Zendesk Struggling Amidst The Downturn

Not all cloud computing stocks have fared well in the current crisis and those serving the SMB segment are seeing a much bigger impact. Zendesk (NYSE: ZEN) recently announced its quarterly results that failed to impress the market with its outlook.

Zendesk’s Financials

Zendesk’s first quarter revenues grew 31% to $237.4 million, in line with the market’s forecast. GAAP net loss was $36.2 million. Adjusted EPS of $0.10 was ahead with the Street’s estimates of $0.06. But the company’s outlook dampened the performance.

Zendesk withdrew its outlook for the year amidst the current virus concerns. It did provide a current quarter outlook. Revenue for the quarter was forecast at $237-$243 million, falling short of the market’s forecast of $245 million. The stock fell 6% in the after-hours session post the result announcement.

Zendesk’s Enterprise Focus

While Zendesk has been trying to expand its footprint into the enterprise segment, most of its customers still fall in the small and mid-sized business category. The current crisis has been particularly hard on the SMB segment. Analysts have expressed concerns that Zendesk’s customer base will make it more prone to the economic downturn than software providers with larger clients. Zendesk continues to focus on making inroads into the larger organizations. Earlier this year, it announced a strategic alliance with Tata Consultancy Services (TCS) as part of this focus. As part of the partnership, Zendesk’s support, sales, and engagement software solutions will be integrated with TCS’s contextual knowledge and experience in digital transformation. The two companies will work together to help organizations solve for their complex technological requirements while providing CRM custom solutions and integrations.

Besides partnerships, Zendesk is also improving its product offering. Earlier this year, it announced its new Support and Sales Suite that expands its service-first CRM solutions by enabling service and sales teams to instantly connect with their customers and have natural conversations across all touchpoints. Zendesk Support Suite will empower businesses to deliver a seamless conversational customer experience. They will be able to get a comprehensive view of the latest conversations so that service agents can deliver personalized interactions with their customers. The new Support Suite includes social messaging channels so that customers can manage conversations on messaging apps such as WhatsApp and Facebook Messenger.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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