Investors largely shrugged off third quarter results from Zoom Video Communications (ZM:NASDAQ) despite beating expectations as mixed guidance for Q4 dulled enthusiasm. 

After initially jumping 8%, pre-market trading points to a 0.3% fall to $65.82.

Revenue grew 3.2% year-on-year to $1.14 billion, beating the consensus estimate of $1.12 billion, helped by its gradual shift to Enterprise customers versus individuals. Enterprise revenue rose 7.5% to $660.6 million versus a 2.4% decline in Online (private users) revenue, at $476.1 million.

Hardly the soaraway growth seen during the pandemic.

WHAT ZOOM SAID

On the one hand, the video conferencing platform lifted Q4 guidance and sprinkled a bit of artificial intelligence fairy dust through commentary. 

‘In Q3, revenue came in ahead of guidance as we bolstered Zoom’s all-in-one intelligent collaboration platform, with advanced new capabilities like Zoom AI Companion, and continued to evolve our customer- and employee-engagement solutions,’ said chief executive Eric Yuan in a statement.

Quarterly revenue stuck at around $1 billion mark / Image source: Adobe

For Q4 (to 31 Jan 2024), Zoom predicted adjusted earnings of $1.14 a share on sales of $1.13 billion, based on the midpoint of its guidance. Analysts had been looking for earnings of $1.09 a share on sales of $1.13 billion in the fiscal fourth quarter. 

HIGH-GROWTH GLORY DAYS GONE

Yet here’s the thing. Zoom broke past the $1 billion quarterly revenue barrier way back in Q3 2021, yet it has bobbed around that same mark ever since. Yes, earnings have improved a little during that time, only to fall back again. Q4 2024 EPS (earnings per share) compares to the $1.22 chalked-up a year ago.

Competition in the market is fierce and Zoom’s hyper-growth glory days seem long gone. Investors might well wonder what will change this. Judging by the share price, which has trended flat this year and has lost two-thirds of its value in the past 20-months, the market isn’t betting on anything much.

---