Zoom forecasts quarterly profit below estimates amid tough competition

ZOOM Communications forecast quarterly profit below Wall Street estimates on Wednesday, signalling intense competition and a cautious spending environment could weigh on its earnings.

Shares of the company were down nearly 3 per cent in extended trading.

Zoom is increasingly squeezed by rivals such as Microsoft’s Teams and Alphabet’s Google Meet, which come bundled with broader workplace suites that often make them cheaper for enterprise customers.

Despite a push to diversify its offerings, Zoom has been grappling with slowing growth as pandemic-era work-from-home arrangements decline and employees return to offices.

While its enterprise business has shown resilience, the online segment, which serves individual consumers and small businesses, has remained a weak spot.

In the fourth quarter, Zoom’s online segment revenue stood at US$489.7 million, with churn increasing marginally from a year earlier.

The broader software sector has also been hammered in recent months as investors await clarity on the impact of AI and potential business model disruptions.

While Zoom has launched a slew of AI features to drive growth, its investments in the technology could pressure operating margins.

The company expects first-quarter revenue between US$1.22 billion and US$1.23 billion, compared with analysts’ average estimate of US$1.22 billion, according to data compiled by LSEG.

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Adjusted profit per share is forecast between US$1.40 and US$1.42, below estimates of US$1.45.

For the fourth quarter, Zoom reported a revenue of US$1.25 billion, beating estimates of US$1.23 billion.

Adjusted profit per share came in at US$1.44, compared with estimates of US$1.49. REUTERS