ZM Stock Falls 10% Despite Satisfactory Zoom Q2 2022 Earnings Report

Zoom Video Communications (NASDAQ: ZM) stock fell by over 10% despite surpassing earnings expectations for its Q2 2022 fiscal year. The teleconferencing software company stated some impressive numbers in its report compared to Wall Street’s earlier projections. Zoom’s revenue earned was $1.02 billion against the $990 million expectation by analysts. Furthermore, the company’s earnings per share increased to $1.36 versus $1.16 expected in the same period.

There was a revenue increase of 54% YoY which ended on July 31st. Zoom also announced plans to buy Five9 for $14.7 billion in stock for the second quarter of 2022. Five9 is a cloud contact-center software maker.

For the third quarter, Zoom issued guidance that came up a little short of expectations. Its revenue guidance was between $1.015 billion and $1.020 billion. In addition, the video communications giant projected its earnings per share at between $1.07 and $1.08. According to a Refinitiv poll, analysts predicted revenue of $1.030 billion and earnings per share of $1.09 for Q3.

Despite these figures, Zoom’s growth is slowing as schools and businesses are reopening after COVID. Zoom experienced a massive surge last year in usage among customers with 10 or more employees. This represented a 458% increase from 66,300 customers to 370,000 customers for the Q2 fiscal year in 2020 and 2021 respectively. The pandemic was primarily responsible for extremely high usage of the software as many people worked virtually.

In addition, the majority of students resorted to using the software for remote learning. Also, families were able to interface with their loved ones during the government-mandated quarantine periods. However, in Q2 2022, customer growth slowed to 36%, with Zoom reporting 504,900 customers.

Regardless, Zoom still increased its general forecast for the year because of COVID. The number of confirmed COVID cases is on the rise because of the COVID Delta variant. This spread is causing some companies to delay reopening their offices until further notice. Such companies may continue using Zoom until the COVID situation lightens. If COVID worsens, Zoom could meet bigger earnings numbers, with stock also rising.

Zoom Earnings Report Also Includes New Services amid Stock Dip

For the same quarter, Zoom announced the availability of a new feature called Zoom Events. This service grants organizations the ability to conduct premium online meetings. The video communications giant also revealed that it invested in Cvent, an event software maker. Cvent recently sought to go public via a special purpose acquisition company merger.

The number of Zoom customers who pay over $100,000 continues to increase. There were 466 such customers in fiscal Q2 2020, which increased 112% to 988 in fiscal Q2 2021. For the current Q2 2022 period, the company experienced a 131% growth and now has over 2,278 such customers.

Zoom’s revenue grew 191% in the previous quarter, and its stock price is up about 3% since the beginning of 2021. This does not take the after-hours price change into account. The teleconferencing giant currently trails the S&P 500, which is up about 21% for the same period. Zoom currently has 2 million seats for its Zoom Phone cloud phone service. Only three months earlier, there were 1.5 million seats.