Zoom’s glory days may be coming to an end as the video calling app struggles to meet revenue and annual profit targets amid declining demand. It appears that the conferencing app is now cooling off from its pandemic highs and needs to take its competition more seriously.
The company’s shares fell by 7% in extended trade recently and its revenue growth was only 8% during the same period, which is an all-time low. It is apparent that people are starting to switch back to in-person meetings and rival apps such as Microsoft Teams, Google Meet, WhatsApp, Discord, and others.
Kelly Steckelberg, the Finance Chief at Zoom, told analysts that the firm’s business is likely going to decline by 7 to 8% in its next financial year.
Zoom was originally founded by a former Cisco executive, Eric Yuan. The app was not well known up until the pandemic hit in 2020 when the company reported triple-digit growth as people were stuck in their homes during lockdowns. It quickly became the top earning app of the year along with TikTok, Facebook, and WhatsApp.
The company’s operating expenses increased by 51% to hit $704 million during the last quarter of its financial year. Its forecast annual revenue was between $4.39 billion and $4.40 billion, compared to last year’s predictions of $4.53 billion to $4.55 billion.
Zoom is now expecting to see an annual adjusted profit per share between $3.66 and $3.69, compared with the $3.70 to $3.77 forecast earlier.
Rishi Jaluria, the managing director of software at RBC Capital Markets says:
Zoom remains a “show-me” story, where the company believes there’s a lot of potential and higher growth ahead, but Wall Street clearly doesn’t believe it yet.
As mentioned earlier, Zoom’s rivals are catching up fast and if the video conferencing giant does not respond appropriately, it might be left in the dust.