USA: Zoom has changed its name to Zoom Communications to highlight its expanding services and long-term growth plans. The company, best known for its videoconferencing service, announced the name change on Monday.
CEO Eric Yuan said the new name “more accurately reflects” the expanding scope and plans for the company’s long-term growth, which now includes phone systems, a contact centre application, and artificial intelligence (AI) assistance.
Despite these additions, Zoom’s shares saw their steepest decline in 18 months.
Executives said that while these new business areas are gaining traction, the 2.7% sales growth projected for the current quarter could continue at the same pace into early 2025, The Edge Singapore reported.
Investors were hoping for more, according to Michael Funk, an analyst at Bank of America.
Mr Funk said they wonder if the company’s comments are “simply setting a low bar” for the new CFO, Michelle Chang. Ms Chang, who joined Zoom in October from Microsoft, replaced Kelly Steckelberg, who left to join the design firm Canva.
The company’s shares fell 6.7% to US$83.08 (S$111.81) at 12:43 pm on Tuesday in New York, marking the largest intraday drop since May 2023.
Despite meeting estimates with its forecast, Zoom’s stock had surged 48% since its last earnings report in August, driven by optimism around the new products.
For the period ending in January, Zoom said in the statement that it expects revenue to reach approximately US$1.18 billion, with profit, excluding some items, to be between US$1.29 and US$1.30 per share.
According to data from Bloomberg, analysts, on average, expected adjusted earnings of US$1.28 per share on sales of US$1.17 billion.
Zoom reported a 59% rise in monthly active users of its AI assistant since the previous quarter, according to a presentation accompanying its earnings report.
The company also surpassed 1,250 customers for its contact centre application.
While there were “no major issues” with the results, Tyler Radke, an analyst at Citigroup, noted that the strong rise in shares leading up to the earnings release might mean the results won’t attract new investors.
In its fiscal third quarter, Zoom reported a 3.6% increase in revenue, reaching US$1.18 billion. This slightly exceeded analysts’ expectations of US$1.16 billion, based on Bloomberg data. Profit, excluding some items, stood at US$1.38 per share for the period ending Oct 31.
Enterprise revenue grew 5.8% to US$699 million, with Zoom reporting 3,995 customers who contributed over US$100,000 in the past year.
However, the company’s ongoing loss of consumers and small businesses remains a concern for investors, especially as these customers tend to be higher-margin than corporate clients.
The average monthly churn for this segment was 2.7% during the quarter, which was better than analysts had expected. Sales in the segment remained steady at US$479 million.
According to comments prepared for the earnings conference call, this marked Zoom’s lowest-ever online churn, as noted by Ms Chang.
Zoom also said it would be increasing its share buyback program by US$1.2 billion, bringing the total repurchase authorisation to US$2 billion. /TISG
Featured image by Depositphotos (for illustration purposes only)