((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Arsheeya Bajwa
Zoom Communications shares
ZM.O fell nearly 11% before the bell Tuesday as its forecast for high-single-digit annual revenue growth disappointed investors after a recent rally.
Intense competition from rival video conferencing services, including Microsoft Teams MSFT.O , has put Zoom under pressure, even as it expands its offerings with products such as phone systems and artificial intelligence assistants to boost demand.
Zoom, which rose to prominence during the pandemic, raised its guidance for fiscal 2025 adjusted profit and revenue on Monday.
The midpoint of the San Jose, Calif.-based company’s new annual revenue forecast of $4.656 billion to $4.661 billion was in line with analysts’ average estimate of $4.66 billion, according to data compiled by LSEG.
The midpoint of its fourth-quarter revenue guidance was also about $1 million higher than estimates.
“Even at this rate of beats and rises, the growth acceleration is potentially at or near its peak,” Piper Sandler analysts said.
According to data compiled by LSEG, the company’s annual revenue growth rate is expected to average 3.1% for fiscal years 2025, 2026 and 2027. Comparatively, Zoom recorded an average annual growth of 21.6% during the three financial years preceding 2025.
Zoom, whose shares are up 19% this month, is expected to lose nearly $3 billion in market value if pre-market losses continue. Its market capitalization peaked in October 2020, crossing the $100 billion mark, but has since fallen to around $24.52 billion.
In a nod to its efforts to diversify its business outside of its core video conferencing platform, the company changed its name from Zoom Video Communications to Zoom Communications.
“dropping the ‘video’ part of its name should help the market and potential customers realize that the company is not the same one that thrived during the pandemic,” said Dan Coatsworth, an analyst at AJ Bell.
Mr Coatsworth also attributed the fall in Zoom shares to “profit taking after a very strong run before the figures were released”.
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