Zoom Lowers Revenue Expectations as Online Business Declines

Zoom has lowered its 2023 annual revenue expectations by 7% as online business is forecast to drop 8% over the same period. 

Revenue for 2023 is now expected to be between $4.37 billion and $4.38 billion, representing around 7% year-over-year growth. In monetary terms, this translates to $15 million dollars lower than its previous full-year guidance. 

Zoom attributes $14 million of this forecast loss to the “continued FX (foreign exchange) pressure in Q3 and Q4”.  

Eric Yuan, Founder and Chief Executive Officer of Zoom, said: “Zoom is purpose-built to make all kinds of connections possible, effective, and meaningful. 

“We have developed and launched more than 1,500 features and enhancements on the Zoom platform this year, advancing how people connect with each other, their organization, and their customers, ultimately, opening the doors wide for creativity and collaboration. 

“Of course, even as we celebrate our innovations and customers, we still face the backdrop of a challenging macroeconomic environment. 

“We continue to see FX pressure and heightened deal scrutiny for new business but remain focused on delivering happiness to our customers by innovating our platform and expanding our go-to-market capabilities.” 

Zoom’s total Q3 2022 revenue, however, was $1.102 billion, which is an increase of 5% year over year and $2 million above the high end of its quarterly guidance. 

The increased revenue for Q3 was mainly the result of growth in its enterprise business, which grew 20% year over year. Enterprise business accounted for 56% of the company’s total revenue, up 7% from last year. Zoom expects enterprise customers to make up an increasingly higher percentage of its total revenue going forwards. 

Zoom also saw strong growth in Zoom Phone, Zoom Rooms, and other products. This quarter, Zoom Phone added 5,500 seats and 650 Zoom Contact Center seats. 

Nine Zoom Phone customers were added in Q3. They purchased more than 10,000 seats, bringing the total customer count to 64. Kelly Steckel, Chief Financial Officer at Zoom, believes these figures show a “continued strength, even in the challenging economic times”. Steckel promised to provide a fuller Zoom Phone adoption breakdown when it reaches 10% of revenue. 

In July, Zoom Phone surpassed three million seats sold globally. At the last quarterly earnings call, Zoom announced it had gained more than four million seats on Zoom Phone.  

On a regional level, Zoom’s revenue across the Americas grew 11% year over year. EMEA revenue declined by 9% year over year, which Zoom says is due to a stronger dollar, online performance, and the Russia-Ukraine war. APAC’s revenue has fallen 3% year over year, which has also reportedly been impacted by the stronger dollar. 

In terms of profitability, Zoom’s non-GAAP margin in Q3 was 79.5%, up 3.5% from the same time last year. Zoom attributes this increase to optimising usage across the public cloud and having more co-located data centres. 

Research and development expenses grew 59% year over year to roughly $108 million, which represents a 3.4% increase compared to Q3 last year. Steckel explained that the added R&D expenditure is due to investments in Zoom’s product portfolio and meeting customer needs. The total annual R&D expenditure is predicted to be between 10% and 12%, which is in line with the company’s long-term target. 

The company is also continuing to invest in sales capacity and channel partner expansion. 

Non-GAAP operating income was $381 million, $51 million higher than the $330 million guidance, which Steckel says is the product of carefully prioritised investments. 

Yuan believes Zoom has proved its resilience in the current economic climate: “The continued strength of our enterprise growth is a testament to how the value proposition of our platform resonates with customers even in tougher economic environments. 

“As we enable customers to drive greater efficiency, we also are focusing on our own efficiency. 

“We have always been judicious with investments, prudent about spending, and we have commanded robust margins since our IPO. So, this is not a major shift for us. 

“We will continue to drive innovation, customer value, and platform expansion, balanced with an increasing emphasis on efficiency and profitability.” 

Zoom’s global customer reach and partner numbers are continually growing with distributors added, including First Distribution, DMOA, Redington MENA, and TD Synnex. 

The CEO also reflected on its annual partner conference, Zoomtopia, in which Zoom hosted hundreds of channel partners. Yuan said its partners are excited to work with Zoom and drive the adoption of its platform worldwide. UC Today created a Zoomtopia Partner Connect 2022 highlights, focusing on the past year of Zoom’s partner programmes and new announcements. 

Recent standout platform announcements include the addition of email and calendar services. Users will no longer need to leave Zoom to access their email and calendar as popular email and calendar services will be integrated directly into the Zoom meeting application. They will be able to quickly access their communications and scheduling and get their work done more efficiently.




Leave a Reply

Your email address will not be published. Required fields are marked *