In the aftermath of Zoom Video Communications, Inc.’s (ZM) fiscal first quarter results, it becomes evident that the growth story of this pandemic darling is losing its luster. While the company managed to surpass revenue expectations and deliver a positive earnings surprise, deeper analysis reveals persistent weakening trends that raise doubts about the rosy picture painted by management.

Although Q1 revenues of $1.105 billion exceeded analysts’ estimates by $30 million, the year-over-year revenue growth stood at a mere 3%, a significant drop from the peak of 369% during the pandemic-driven surge. The addition of Enterprise customers, while still significant, experienced its slowest growth in years. The trailing twelve-month net dollar expansion rate continued to decline, raising concerns about sustaining profitability.

Zoom’s guidance for Q2 and the fiscal year appeared in line with expectations, but the overall forecast for the latter half of the year does not indicate substantial deviation from current market estimates. The weakness in key metrics is further highlighted by the meager growth in total deferred revenue, which saw just a 3% increase year over year, suggesting potential decline in Q2.

While Zoom reported a net profit of $15 million in Q1, a decline of $100 million compared to the previous year, non-GAAP income did show a modest year-over-year increase. However, the adjusted operating margin only saw a one percentage point improvement. The company’s cash generation remained strong but declined from the year-ago period.

Although Zoom’s shares initially saw a slight increase in after-hours trading following the earnings report, a deeper analysis of the internal numbers suggests a less favorable outlook for the next few quarters, particularly if the US enters a recession. The average price target from analysts implies a double-digit upside, but it is important to note that just two years ago, Zoom’s valuation approached $500, highlighting the volatility of the stock.

While Zoom’s Q1 results may appear decent at first glance, a closer examination reveals underlying weaknesses in key metrics and a looming uncertainty regarding future revenue growth. As the company’s growth story loses momentum, investors, including notable ones like Cathie Wood’s ARK Invest, will likely reassess their outlook. It remains to be seen how Zoom will navigate the challenges ahead and regain its position as a growth leader in the market.