Zoom Video Communications Inc. learned what it feels like to be scorned by investors today as its stock fell more than 12% in extended trading despite beating expectations for its second-quarter financial results.

The company reported a profit before certain costs such as stock compensation of $1.36 per share on revenue of $1.021 billion, marking the first time it has recorded more than a billion dollars in sales. That was better than expected, with analysts looking for a profit of just $1.16 per share on revenue of $990.96 million.

That said, the company’s revenue growth of 54% year-over-year may have left investors feeling a tad disappointed, compared with the growth of 191% seen in the previous quarter. The next quarter will be even slower, with Zoom guiding for just 31% revenue growth.

Zoom founder and Chief Executive Eric Yuan (pictured) said the company delivered strong profitability and cash flow. “Today we are a global brand counting over half a million customers with more than 10 employees, which we believe positions us extremely well to support organizations and individuals as they look to reimagine work, communications, and collaboration,” he added.

Kelly Steckelberg, Zoom’s chief financial officer, noted this was the first full quarter year-over-year comparisons since the start of the pandemic, when COVID-19 drove thousands of businesses and consumers to use the tool to keep on working and socializing with friends.

“We have seen customers return to more thoughtful, measured buying patterns,” she said. “While revenue, profitability and cash flow were strong in the second quarter and the first half, other metrics have begun to normalize, especially when compared to the unprecedented year-over-year comps.”

Zoom’s numbers were still fairly impressive considering they’re a more normal measure of growth. The company’s gross margin widened to 74.4% from 72.3% in the previous quarter. Steckelberg said the availability of more data center capacity helped push this up, as well as lower usage levels during the summer thanks in part to school being out.

The company said it had 2,278 customers with more than $100,000 in trailing-12-months revenue, up 131% from the same quarter last year. And it has 504,900 customers with more than 10 employees, up 36% from the year before.

Zoom also boosted the number of enterprise customers spending more than $1 million in annual recurring revenue by 77% from a year ago. It also reported accelerated growth for Zoom Phone and Zoom Rooms. The number of customers spending more than $100,000 in ARR on Zoom Phone grew in the second quarter by 241% year-over-year. In August, Zoom reached 2 million Zoom Phone seats sold, eight months after reaching its first million.

While Zoom has been reaping the rewards of the pandemic and the shift to remote work, the company has also invested a lot. During the quarter, it announced its plans to buy Five9 Inc., a cloud contact center software firm, for $14.7 billion in stock. The idea is to create a new customer engagement platform that will transform how companies connect with their user bases, Yuan said at the time.

Zoom has also invested massively in building out an app ecosystem that it hopes will make its platform more useful to enterprises.

Holger Mueller of Constellation Research Inc. told SiliconANGLE that Zoom’s pandemic-fueled growth spurt is slowly fizzling out, but he said a 50%-plus revenue increase is still quite remarkable.

“Now it comes down to how Zoom can expand its footprint and become even more relevant to enterprises as normality returns,” Mueller said. “It has laid down its strategy with Zoom Apps, now we have to see how they will help the vendor to keep revenue growth up.”

During the quarter, Zoom also announced availability of its Zoom Events platform, which enables companies to host online experiences such as conferences, sales summits, trade shows, customer and internal events.

“The real question is what will post-pandemic life be like for Zoom,” said Forrester Research Inc. Principal Analyst James McQuivey. “The company has responded by diversifying its business into call center tools and larger conference hosting solutions so that it has a chance at growing revenue per user even after users level off and possibly decline.”

Charles King, an analyst with Pund-IT Inc., told SiliconANGLE that though investors are likely concerned about Zoom’s slowing growth, perhaps the real fear is the increased competition it faces in video calls and videoconferencing.

“That’s not unreasonable given the size and heft of competitors like Microsoft, Cisco and Google,” King said. “However, Zoom’s leadership is looking forward by investing in new apps and services that should measurably enhance both the company and its services. That will benefit Zoom customers of every size, and should help the company enjoy more $1 billion-plus quarters in the years ahead.”

Analyst Patrick Moohead of Moor Insights & Strategy indicated that he too is very optimistic about Zoom’s prospects going forward. “Some investors have unrealistic expectations and that’s exactly what’s going on here,” he said. “I think Zoom is executing well and with the Five9 acquisition it will grow more. It’s growing organically, too, just not as fast as some investors want.”

Forrester’s McQuivey said all makers of videoconferencing services face the same challenge, “namely, to make virtual meeting tools so convenient and so engaging that people will prefer them for at least some kinds of meetings rather than seeing them as a handy substitute,” he said. “This means promoting productivity apps like automated transcription, language translation, visualization and collaboration tools that make these tools useful even when participants are in the same room.”

Zoom may have even more avenues for growth in future. Following today’s earnings call, the company announced the first major investments from the Zoom Apps Fund, its new venture capital arm that’s betting it can find other hot startups to perhaps follow in its footsteps. The company is backing more than 10 different startups in the collaboration, productivity, gaming and entertainment spaces.

Looking to the third quarter, Zoom said it’s gunning for a profit of $1.07 to $1.08 per share on revenue of $1.015 billion to $1.020 billion. That compares with Wall Street’s forecast of earnings of $1.09 per share on $1.01 billion in sales.

For the full year, Zoom upped its guidance to a profit of $4.75 to $4.79 per share on revenue of $4.005 billion to $4.015 billion. Wall Street sees a full-year profit of $4.67 per share on $4.01 billion in revenue.

Photo: Zoom