Zoom shares fall as pandemic boom fades and offices open up

SHARES in video-conferencing business Zoom tumbled in after-hours trading after reporting slowing growth as workers head back to the office.

The New York-listed company has become a household name during the pandemic as lockdowns forced employees to stay at home and hold meetings online.

It made sales of more than $1bn (£726m) for the three months to July 31, a 54pc increase on the same period last year. It now has about 504,900 business customers with more than 10 employees each, 36pc up on the same period last year. However, that is far slower than its rapid growth rate at the outset of the pandemic, raising questions over its long-term dominance.

Revenue had risen 369pc in the three months to the end of Jan 31, while customers with more than 10 employees leapt from 66,300 to 370,200 between July 2019 and July 2020.

The slowdown in growth sent shares tumbling from $347.5 to $306.2 after markets had closed in the US.

Eric Yuan, founder and chief executive, was upbeat on the company’s prospects, however.

He said: “We achieved our first billion dollar revenue quarter while delivering strong profitability and cash flow.

“Today we are a global brand counting over half a million customers with more than 10 employees, which we believe positions us extremely well to support organisations and individuals as they look to reimagine work, communications and collaboration.”

Zoom’s quarterly profit of $316.9m and revenue of $1.02bn were both higher than analysts’ estimates. However, its margins have taken a hit while competition from legacy platforms such as Cisco’s Webex and Microsoft Teams has also dented the company’s efforts to win bigger contracts from businesses.

It forecast annual revenue in the range of $4.01bn to $4.02bn for the financial year 2022, roughly in line with expectations.

The slowdown in Zoom’s growth comes amid an uncertain picture of when and to what extent workers will return full-time to the office.

In a sign of its plans to sustain its market strength beyond the pandemic, Zoom has in the last two months said it would buy Kites Gmbh, a firm that helps in-real-time language translation. It also announced its largest deal, a $14.7bn buyout of Cloud-based call-centre software provider Five9.

“Long term, we expect Zoom will grow into a broader enterprise communication and collaboration platform,” said Rishi Jaluria, RBC Capital Markets analyst.