Why did Zoom stock drop today? Focus turns to enterprise growth
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Zoom Video Communications (NASDAQ:ZM) rose postmarket Monday in the immediate wake of its first-quarter earnings -- but along with a tech sector that finished broadly lower, Zoom stock (ZM) finished Tuesday down 8.1%.
That came despite a straightforward beat of expecations on top financials: Earnings per share came in ahead of expectations, and growth in Enterprise sales pushed the company to top expectations on revenues. The company also offered a positive outlook on its business.
That same Enterprise wing raised concerns, though, as many investors look to renewal rates among Zoom's biggest customers as an indicator -- and an enterprise customer count of about 215,900 was short of consensus expectations that reached near 218,000.
Citi rates Zoom a Sell and pointed to the Enterprise weakness, but also noted the online business was stabilizing toward flatter growth the rest of the year, and a boosted forecast (if against a low bar).
Meanwhile, KeyBanc Capital Markets (which calls Zoom a Sector Weight stock) says that while the Enterprise business should accelerate into fiscal 2025, gross margins are set to feel pressure from the company's investments in artificial intelligence.
For more detail, dig into Zoom's earnings call presentation and Seeking Alpha's earnings call transcript.