As companies continue to push for the return of face-to-face work, Zoom’s earnings show the company faces challenges in the post-pandemic era.
The results of the third quarter of Zoom in show the big question for businesses is whether BtoB sales will be strong enough to offset slowing consumer revenue growth as companies bring workers back to the office in the wake of the pandemic. Zoom’s third-quarter 2022 revenue, reported Monday, rose 5% year over year to $1.1 billion, but total revenue rose 8% in the prior quarter. The company’s revenue for the past three months was $614.3 million, up 20% year over year. However, online revenue was down 9% year over year to $487.6 million.
Declining online sales and rising expenses led to a 23% decline in net operating income to $66.5 million. Zoom lowered its full-year sales forecast to as high as $4.38 billion, down from its previous estimate of $4.4 billion. Zoom’s stock price fell 7.7% in Tuesday morning trading. Speaking to analysts on a conference call following the earnings release, Chief Financial Officer Kelly Steckelberg said the company has seen strong growth from Zoom Phone, coupled with contributions from Rooms and other products, and expects enterprise customers to make up a ever-increasing percentage of total revenue.
Zoom’s shares are down 85% since October 2020
In the transcript published on Seeking Alpha, Steckelberg said the publisher had approximately “209,300 corporate clients, up 14 percent from the same quarter last year.” During first year of the Covid-19 pandemic, Zoom has seen its revenue increase by 300%, as employees around the world have been forced to leave their desks and communicate with colleagues via video call. While hybrid and remote working remain a reality for a large percentage of workers, the return to face-to-face work has impacted Zoom stock, which has lost more than 85% of its value since its October 2020 peak.
As a result, the company has attempted to move away from the exclusive definition of a video conferencing platform, with founder and CEO Eric Yuan telling analysts on the third quarter conference call that the company had “rolled more than 1,500 features and enhancements to the Zoom platform this year, improving the way people connect with each other, with their organization and with their customers.” However, he warned that even as the company pushes its innovations, it still faces a “challenging macroeconomic environment” as well as “exchange rate pressures and increased scrutiny over new contracts.” The strong dollar has lowered the value of product sales in euros and other currencies for US-based technology companies this year, negatively impacting their bottom line.
Less hiring but no massive cuts
In recent months, other IT companies (Amazon, Meta, Cisco, Salesforce…) have tried to reduce their operating costs after recording poor financial results by laying off a large number of employees. While Zoom hasn’t announced any job cuts, Kelly Steckelberg said on the same call with analysts that the company is looking to reduce hiring for fiscal 2024. year, then [Zoom] he takes great care to ensure that [ces ressources] they are focused on the right things,” he said.