Zoom issues disappointing revenue forecast as growth continues to slow

Videoconferencing platform Zoom issued a disappointing forecast as part of its 2022 fourth quarter financial results last night, as some workers start to return to the office and customers slow down their investment in video technology.

While quarterly revenue was up 21% year-on-year to $1.07 billion, this represented a deceleration from 35% growth in the previous quarter.

The company reported full year revenues of $4.1 billion in 2022, which is up 55% year-over-year, before forecasting total revenue to grow to between $4.53 billion and $4.55 billion in the next fiscal year, which was below analyst expectations of $4.71 billion. Shares were down by as much as 13% as a result.

Zoom shifts its focus to the enterprise

When global lockdowns came into force in March 2020, Zoom saw its customer numbers explode as employers turned to virtual conferencing software to smooth the transition to home working. The company’s market cap peaked in October 2020 at about $159 billion, but the company has since lost over three-quarters of its value.

Zoom’s customer base is down too. At the end of January 2022, the company said it had 509,800 smaller customers with over 10 employees, a figure that was down from 512,100 in October.

However, it plans to stop reporting that number as of this quarter, with Zoom’s chief financial officer, Kelly Steckelberg, stating on a call with analysts that Zoom doesn’t think it’s the appropriate metric to use going forward.

Instead, Zoom will disclose the number of enterprise customers and the net dollar expansion rate among those clients. Regarding those metrics, Zoom said it now has 191,000 enterprise customers, up 35% from a year earlier. The net dollar expansion rate is 130%.

Zoom has been caught out in the past when disclosing the number of users on its platform. In April 2020, it walked back a claim that it had 300 million daily active users, after it was accused of misleading the public.

Despite most of the strictest lockdown mandates having been lifted over recent months, Zoom’s CEO, Eric Yuan, sought to put a positive spin on yesterday’s announcement.

On the same analyst call, Yuan pointed to hybrid work and business workflow as the two key pillars of Zoom’s future strategy. “In the next several years, we are working very hard to transform our business from a meeting company to a platform company,” he said.

Zoom also announced that it has appointed ServiceNow CEO Bill McDermott as an independent board director, effective March 1.