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Competition Squeezes Zoom's Profit Forecast
26 Feb
Summary
- Zoom forecasts quarterly profit below expectations due to competition.
- Rivals like Microsoft Teams and Google Meet offer bundled, cheaper alternatives.
- Slowing growth noted as pandemic work-from-home trends decrease.
Zoom Communications (ZM.O) projected its first-quarter profit will fall short of analyst expectations, citing intense market competition and a cautious economic climate.
The company's shares saw a dip in extended trading following the announcement. Zoom is experiencing significant pressure from rivals like Microsoft's Teams and Alphabet's Google Meet. These competitors often provide bundled workplace suites that present a more economical choice for enterprise clients.
Despite efforts to broaden its service portfolio, Zoom has contended with decelerating growth as the shift back to office environments diminishes the prevalence of pandemic-era remote work arrangements. While its enterprise sector has demonstrated stability, the online segment, catering to individuals and small businesses, has remained a vulnerable area.
For the fourth quarter, Zoom reported revenues of $1.25 billion, surpassing estimates. However, its adjusted profit per share was $1.44, falling short of the $1.49 predicted by analysts. Looking ahead, Zoom anticipates first-quarter revenue between $1.22 billion and $1.23 billion, aligning with market estimates. Yet, its projected adjusted earnings per share of $1.40 to $1.42 are below the $1.45 consensus.
