Zoom (ZM) Stock Down 6% Despite Reporting Better Than Expected Fiscal Q3 Earnings

UTC by Steve Muchoki · 3 min read
Zoom (ZM) Stock Down 6% Despite Reporting Better Than Expected Fiscal Q3 Earnings
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During the Q3 quarter that ended on October 31, Zoom recorded a revenue growth of 367% on an annualized basis in the quarter. 

Shares of the video-conferencing giant Zoom Video Communications Inc (NASDAQ: ZM) fell more than 6% on Tuesday’s pre-market trading session even after the company reported better-than-expected earnings for Q3. Zoom posted earnings per share of 99 cents on revenue of $777.2 million. Analysts expected a profit of 76 cents per share on revenue of $694 million, according to Refinitiv.

Apparently, with zoom investors anticipating the relevant government agencies to approve a coronavirus vaccine in the coming quarters, they buy hype declined amid moderate revenue growth.

Zoom stocks closed yesterday trading at $478.36, after adding 1.43% during the day. Notably, zoom stocks have rallied approximately 603.06% year to date. However, the rally was moderate in the past three months as they jumped approximately 4.52%, 5.95% and 11.88% in the past three months, one month and five days respectively.

The exemplary returns can be largely attributed to investors’ hype based on speculation. Moreover, the company has been providing essential services needed to keep the economy running smoothly during the coronavirus pandemic.

Zoom video services have been subscribed by schools for e-learning, companies for meetings, family and friends hangout, and also government agencies for communications.

Initially, the company was faced with security issues, whereby its video conferencing channels would either leak to outsiders or attackers could gain access to private conferences. However, after a thorough system upgrade, reported case attacks have significantly declined thus attracting more valuable customers over time.

Notably, the company is facing fierce competition from Microsoft‘s similar services, thus putting pressure on Zoom stocks. In addition, as the global economy recovers from the ongoing coronavirus pandemic, the number of subscribers is expected to decline and adjust accordingly.

Zoom Stock and Q3 Results

During Q3 that ended on October 31, Zoom recorded a revenue growth of 367% on an annualized basis in the quarter. Notably, in the prior two quarters- the second and first quarter, Zoom revenue had risen by 355% and 169% respectively.

According to the earnings report, Zoom indicated that it had about 433,700 customers with over 10 employees, up 485% year over year, higher than the 355% growth from the prior quarter.

Apparently, over 80% of the company’s fiscal third-quarter revenue came from new customers’ subscriptions. Whereby, revenue in the Asia Pacific and Europe, Middle East and Africa grew 629%, compared with over 300% growth in the Americas.

Forward, the company anticipates similar results as it indicated remote working is here to stay. “We expect to strengthen our market position as we finish the fiscal year with an increased total revenue outlook of approximately $2.575 billion to $2.580 billion for fiscal-year 2021, or approximately 314% increase year-over-year,” Zoom Chief Executive Eric Yuan said in a statement announcing the results.

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Steve Muchoki
Author Steve Muchoki

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