Not too long ago, Zoom was the pandemic darling. In January 2020, the stock sat around $76 per share, but by peak-pandemic–September of the same year–Zoom stock (ticker: ZM) surged to over $470 per share. Talk about amazing returns.
But almost two years later, Zoom stock is taking a beating after the company reported its Q2 2022 results. The problem? The pandemic might not be over, but work forces are acting like it is. Here’s what you need to know.
- What’s happened? Zoom reported its second-quarter earnings results yesterday and the stock sank. As of the time of this writing, ZM stock is down over 11% to $86.35 per share in pre-market trading.
- What was so bad about Zoom’s Q2? The main thing that spooked investors was that the company cuts its yearly revenue and profit forecasts, reports Reuters. The company said its online business was likely to decline by 7% to 8% in 2023. It also slashed its annual revenue forecast from $4.53 billion–$4.55 billion to $4.39 billion–$4.40 billion. But its Q2 2022 wasn’t great either. Zoom has revenue of $1.1 billion; up only 8%.
- Isn’t 8% revenue growth good, though? Sure, no company is going to see 8% revenue growth as a bad thing. But the thing is, Zoom isn’t posting the massive growth as it did during the earlier days of the pandemic–and that has investors thinking the ride could be over soon.
- Why is Zoom’s growth slowing? For a number of factors. There’s a lot of economic uncertainty due to inflation right now, and enterprise customers usually cut back on service expenses when that happens to save on costs. Also, Zoom is facing increased competition from the likes of Microsoft Teams, which comes bundled with Microsoft Office subscriptions–which most businesses already pay for anyway. But the real problem for Zoom is likely the return-to-office of work forces around the world.
- Why is return-to-office bad for Zoom? The fewer employees a company has working from home means the less likely it is for a company to require Zoom’s services. After all, if all your employees are in the same building, you can have face-to-face meetings–no awkward video calls required.
- Can anything help Zoom get back to its pandemic highs? That remains to be seen. However, many companies are currently seeing pushback from their employees over return-to-office mandates. While big tech companies usually stick together when it comes to managing employees and their working hours, it’s reasonable to assume Zoom might be rooting for the employees this time. The employees who want to continue working from home–and thus still requiring their employers to splash out for Zoom’s services.