Zoom Video Communications Stays on Track Despite Low Expectations and Share Buybacks, but Growth Remains Sluggish. Zoom Video Communications is currently not enjoying investor confidence. However, this could prove to be a blessing in disguise in the long run. The company, which rose to stardom in videoconferencing at the onset of the pandemic, has since been in a painful downtrend.

According to the quarterly results released late Monday, revenue growth over the last six quarters was in the low single-digit percentage range and reached just 2.6% in the fiscal year that ended in January. This makes Zoom one of the slowest-growing companies among cloud software firms with annual sales of more than $1 billion, data from S&P Global Market Intelligence shows.

The significantly larger cloud company Workday announced on Monday that its annual sales have increased by almost 17% in the same period. So far, Zoom has failed to gain a foothold in the field of artificial intelligence, despite all efforts. In September, the company announced a generative AI tool called "Zoom AI Companion," and less than two months later, it reported that more than 125,000 customers were already using it.

However, Zoom's stock price has fallen by almost 7% in the last six months, significantly lagging behind the BVP Nasdaq Emerging Cloud Index, which has risen by almost 16% during this time. Nonetheless, the weak stock price provided a better starting point for Zoom's quarterly results on Monday. After the announcement of the results and the subsequent teleconference, the stock price increased by more than 10%.

A Pleasing Change, Considering That the Stock Price Has Fallen in 10 of the Last 12 Reporting Periods According to FactSet. The Adjusted Operating Income for the Last Quarter Exceeded Wall Street's Expectations and the Book-to-Bill Ratio - a Measure for Business Conducted in this Period - Exceeded Analysts' Forecasts for the First Time in a Year.

Moreover, Zoom announced its second share buyback program valued at 1.5 billion US dollars. Nevertheless, the glorious days of strong growth for Zoom are still far off. For the current fiscal year, the company forecasts revenue of 4.6 billion US dollars, which corresponds to a growth of 2% and is slightly below the already weak predictions of Wall Street. However, it seems as though Zoom has finally stabilized demand in the consumer segment.

Revenue in This Segment Remained at Last Year's Level in the Fourth Quarter, After a Consistent Decline Over the Previous Seven Quarters

This segment includes individuals and small businesses that were early adopters of the service but have since been slowly moving away. The company has been somewhat more successful in the corporate customer segment that sells to large enterprises, yet it also feels the impact of cost-cutting measures and competition from much larger players like Google and Microsoft, who are integrating videoconferencing features into their extensive software offerings.

This Segment Could Perform Better in the New Fiscal Year. During the conference call on Monday, Zoom's CFO Kelly Steckelberg explained that the majority of customers had already had a "renewal event" in the last fiscal year, which means that this year there will be fewer contracts up for renewal. "Therefore, we expect this to have much less impact in the fiscal year 2025," she said.

In the meantime, Zoom investors must take solace in the relatively strong results and the positive cash flow, which has enabled the company to build up a cash reserve of around 7 billion US dollars - the fourth-largest among cloud software companies. This has made share buybacks possible and could help the company to make a worthwhile acquisition should the opportunity arise.

In a note from Thursday, Tyler Radke of Citigroup called the results "better than feared" and added that "we expect the stock to recover from its recent underperformance." A satisfactory outcome for Zoom has been long awaited.