud executive, said on the decision. “So I believe we have the flexibility to be slightly smarter about how we price and discount our products.”

Within the quarter, Zoom announced a recent pricing structure called Zoom One and said it had agreed to amass conversational artificial-intelligence software startup Solvvy. Citi lowered its rating on Zoom stock to sell from the equivalent of hold last week, citing rising competition and economic pressure on small and medium-sized businesses and spending on less essential categories.

Excluding the after-hours move, Zoom shares have fallen 47% thus far this 12 months, while the S&P 500 index is down 13% in the course of the same period.

This story is developing. Please check back for updates.

WATCH: Here’s why Citi’s Tyler Radke sees downside ahead for Snowflake and Zoom

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