Home News Zoom could post first loss since pandemic as demand dries up

Zoom could post first loss since pandemic as demand dries up

by SuperiorInvest

Key things

  • Zoom will likely say Q4 2023 adjusted EPS was -$0.11, down from $1.60 in the year-ago quarter.
  • Zoom’s revenue likely climbed 2.6% to $1.1 billion.
  • Zoom’s net income has declined in recent quarters as demand for video conferencing services for offices and schools has dried up.
  • The company announced earlier this month that it would cut 1,300 jobs, or about 15% of its workforce.

Zoom Video Communications Inc. (ZM), the video conferencing provider ubiquitous during the early stages of the pandemic, likely posted its first quarterly loss in four years as the return to offices gained momentum.

Analyst estimates compiled by Visible Alpha show Zoom posted a loss of $24.4 million in the final three months of 2022, a sharp turnaround from net income of nearly half a billion dollars just a year earlier. Edited earnings per share (EPS) could move to -$0.11 from $1.60, even though sales rose 2.6% to $1.1 billion. Zoom will report results for the final quarter of fiscal 2023 after markets close on February 27.

Zoom has been one of the main successes of the pandemic, tripling the number of employees in two years as companies, academic institutions and individuals turned to video conferencing solutions during the lockdown.

The number of customers of companies with more than 10 employees tripled in the first three months of 2020. Net income rose to more than $490 million in the quarter from $15 million during the first two years of the pandemic. Zoom’s quarterly revenue grew more than 350% in three consecutive quarters at the height of the pandemic.

However, the return to personal work and school caused a turnaround. Offices in New York reached average daily occupancy 52% at the end of January. The share of office workers working remotely full-time last month fell to 10% from 16% in September.

Zoom has reported single-digit revenue growth in each of the past two quarters. Analysts expect that figure to fall further to 2.6% in the final quarter.

Enlargement, like other technology companies, responded to slow revenue growth with cost-cutting measures. The company said in early February that it would cut its workforce by roughly 15%, or 1,300 jobs. Citing “uncertainty in the global economy,” CEO Eric Yuan also told employees he would cut his $300,000 salary by 98% and forgo an annual bonus.

Zoom shares have fallen 42% over the past year, compared with an 11% decline in the S&P 500 Information Technology Index.

Source: TradingView.

Key approach statistics
Estimate for Q4 FY2023 Current for Q4 FY2022 Current for Q4 FY2021
Adjusted earnings per share ($) -0.11 1.60 0.87
Sales ($B) 1.1 1.1 0.9
Customers + $100,000 3,527 2.725 1,644

Source: Visible Alpha

Key Metric: Customers over $100,000

Zoom says it is targeting customers who contribute more than $100,000 in annual revenue as a measure of its effectiveness in expanding its offerings and attracting large enterprise clients. Such customers are especially valued as a relatively reliable source of steady income.

Zoom is expected to grow its $100,000 customer base to more than 3,500, a year-over-year improvement of more than 29%. These customers are likely to contribute $347.6 million in sales, more than a third of total revenue for the quarter.

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