Zoom (Nasdaq: ZM) shares were 15% lower following the company's Q3 earnings report. The company topped analysts' estimates on the top and bottom-line, but shares were lower as the company issued guidance below expectations that showed slowing revenue growth.
Shares did catch a bid, following the announcement that the omicron-variant of the coronavirus had been identified which has sparked concerns given some reports that the variant may elude antibodies generated by current vaccines and be more contagious than previous variants. This news sent the broader market lower but provided a boost to the 'pandemic winners' like Zoom and Peloton (Nasdaq: PTON).
Overall, Zoom's shares are still up more than 100% from its March 2020 levels, but the stock is down by nearly 70% since its peak in October 2020.
Inside the Numbers
In Q3, Zoom reported $1.11 in earnings per share, slightly better than estimates of $1.09 per share. This was a 71% increase from last year. Revenue also came in higher than expectations at $1.05 billion vs $1.02 billion. This was a 35% increase from last year, a deceleration from 54% growth last quarter.
Next quarter, the company is forecasting earnings per share between $1.06 and $1.07 per share on about $1.05 billion in revenue which comes out to about 19% growth from last year. Both figures were basically in-line with analysts' estimates.
Of course, Zoom was one of the biggest winners during the pandemic as its software quickly became integral for schools, business, and social use. However, the company is now dealing with the world returning to normal as its revenue growth has dropped from just under 300% in Q1 to a much more modest 19% in Q4. Of course, the negative reaction in Zoom's stock price is because its high-multiple meant that investors had unreasonable expectations for growth.
One silver lining is that its product continues to gain traction within existing customers as over 2,500 customers are now spending more than $100,000 a year on its products, a 94% increase from last year. Zoom Rooms is another growth areas as it allows companies to add people to conference rooms who are remote. It's also called off plans to acquire cloud contact center software provider, Five9, a decision that has been applauded by shareholders.