- While the pandemic has destroyed some businesses, others have profited majorly from it. Zoom, which offers the popular video conferencing software, is one of those companies who reaped the rewards of physical distancing.
- However, with the reopening of offices and businesses around the world, Zoom has seen a sharp decline in demand for the product, resulting in a drop in share price and projected revenue for the remainder of the year.
- At the end of August, Zoom’s stock plunged to $293.70 and so far isn’t showing signs of recovering.
Zoom Video Communications Inc. has hosted virtual business meetings, family and friend gatherings, workouts, worship services, school and university lessons, telemedicine, and numerous other types of one-on-one and group meetings, conferences, and screen sharing for well over 300 million daily meeting participants during the Covid-19 pandemic.
Founder and CEO Eric Yuan offered his video conferencing tool Zoom for free all around the globe over the past almost-two years via a user’s internet browser or mobile or desktop app. During this time, “Zoom” has become a household word, one of the best-known tech companies on the planet and an easy to use, reliable, go-to-platform for meeting the intense demand to connect during the pandemic.
Zoom profits from charging businesses a reoccurring subscription fee for the products the company offers. They also generate funds from promoting hardware products industrially. It serves more than 300,000 organizations and offers four different memberships plans. There are also special features that can be purchased (i.e. adding 100+ members, increasing meeting hours, and integrating with other services) primarily for larger-scale businesses wanting to collaborate across multiple offices.
More products and services are being developed for future communication to target larger business customers. Visionary ideas include artificial intelligence to summarize business meetings in real-time and the ability to provide real-time translation tools to allow people to communicate with each other regardless of what language they speak.
However, Zoom’s success seems to be hitting a wall.
Despite Q2 earnings, which beat earlier predictions with earnings per share coming in at $1.36 compared to the analysts in a Refinitiv poll of $1.16), revenue of $1.02 billion and 54% yearly growth, and promising visionary products to meet the needs of a changing work world, Zoom’s stock fell nearly 17% in early trading in New York at the end of August 2021.
As of September 14, 2021, the share price is $285.10 per share, down from $308 on August 30.
This significant drop is primarily due to the lifting of coronavirus restrictions around the country and the pandemic receding in more advanced economies. Zoom, Inc. announced its revenue will roughly flatline for the remainder of the 2021 year. In both Q3 and Q4, customers may not need the video-conferencing tool as much as companies call employees back to the office post-pandemic. Ultimately, the demand for Zoom services is predicted to decline.
Retaining small businesses and corporate accounts will be essential for Zoom’s continual success. Converting free users to paid subscribers is another key factor. They may also be able to benefit from having monthly business users subscribe to an annual contract instead. Presently, 50% of revenue comes from monthly payers.
The company has forecasted annual revenue for 2021 between $4.005 and $4.015 billion with earnings per share of $4.75 to $4.79. While Zoom continues to receive public and industry recognition, only time will tell whether their growth will continue, stagnate or decline.