Zoom shares fell 14.71% on Tuesday after the video conferencing company reported fewer-than-forecast large customers for the second straight quarter, prompting growth concerns as more jobs and schools reopen.
According to Zoom, the company had 512,100 customers and more than 10 employees, up 18% from a year earlier. According to data compiled by Bloomberg, this falls short of the analyst average of 516,174.
Profits from this closely monitored metric are shrinking – Zoom also fell short of forecasts for large clients last quarter, which grew 36% over the period. Zoom’s large customer base jumped 87% in the quarter prior to that, and a 485% increase in the third quarter of last year, still in the midst of COVID-19 quarantine.
Zoom’s third-quarter revenue and earnings exceeded forecasts, and it gave an upbeat outlook for sales for the current period. Still, questions about post-pandemic growth are haunting the stock, which is down nearly 30% this year. Investors are watching Zoom closely to see if its online meeting platform, which has become a ubiquitous tool throughout the pandemic, continues to be widely used in resuming many personal events and as the company faces increasing competition from such companies like Microsoft and Google Alphabet.
Zoom’s plunge this year disrupted a planned $ 14.7 billion merger agreement with call center software provider Five9 in September, cutting off another growth path for Zoom.
The stock initially surged 9% on Monday afternoon and then fluctuated between gains and losses before turning sharply into negative territory. Shares closed the trading day in New York at $ 242.28. While stocks are up nearly five times in 2020, they are down 28% this year.
In the third quarter that ended in October, Zoom said sales rose 35% to $ 1.05 billion, up from an average analyst estimate of $ 1.02 billion. Earnings excluding certain items were $ 1.11 per share, which also beat forecasts. Net income was $ 340.3 million, or $ 1.11 per share, up from $ 198.4 million, or 66 cents, a year earlier.
According to the company, in the current period, revenue will be about $ 1.05 billion. Analysts, on average, had expected fiscal fourth quarter revenue of $ 1.02 billion.