Video conferencing company Zoom Communications announced Wednesday that its upcoming quarterly earnings will likely miss Wall Street projections, as the firm faces mounting pressure from competitors and cautious corporate spending habits.
The company’s stock dropped almost 3% during after-hours trading following the announcement.
Zoom finds itself under increasing pressure from competing platforms like Microsoft’s Teams and Google Meet from Alphabet, both of which are packaged with comprehensive workplace software suites that frequently offer more cost-effective solutions for business clients.
Even with efforts to expand its product lineup, Zoom continues to struggle with declining growth rates as the pandemic-driven remote work trend fades and workers head back to traditional office settings.
Although the company’s enterprise division has maintained stability, its online division, which caters to individual users and smaller companies, continues to underperform.
During the fourth quarter, Zoom’s online division generated $489.7 million in revenue, while customer turnover rates saw a slight uptick compared to the previous year.
The entire software industry has faced challenges in recent months as investors wait for clearer understanding of artificial intelligence’s effects and possible disruptions to existing business models.
Although Zoom has introduced numerous AI-powered features to boost growth, the company’s technology investments may put strain on its operating profit margins.
The company projects first-quarter revenue will range from $1.22 billion to $1.23 billion, matching analysts’ average prediction of $1.22 billion based on LSEG data.
Adjusted earnings per share are expected to fall between $1.40 and $1.42, which is lower than the estimated $1.45.
Zoom’s fourth-quarter revenue reached $1.25 billion, surpassing the anticipated $1.23 billion.
The company’s adjusted earnings per share totaled $1.44, falling short of the projected $1.49.
