Zoom Communications on Wednesday projected adjusted quarterly earnings that fall below analyst expectations, underscoring the mounting pressures from rivals and a cautious corporate spending backdrop. The stock slipped nearly 3% in extended trading after the company released its outlook.
Management has been contending with competition from alternatives such as Microsoft Teams and Google Meet. Those services often arrive bundled within broader workplace software suites, which can make them less costly for large enterprises and increase price sensitivity across Zoom's addressable market.
Despite efforts to broaden its product portfolio, Zoom continues to face slower top-line momentum as pandemic-driven remote work trends recede and more employees return to office environments. The company reported that its enterprise business remains comparatively resilient, but it identified the online segment - which serves individual consumers and small businesses - as an ongoing weakness.
For the fourth quarter, Zoom posted revenue of $1.25 billion, coming in ahead of the consensus estimate of $1.23 billion. Adjusted earnings per share for the period were $1.44, which trailed analyst expectations of $1.49. Within the company, online segment revenue was $489.7 million in the fourth quarter, and churn in that segment ticked up slightly compared with the same period a year earlier.
Looking ahead to the first quarter, Zoom guided revenue between $1.22 billion and $1.23 billion, in line with the aggregated analyst estimate of $1.22 billion compiled by LSEG. However, adjusted earnings per share are projected in a range of $1.40 to $1.42, below the street estimate of $1.45.
The broader software sector has faced pressure recently as investors seek clearer signals on how artificial intelligence will affect business models and profitability. Zoom has rolled out multiple AI-powered features intended to spur growth, but the company acknowledged that spending on those initiatives could weigh on operating margins.
The combination of intensifying competition from bundled workplace suites, a slowdown in pandemic-era demand tailwinds, and elevated investment in AI tools sets a challenging near-term picture for Zoom's profitability despite revenue that beat estimates in the most recent quarter.