Zoom Earnings Expected to Shrink as Return to Office, Competition Heat Up

The Zoom logo is visible on the exterior of the Zoom Video Communications headquarters.

Justin Sullivan / Getty Images

Zoom Video Communications Inc. (ZM), the video conferencing company that was so ubiquitous at the outset of the pandemic it became a verb, is expected to say sales grew slower than ever before in the first quarter of the year.

Key Takeaways

  • Analysts expect earnings of $0.98 per share, down 5% from the same quarter last year.
  • Quarterly revenue growth has slowed from a peak above 300% to only 4.45%.
  • Microsoft and Google’s AI-integrated workplace applications could challenge Zoom's market share.

Net income likely fell 5% year-over-year to $300 million, or $0.98 per share, according to estimates compiled by Visible Alpha. The company's revenue is forecast to inch up 1% to $1.1 billion. That would be Zoom's slowest pace of sales growth on record.

Operating expenses are also expected to grow at their slowest-ever rate, rising 8% to $480 million, as the company reins in spending amid a tech slowdown. Zoom will report earnings for the first quarter of its 2024 fiscal year after markets close Monday, May 22.

Zoom has struggled to capitalize on the return-to-office trend the way it did work-from-home. Zoom was one of the fastest-growing workplace software companies at the height of the pandemic, with revenue quadrupling in three consecutive quarters in 2020.

Business boomed even more abroad, where quarterly sales growth averaged more than 500% that year. But the U.S., where revenue in the most recent quarter likely rose 4.5%, is now the only market in which Zoom's sales are growing.

  Q1 FY2024  Q1 FY2023  Q1 F2022 
 Diluted earnings per share ($)  0.98  1.03  1.32
 Revenue ($M)  1,084  1,074  956

The company could also face stiffer competition thanks to Big Tech's investments in artificial intelligence. In March, Microsoft (MSFT) said it would integrate ChatGPT into its 365 business apps, including the video software Teams. Google (GOOG; GOOGL) has unveiled similar AI integrations for its workplace applications.

Zoom would need to increase its research and development (R&D) spending to match competitors, and it could struggle to keep up. Microsoft and Google spent $7 billion and $11.5 billion, respectively, on R&D last quarter. Zoom is expected to have spent $193 million.

Zoom shares are flat for the year, underperforming the S&P 500 and the S&P 500 Information Technology Sector, up 9% and 25.5%, respectively.

Year-to-date return of Zoom stock, the S&P 500, and the S&P 500 Information Technology Sector (as of May 17, 2023).
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  1. Visible Alpha. "Financial Data."

  2. Zoom. "First Quarter FY 2024 Earnings Release."

  3. Microsoft. "Introducing Microsoft 365 Copilot."

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  6. Alphabet. "Alphabet Announces First Quarter 2023 Results." Page 6.

  7. S&P. "S&P500 Information Technology Index".

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