Zoom Video Communications (ZM:NSD) Cuts 1300 Jobs as Covid Wanes

Zoom Cuts Workforce

Zoom Video Communications Inc has announced that it will be cutting around 1,300 jobs, due to a slowdown in demand for its video conferencing services as the pandemic comes to an end. The layoffs will affect nearly 15% of its workforce. The company estimates that it will incur charges of up to $68 million related to the job cuts, with a substantial part of it being spent in the first quarter of fiscal 2024.

The CEO, Eric Yuan, stated that the company grew too quickly and didn’t take enough time to analyze its teams or assess if the growth was sustainable. He also announced that he will be taking a 98% pay cut for the coming fiscal year and forego his bonus. The executive leadership team will be reducing their base salary by 20% in the same period.

Zoom’s revenue growth has slowed down, with analysts forecasting a 6.7% increase in revenue for fiscal 2022, compared to a more than four-fold jump in revenue and a nine-fold surge in profit in 2021. Profit is estimated to have fallen 38% in 2022. The company hired heavily during the pandemic to meet the surging demand, but now it joins other US companies in cutting costs to prepare for a potential recession.

Several US companies, including Goldman Sachs Group Inc and Alphabet Inc, have laid off thousands of employees this year to cope with the demand downturn caused by high inflation and rising interest rates. The video conferencing software maker has become a household name during the lockdowns due to the popularity of its video conferencing tools.

Departing employees will receive 16 weeks of salary, healthcare coverage, and a bonus for the year. Despite the job cuts and charges, Zoom’s shares rose 9.9% on the news, but were down slightly in extended trading.

Zoom’s announcement of job cuts and charges is a reflection of the current state of the economy and the demand downturn that companies are facing. As the pandemic comes to an end, companies are reining in costs to prepare for a potential recession. While the job cuts are unfortunate, they are necessary for the company to remain sustainable in the long run.

ZM Stock Price Forecast & Analysis

The stock of Zoom Video Communications Inc. has a bullish outlook among financial analysts, with an average target price of USD 92.12 over the next 12 months. The stock price has increased by 4.86% over the past week and 10.88% over the past month. The average analyst rating for Zoom is “Buy”.

Stock Target Advisor’s own analysis, the outlook for the company is “Slightly Bullish”, based on 9 positive signals and 4 negative signals. This suggests that while there are some potential challenges faced by the company, the overall outlook is optimistic.

 

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