(Reuters) – Zoom Video Communications Inc forecast fourth-quarter revenue above expectations on Monday but its gross margins fell and some growth metrics slowed, sending shares down nearly 8% despite booming sales powered by working and learning from home.
Zoom’s user figures have spiked as a pandemic-induced switch to work from home encouraged more users of its video conferencing service to sign up for paid subscriptions.
A relative upstart before the pandemic hit, Zoom quickly became a household name globally as a desperately needed, easy-to-use video conferencing platform for schools and offices forced to work remotely.
But that growth has come at a cost. While Zoom operates some of its own data centers, it also relies on cloud computing services from outside vendors such as Amazon.com (NASDAQ:AMZN) , Microsoft Corp (NASDAQ:MSFT) and Oracle Corp (NYSE:ORCL) to keep up with rising demand. Those bills helped push down Zoom’s gross profit to 66.7% in its fiscal third quarter, below analyst expectations of 72.1%, according to IBES data from Refinitiv, and its pre-pandemic average of around 80%.
Moreover, Zoom said it had 433,700 customers with more than 10 employees, a 485% increase from the year before but only a 17% increase from the fiscal second quarter. Between the company’s fiscal first and second quarters, the growth rate had been 40%.
But Zoom still forecast sales above estimates, saying it expects fourth-quarter revenue of between $806 million and $811 million, above estimates of $730.1 million, according to Refinitiv data.
Revenue for the third-quarter ended Oct. 31 surged 367% to $777.2 million, beating analysts’ average estimate of about $694 million.
Net income attributable to common stockholders jumped to $198.4 million, or $66 per share, from $2.2 million, or 1 cent per share, a year earlier.
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