What's going on?
Zoom gave a disappointing quarterly results update earlier this week.
What does this mean?
Zoom’s peak-Covid glory days are well and truly behind it, with the teleconferencing service losing sales from individuals and small businesses even faster than it forecast. That’s increasingly pushed it to try and attract more enterprise customers, but even that segment – now responsible for more than half its revenue – had a humdrum quarter: the company added just 3% more enterprise clients from the quarter before, bringing the total to just over 200,000. So while overall revenue was 8% higher than the same time last year, it still represented the company’s slowest growth on record – not to mention the first time it’s ever missed analysts’ expectations (tweet this).
Why should I care?
The bigger picture: Zoom versus Microsoft.
One of the ways Zoom tried to win over big businesses was with its June launch of “Zoom One” – a bundle that includes internet-connected phones and physical conference rooms. And while analysts are generally upbeat about those secondary offerings, they’re still worried Zoom can’t compete with the likes of Microsoft. The Zoom name, after all, doesn’t have quite the same clout with businesses as Microsoft’s does, while the latter’s ability to package Teams into Office 365 – used pretty much everywhere – gives it a clear advantage.
Zooming out: Zoom is only going one way.
Investors sent Zoom’s stock down 9% after the news, not least because the company cut its full-year outlook for both revenue and profit. That makes this the seventh of the last eight earnings reports where investors have sent its stock down afterward. Zoom’s stock is now worth half as much as it was at the end of last year, which Citi analysts think is just the beginning: they downgraded it to a “sell” rating last week.