- Zoom issued new revenue guidance for its fiscal year 2023 Monday, moderating its growth trajectory as the collaboration market shows signs of saturation.
- The company projects annual revenue between $4.53 billion and $4.55 billion for FY23, shy of analyst estimates of $4.71 billion.
- The company's fourth quarter revenue reached $1.07 billion, up 21% year over year. The growth rate is a far cry from the same quarter in the previous fiscal year, which saw revenue grow 369% to $882.5 million.
In the pandemic ebb and flow, the collaboration staple has largely given up ground on its meteoric rise.
Zoom shares closed at $123 Tuesday, down more than 7% for the day. It's a more than 79% drop from its record high of $588 in October 2020, as investors dumped shares on weaker revenue projections for the year. Despite the contraction, Zoom plans to rely on brand recognition, newer enterprise services such as Zoom phones and loyalty of existing enterprise customers to sustain growth.
The revenue growth Zoom reported "was primarily driven by the strength in our enterprise business, which continued to grow significantly faster than our online business," said CFO Kelly Steckelberg, during the earnings call. "We also saw strong demand for Zoom Phone, which had a record quarter adding over 550,000 paid seats."
Zoom launched its Zoom Phone appliance line in the summer of 2021. The company billed the group of hardware products combining video, audio and collaboration as an all-in-one desk phone solution to respond to hybrid work trends.
After an initial, business-wide pivot to remote work, demand for collaboration solutions cooled. Many organizations have since improved and streamlined their hybrid work strategies, pulling back or consolidating the services they require.
"The meeting solutions market, which is at the core of Zoom's business or at least certainly has been for the past several years, has reached a point of saturation," said Mike Fasciani, senior director analyst at Gartner.
Zoom's position in the market provided an opportunity for upselling on additional services: Existing customers might be more likely to add features or equipment such as Zoom Phone or Zoom Room, said Fasciani.
IT leaders' approach to hybrid work is focusing on consistency, reliability and efficiency, as well as the ability to respond to shifting conditions as the pandemic unfolds. Despite challenges, most employers plan to expand hybrid work programs in the long-term.
It's why Zoom continues to see opportunity for growth in the post-pandemic age. "Most of our customers already deployed our videoconferencing solution, and also they want to have one, consistent experience," said CEO Eric Yuan. The executive also suggested the company will double the pace at which it releases new services in order to maximize growth.
Because Zoom lacks onboard productivity features such as word processing or deck building, Zoom's approach for the longer term might stick closer to telephony, UCaaS and enabling customer experience, according to Thomas Randall, senior research analyst at Info-Tech Research Group.
"That's where we see Zoom heading," Randall said.