Zoom growth slows down from it’s peak while guidance disappoints investors
Zoom Video Communications, the rockstar company during the pandemic has lost more than 80% of its market capitalization since its peak in mid-2020.
If until now, Zoom’s challenge was to keep up with the demand, now they are back quite a bit. Quarterly or annual growth rates are no longer hundreds of percent.
Moreover, the revenues from the last quarter, ended on October 31, increased by only 5% compared to the previous year while in the previous quarter, revenues increased by 8%.
Total revenue for the third quarter was $1,101.9 million, up 5% year over year and income from Operations for the third quarter was $66.5 million, compared to $290.9 million in the third quarter of fiscal year 2022.
After adjusting for stock-based compensation expense and related payroll taxes, and acquisition-related expenses, non-GAAP income from operations for the third quarter was $380.9 million, compared to non-GAAP income from operations of $411.3 million in the third quarter of fiscal year 2022.
Profitability, however, plunged from $340 million last year to $48 million this quarter and the shares collapsed.
The outlook does not look too good either, the guidance being below analysts’ expectations for the next quarter as well. The company expects sales this fiscal year of between $4.37 billion and $4.38 billion, a slight reduction from its August forecast and below the average analyst estimate of $4.4 billion.
The return to face-to-face discussions and the appearance of Microsoft Teams kind of gave Zoom a headache.
However, Zoom is still adding enterprise customers, at the end of the quarter the company had 209,300 enterprise customers, up from 204,100 in the previous quarter.
Customer Metrics: Drivers of total revenue included acquiring new customers and expanding across existing customers. At the end of the third quarter of fiscal year 2023, Zoom had:
• Approximately 209,300 Enterprise customers, up 14% from the same quarter last fiscal year.
• A trailing 12-month net dollar expansion rate for Enterprise customers of 117%.
• 3,286 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 31% from the same quarter last fiscal year.
• Online average monthly churn of 3.1% for Q3, down 60 bps from the same quarter last fiscal year.