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Earnings Results: Zoom’s stock swings lower on fourth-quarter prospects after initially rising on revenue and earnings beat

Zoom Video Communications Inc.’s stock initially popped 5% in extended trading Monday after the videoconferencing-service giant posted revenue, earnings and a full-year revenue outlook that topped Street estimates.

The stock eventually retreated to even, and then fell 6% during a conference call with analysts late Monday when company executives detailed declining revenue as more Americans return to work. During the call, Zoom said it expected year-over-year growth rate and deferred revenue to be in the mid-20s [percent] in the fiscal fourth quarter, which is traditionally the company’s lowest renewal period. The company did not provide a fiscal 2023 outlook.

For the fiscal fourth quarter, Zoom
ZM,
-3.59%

forecast adjusted earnings of $1.06 to $1.07 per share on $1.051 billion to $1.053 billion in revenue, which implies 19% growth – the company’s lowest in several years.

Earlier, Zoom reported fiscal third-quarter net income of $340.4 million, or $1.11 a share, compared with net income of $198.4 million, or 66 cents a share, in the year-ago quarter. The company’s adjusted net earnings were $338.4 million, or $1.11 a share.

Net revenue soared 35% to $1.05 billion from $777.2 million a year ago.

“Looking forward, we expect to close the year between $4.079 to $4.081 billion in total revenue, representing approximately 54% year-over-year growth, alongside strong profitability and operating cash-flow growth,” Zoom Chief Executive Eric Yuan said in a statement announcing the results. The company said it had surpassed 512,100 customers with more than 10 employees, up 18% from the same quarter a year ago.

Analysts surveyed by FactSet had expected net income of $1.09 a share on revenue of $1.02 billion. Analysts are projecting $4.01 billion is fiscal year revenue.

Shares of Zoom have declined 28% this year. The S&P 500 index
SPX,
-0.32%

is up 25% in 2021.

Analysts have carefully watched Zoom as it transitions from a pandemic-fueled boom period to an era in which more vaccinated employees are returning to work. While the company’s growth has cooled dramatically in recent months, Zoom executives are confident their technology is here to stay as a permanently technology tool of most enterprises.

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