Zoom Communications (NASDAQ: ZM), the video-conferencing and workplace software provider, beat Wall Street’s Q2 estimates on both revenue and profit but still saw shares drop as its outlook for the current quarter disappointed. Enterprise revenue grew at its fastest pace in three years, yet that was not enough to hold the stock up.
Shares closed yesterday at $93.83, down 7.03% from Tuesday’s $100.92, within Zoom’s 52-week range of $70.70 to $114.74. The stock has since partially rebounded, trading at $96.67 in early trade today, up 3.03%.
Zoom’s fiscal second-quarter revenue of $1.28bn, up 4.9% year on year, beat the $1.27bn consensus, while adjusted earnings per share of $1.55 topped the $1.48 estimate. Chief executive Eric Yuan said total revenue grew 4.9% year on year, anchored by 7.8% growth in Enterprise revenue, its strongest growth rate in three years. The problem was guidance: Zoom pointed to third-quarter adjusted earnings of $1.46 to $1.48 a share, below the $1.50 the market had expected, even as full-year guidance was nudged higher to $6.08-$6.12 a share.
The market focused less on the beat than on signs the growth engine is cooling. Online segment revenue, sales to smaller customers who sign up directly rather than through a sales team, rose just 0.6% year on year. Non-GAAP gross margin, the share of revenue left after direct costs, slipped to 79.1% from 79.8%, which Zoom tied partly to rising costs of running AI infrastructure. Net dollar retention, a measure of whether existing customers are spending more, stood at 99%, still below the 100% mark that signals expanding customer spend.
Patrick Walravens, an analyst at brokerage Citizens, reiterated a Market Perform rating yesterday, arguing that the market has stopped rewarding Zoom for beating a number it usually beats. Peer software names including HubSpot, Monday.com and Atlassian were roughly flat the same day, suggesting the sell-off was specific to Zoom rather than a sector-wide move.
Elsewhere in the results, Zoom’s stake in AI firm Anthropic produced a $1.6bn unrealised gain in the quarter, pushing GAAP net income to $1.54bn, and the company also raised its full-year guidance. No single catalyst has been confirmed for today’s partial stabilisation in the shares, which remain well below Tuesday’s close.