The post-pandemic world has been anything but favorable to Zoom Video (ZM), which has seen its shares under heavy pressure despite the company stringing together an impressive streak of thirteen straight earnings beats. The market continues to reassess the company’s value proposition, particularly amid stiff competition. The question is whether Zoom can retain its large enterprise customer base in the years ahead. That assessment continues Monday when the when video conferencing specialist reports second quarter fiscal 2023 earnings results after the closing bell.

In the most recent quarter, the company trimmed both its profit forecast and revenue outlook for the fiscal year, during which the anticipated earnings at the midpoint range implies a year over year decline of 27%. The lowered estimate prompted Wall Street analysts such as Patrick Walravens of JMP Securities to take a more bearish view. In a note to clients, Walravens warned that Zoom’s overall revenue results are not expected to improve. Similarly, analyst Tyler Radke of Citigroup said the company appears to be “stuck in the waiting room.”

However, in my view, the time to be bearish has already come and gone. Although Zoom is not seeing the level of demand it enjoyed at the height of the pandemic, the company is still booking solid enterprise demand from the remote-in-person hybrid work style. As it stands, Zoom’s valuation remains appealing given that the company continues to generate strong free cash flow. To reverse the stock’s bearish trend, in addition to growth re-acceleration, Zoom on Monday will have to issue strong revenue and earnings forecast.

For the three months that ended September, Wall Street expects the San Jose, Calif.-based company to earn 84 cents per share on revenue of $1.11 billion. This compares to the year-ago quarter when earnings came to $1.11 per share on revenue of $1.05 million. For the full year, ending in January, earnings are projected to decline 27% year over year to $3.70 per share, while full-year revenue of $4.4 billion will rise 7.4% year over year.

Combining video, audio, phone, screen sharing, and chat functionalities, the company’s cloud-native unified communications platform, was a key factor in enabling remote-work, while making collaboration easy during the pandemic for its large enterprise customers that contribute over $100,000 in 12-month trailing revenue. That customer tier tend to be more stable, providing Zoom longer-term revenue streams than smaller customers. Microsoft (MSFT), however, has encroached on this territory with its Teams platform.

Competition from Microsoft, and others, have caused a deceleration in Zoom’s revenue growth. In the second quarter, although the company beat on both the top and bottom line, growth slowed dramatically. The company earned $1.05 per share on revenue of $1.1 billion, topping expectations for a profit of 93 cents per share, on $1.05 billion. However, the revenue growth was just 7.63% year over year, down from 11.9% in Q1. This marked the company’s slowest growth figure in more than two years. 

For its fiscal 2023 guidance, the company said it expects to earn between $3.66 and $3.69 per share. However, the midpoint of Zoom’s of that earnings outlook implies a 27% year over year decline. Zoom has been a victim of its own success. The management team deserves credit for continually raising gross margin and taking steps to grow the business. They must now find new revenue streams to revive the stock.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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