Zoom's first-quarter performance is improving, but the pressure from Microsoft remains unabated.

Zoom has risen 5% so far this year, while the NASDAQ Composite Index has risen 22%.

In pre-market trading, Zoom fell nearly 3%. Zoom announced better-than-expected financial results, but did not dispel concerns about a decrease in corporate spending and competition from rivals such as Microsoft.

Zoom's Q1 performance exceeded expectations

Zoom's Q1 revenue was $1.11 billion, a year-on-year increase of 3%, exceeding expectations; adjusted earnings per share were $1.16, better than the market's expected $0.99.

The number of enterprise customers in Q1 was 215,900, a year-on-year increase of 9%. Among them, there were 3,580 companies that contributed more than $100,000 in revenue in the past 12 months, a year-on-year increase of 23%.

Although the number of enterprise customers is growing, it is still lower than analysts' expectations. Revenue from large enterprises accounted for 57%, the same as the previous quarter.

Zoom also raised its full-year revenue guidance, a positive sign for the software manufacturer to continue its growth after the pandemic.

Zoom expects revenue for the fiscal year 2024 to reach $4.47 billion to $4.49 billion, higher than the previous expectation of about $4.44 billion; adjusted earnings per share are expected to be $4.25 to $4.31, compared to the previous expectation of $4.11 to $4.18.

Analysts maintain their rating

KeyBanc analysts, led by ****, rated Zoom's stock as "industry weight."

They pointed out that Zoom's enterprise business growth rate is expected to slow to above 3% in the second half of this fiscal year, while the growth rate in the first quarter was 13%.

"We believe that Zoom is still in a favorable position to benefit from long-term digital trends, but given the continued slowdown in growth, we maintain our current rating," wrote KeyBanc analysts.

A key concern in the market is whether Zoom's growth will be affected by corporate cuts in video conferencing tool spending and the choice of competitors such as Microsoft and its Teams product. Microsoft recently launched an AI-integrated advanced version of Teams.

When asked about competitive pressure, Zoom CFO Kelly Steckelberg said, "I don't think the adjustments you see necessarily have to do with competition."