Zoom Slides on High Expectations After Projecting Slower Growth

(Bloomberg) -- Zoom Video Communications Inc. projected sales that will beat analysts’ estimates, but reflected slowing revenue growth. Shares fell in extended trading, underscoring Wall Street’s high expectations for the videoconferencing company whose stock has more than tripled since going public.

Revenue will be $199 million to $201 million in the quarter ending in April, the San Jose, California-based company said Wednesday in a statement. Analysts, on average, expected $185.4 million. If Zoom hit the top end of that sales projection for the fiscal first quarter, it would represent year-over-year growth of 65%, compared with 78% in the January quarter and 85% in the previous one.

Zoom’s stock, which has hovered near a record high recently, has surged since the company’s initial public offering in April, reflecting robust growth rates and disciplined finances. Chief Executive Officer Eric Yuan has sought to outrun competition from Microsoft Corp. and Cisco Systems Inc., which have continued to invest in their conferencing software amid Zoom’s rise.

“People were hoping for a revenue acceleration,” Pat Walravens, an analyst at JMP Securities, said in an interview. Recent announcements that companies were asking their employees to work from home further inflated investor expectations, he said.

The spread of coronavirus, officially known as Covid-19, has especially increased remote working in Asia. Wall Street was hoping that would raise demand for videoconferencing technology to connect teams through virtual meetings. U.S. companies including Microsoft and Twitter Inc. have encouraged their employees to work from home as a precaution against the spread of the virus.

Shares fell about 5% after closing at $116.80 in New York. The company had a market value of more than $32 billion at Wednesday’s close.

This isn’t the first time investors have punished Zoom despite beating expectations. In December, Zoom’s stock fell 10% the day after reporting surging revenue.

Zoom projected that profit, excluding some items, will be 10 cents a share in the current period, compared with analysts’ estimate of 6 cents.

Sales were $188.3 million in the fiscal fourth quarter, which ended Jan. 31. Analysts’ projected $175.8 million.

Revenue will be $905 million to $915 million in fiscal 2021, compared with analysts’ average estimate of $867 million. Sales at the high end of Zoom’s forecast would represent a year-over-year increase of 47%.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack

©2020 Bloomberg L.P.