Zoom’s growth outlook underwhelms despite record revenue

As the UK enjoyed it’s late-summer bank holiday, Zoom Video Communications reported earnings yesterday…

On the face of it the headline numbers were stellar:

• Second quarter total revenue of $1,021.5 million, up 54% year over year.

• Number of customers contributing more than $100,000 in TTM revenue up 131% year-on-year.

• Second quarter operating margin of 28.8% and non-GAAP operating margin of 41.6%.

However, its outlook signalled a faster-than-expected easing in demand with third-quarter revenue expected to be between $1.015 billion and $1.020 billion – indicating a rise of around 30% from a year earlier, compared with multiple-fold growth rates in 2020.

Competition from legacy platforms such as Cisco’s Webex and Microsoft Teams has also dented Zoom’s efforts to win bigger contracts from businesses.

Zoom said it expects a decline in revenue from customers with 10 or fewer employees. And it forecast third-quarter adjusted earnings between $1.07 and $1.08 per share, compared with expectations of $1.09 a share.

Technicals

The shares retreat from their near-parabolic highs has coincided with the global vaccine rollout.

And whilst there’s little to suggest that a downtrend will form, there’s also little in terms of bullish momentum to reignite another run higher.

Key levels to watch moving forward include resistance at $406 and support at $273.

Until these structural levels are breached, Zoom’s share price looks set to continue to remain rangebound.