Tech

Zoom beats estimates even as revenue growth is poised to slow after pandemic

Key Points
  • Zoom exceeded analysts' estimates for the quarter and issued better-than-expected guidance.
  • The company called off its planned $14.7 billion Five9 acquisition during the quarter.
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RBC's Rishi Jaluria on Zoom earnings: Overall, the numbers aren't as bad as people feared

Zoom reported better-than-expected quarterly earnings on Monday, while warning investors of a revenue slowdown at the video-chat company as the pandemic comes to an end.

Here's how the company did:

  • Earnings: $1.11 per share, adjusted, vs. $1.09 per share as expected by analysts, according to Refinitiv.
  • Revenue: $1.05 billion, vs. $1.02 billion as expected by analysts, according to Refinitiv.

Revenue increased 35% from a year earlier in the quarter, which ended Oct. 31, slowing from 54% growth in the prior period. Net income jumped 71% to $340.3 million, according to a statement.

For the fiscal fourth quarter, Zoom forecast adjusted earnings of $1.06 to $1.07 per share on $1.051 billion to $1.053 billion in revenue, which implies 19% growth. Analysts polled by Refinitiv had expected $1.05 in adjusted earnings per share and $1.02 billion in revenue.

Zoom stock moved swiftly higher last year as the company expanded from a contender in a narrow category of business software to a fabric of culture. Millions of people adopted its software to remotely attend classes and meet after the coronavirus pandemic made those types of gatherings difficult if not impossible.

Revenue growth was above 300% as recently as the quarter that ended in January. Now Zoom has reported its slowest growth since at least 2018, before its 2019 initial public offering.

While Zoom is reckoning with decelerating growth because so many businesses made their purchases last year, the company is expanding its usage within big organizations. Zoom said that over 2,500 customers are spending more than $100,000 a year, up 94% from the same period a year earlier.

And the company's Zoom Rooms software is enjoying growth as organizations equip conference rooms for meetings with participants who are not on site. "The conference room strategy has become even more important than it was pre-pandemic," Kelly Steckelberg, Zoom's finance chief, said on a Zoom call with analysts.

During the quarter, Zoom said it had called off its plan to acquire cloud contact center software provider Five9 for $14.7 billion. In announcing the news, Zoom said its own cloud contact center software would launch in early 2022.

It's hard to know how to re-engage with Five9 around a potential deal at a higher priced because Zoom and Five9 are both public companies, Eric Yuan, Zoom's founder and CEO, said. But Zoom now has $5.4 billion in cash, cash equivalents and marketable securities.

Yuan said analysts should reach out if they know "any other cool companies that can help us, you know, to beef up our investment on that front."

Prior to the after-hours move, Zoom shares are down 28% in 2021, while the S&P 500 index is up 25% over the same period.

-- CNBC's Ari Levy contributed to this report.