Zoom Revenue Growth Decline—A Blueprint for Video Conferencing Vendors

Credit: jagritparajuli99

Zoom was once the darling of the pandemic, with its daily downloads increasing 30 times at the onset of the COVID-19 pandemic. In fact, the term “Zoom meeting” became more recognized than “video conferencing” at the time. Now that the pandemic is in its latter stages, and with many employees returning to the office, the company’s numbers have begun to slide as seen in its financial results for the second quarter of the fiscal year 2023.

Zoom’s revenue, $1.0995 billion, represents an increase of 8%, quarter-over-quarter, but is a step down from the previous quarter’s 12% growth and the 54% growth from the same quarter last year. What’s more, its net income sank from $316.9 million last year to $45.7 million in the same quarter this year. The huge difference, according to the company, is due to raised spending on sales and marketing.

As far as earnings are concerned, the company beat expectations, reporting a value of $1.05 per share (adjusted). This is above Refinitiv’s projected value of 94 cents. Meanwhile, Zoom’s cash flow amounted to $257.2 million, which is below the previous quarter’s $468 million.

Given its mixed financial results, Zoom provided modest guidance for the succeeding quarter. Total revenue is set at $1.05 billion to $1.1 billion, falling within the same range as the second quarter’s revenue. In addition, the total revenue for the fiscal year is projected by the company to be in the range of $4.385 billion to $4.395 billion, which translates to a potential 7% growth. These lukewarm projections affected the company’s performance in the stock market.

Zoom’s shares tumbled by 7% in extended trade. These could drop even more in the long run considering that the company’s finance chief, Kelly Steckelberg, said that Zoom’s online business is set to decline by around 7% to 8% in 2023.

Return to Pre-pandemic Form

Zoom’s less-than-stellar numbers might alarm video conferencing software vendors. After all, the company had 48.7% of the global market share in 2021 as the market leader. Its performance could signify a downturn for the entire market. Fortunately, this does not spell doom for the video conferencing industry. It still has high demand in today’s business landscape, which is shifting to pre-pandemic working conditions, but not overblown as it was at the height of COVID-19.

Zoom has outlined its plan to raise earnings and revenues in the long run. The company aims to develop a new pricing structure, Zoom One, which introduces new features and strategically consolidates functionalities into more plans. This affords consumers more flexibility and innovative features.

Zoom also bared that 54% of its revenues originate from enterprise customers. It had 204,100 enterprise users in the second quarter, up by nearly 3% from the first three months of 2022. The company has pushed to strengthen its research and development initiative to grow this segment. As such, it acquired the artificial intelligence platform Solvvy to beef up its capabilities. This grants the company a lot of room for growth.

Other video conferencing software vendors can follow Zoom’s lead and analyze the market segments that provide the most business. After which, they can invest in ways and technology to innovate the solutions provided to these segments. This attracts more users to the platform and can inspire recommendations. Finally, take a look at the pricing structure and see if it accommodates and satisfies the needs of all the targeted segments.