Zoom struggles to convince consumers to pay, and stock slips

Zoom Video Communications Inc. is struggling to convince people to pay for its video conferencing service in the third year of the COVID-19 pandemic, contributing to a reduced forecast and falling stock price on Monday.

Zoom
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executives slashed their full-year earnings and revenue forecast Monday afternoon, and Zoom chief financial officer Kelly Steckelberg blamed a stronger U.S. dollar — a problem many global technology companies have called in recent earnings reports — but also a decline in “e-commerce,” or the more casual Zoom user.

“Our revenue was impacted by the strengthening US dollar, the performance of the online business and, to a lesser extent, weighted sales at the end of the quarter,” Steckelberg said in a statement attached to the results. .

In an interview with MarketWatch and a Monday afternoon conference call, Steckelberg acknowledged that individuals and small businesses have changed their ways. Many aren’t flocking to the service as often or for as long as they did during the peak of the pandemic, when many Americans worked almost exclusively from home and socialized with friends on the service. An increase in one-on-one meetings, vacations and hybrid work schedules has changed Zoom’s post-pandemic business cycle, executives acknowledge, and it’s harder to get users to pay.

“The big challenge is adding new customers,” she said.

Zoom recently installed a 40-minute limit for users with a basic or free subscription, which Mizuho Securities analyst Siti Panigrahi said could be a way to push more users into paying subscribers. Steckelberg told MarketWatch that the time cap has had a “significantly positive impact” so far, but admitted on the conference call that it was “not enough to overcome macro dynamics.”

The news wasn’t all bad — Zoom’s enterprise business, which sells subscriptions to larger organizations, rose 27% to $599 million. The number of corporate customers grew 18% to 204,100 in the past year thanks to contracts with UCLA, Warner Bros. Discovery Inc.
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and others, as well as longer offers. Zoom Phone licenses reached a record close to 4 million, up more than 100% year-over-year.

“It was a mixed quarter, with business proving strong,” Steckelberg told MarketWatch.

Ongoing friction between employees who want to continue working from home and employers like Apple Inc.
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Alphabet Inc.
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The parent company of Google and Facebook Meta Platforms Inc.
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— all of which sit on acres of unused commercial real estate and ask workers to come in at least twice a week — could have a profound impact on Zoom. A group of Apple employees on Monday started a petition asking CEO Tim Cook for a more flexible working policy.

The company also faces fierce competition from Microsoft Corp.
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-2.94%
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Cisco Systems Inc.
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Google and many other corners.

M Science software analyst Charles Rogers believes users are not jumping to other platforms, but cutting service due to inflation and more relaxed pandemic guidelines. It also saw more worrisome results internationally than in the United States, with a second consecutive quarterly decline in the European region and sequentially flat sales in the Asia-Pacific quadrant.

Read more: Zoom faces a threat from Microsoft Teams, but what’s the risk?

Zoom job net income in the second quarter of $45.7 million, or 15 cents per share, on revenue of $1.1 billion, compared with $1.02 billion a year ago. After adjusting for stock-based compensation and other effects, Zoom reported earnings of $1.05 per share, compared to $1.36 per share last year. Analysts polled by FactSet had expected adjusted net income of 94 cents per share on revenue of $1.12 billion.

Zoom executives said they now expect full-year adjusted earnings of $3.66 to $3.69 per share on revenue of about $4.39 billion, down 3 $.70 to $3.77 per share on sales of $4.53 to $4.55 billion. For the third quarter, they expect 82 to 83 cents per share on revenue of about $1.1 billion, while analysts had averaged 92 cents per share on sales of $1.15 billion. dollars, according to FactSet.

Zoom shares fell nearly 9% in after-hours trading after the earnings release, after closing 2.1% lower at $97.44. Zoom’s stock is down 47% so far in 2022. The broader S&P 500 index
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down 13% this year.

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