The focus should be on enterprise customers, provided the consumer side doesn’t melt away too quickly
Zoom also managed to deliver a forecast that was ahead of Wall Street’s estimates for the first time in more than a year — despite a sharp sell-off in the rest of the tech sector that helped underperformed stocks on Tuesday morning.
Zoom has its roots in the enterprise market; The company was founded by a former Cisco executive with the idea of how to create a videoconferencing platform for businesses that could challenge that company’s WebEx offering. The result was an easy-to-use service that quickly became a lifeline for people moving home from offices at the start of the COVID-19 pandemic.
Zoom’s “online customers” — designating individuals and small businesses who signed up for the service without a Zoom sales representative or one of the company’s reseller partners — comprised 25% of its total revenue in the fiscal quarter Which ended before January 2020.
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Beginning of the pandemic. In one year, this contribution increased to 56%.
But that customer base is much less sticky, with cancellations involving a few clicks on a webpage as more people start meeting in person. Zoom’s revenue growth from online customers has been noticeably slow over the past few quarters and turned negative for the first time in the recently ended period — falling 2% year over year to about $514 million.
Analysts expect this trend to continue. Visible Alpha’s consensus estimates currently show revenue from Zoom’s online business falling for the remaining three quarters in the current fiscal year.
The company is investing in sales representatives and other equipment to build a more stable enterprise base; Sales and marketing expenses comprised 34% of revenue in the recently ended quarter, compared to 26% in the same period of the prior year. But the more rapid deterioration of the online subscriber base to preendemic levels will still put pressure on Zoom’s top line.
Again, Zoom’s share price is down more than 48% for the year — and 83% from its peak — even after a 5% jump on Tuesday. Sometimes there really is nowhere to go but up.
Write Dan Gallagher at [email protected]
Credit: www.Businesshala.com /