Zoom tumbles as much as 12% premarket as lifting of coronavirus restrictions weighs on revenue forecast

Zoom listed on the Nasdaq in 2019.

Kena Betancur/Getty Images

• Zoom fell as much as 12% in premarket despite the company's Q2 earnings beating expectations.
• Wall Street was underwhelmed by roughly flat revenue forecasts and slowing quarter-on-quarter growth.
• Zoom said the evolution of the pandemic meant that smaller customers were less interested in video-conferencing.
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Zoom fell as much as 12% in premarket trading after the company forecast that its revenue will flatline for the rest of the year, with the lifting of coronavirus restrictions set to weigh on the uptake of its video-calling software.

The company's stock was down almost 11% at $347.50 premarket as of 5.40 a.m. ET. Not including the premarket decline, the stock is 3% higher year-to-date, compared with a 20.6% rise for the benchmark S&P 500 index.

Zoom's second-quarter earnings convincingly beat analysts' expectations when they were released after the bell on Monday. Earnings per share came in at $1.36, compared with $1.16 predicted by analysts in a Refinitiv poll.

Revenue rose 54% year-on-year to $1.02 billion, but growth slowed compared with the previous quarter.

Further downbeat news came in Zoom's third-quarter earnings guidance. It forecast revenue at $1.015 billion to $1.02 billion, with earnings per share of $1.07 to $1.08.

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The stock fell "primarily due to guidance calling for revenue to be roughly flat sequentially in 3Q and 4Q," said RBC Capital Markets analyst Rishi Jaluria in a note. "Management's guidance, which looks conservative to us, assumes headwinds from [small and midsize businesses and] consumers post-pandemic," Jaluria said.

For the full fiscal year, the company predicted revenue of $4.005 billion to $4.015 billion, and earnings per share of $4.75 to $4.79.

Zoom was one of the handful of technology companies to massively profit from the COVID-19 pandemic, as its video-conferencing technology became widely used during lockdowns. Its revenue rose 355% year-on-year in the second quarter of 2020.

But the company's earnings forecast underscored how difficult it will be to maintain the break-neck growth as the pandemic recedes in advanced economies. Zoom's chief financial officer Kelly Steckelberg said after the earnings: "Our online business will be a headwind in the coming quarters as smaller customers and consumers adjust to the evolving environment."

However, Jaluria said RBC remained impressed by Zoom's work with large customers and new products, adding: "We continue to like the long-term potential of Zoom to become a broader platform."

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