Zoom ranks high among its peers on multiple fronts, though, leading the charge among basic meeting conference tools according to tech researcher Gartner and nipping at the heels of more complex unified cloud communications service providers like Microsoft.įor a business looking to update its communications capabilities, there are plenty of options to choose from, but Zoom is clearly winning many of these new converts to cloud video and voice. Cloud-based video conferencing is a crowded space, with competitors including Microsoft Teams and RingCentral, not to mention firms like Twilio that enable developers to custom-build their own communications applications. The fact that Zoom is still landing big deals with organizations with lots of users bodes well for continued double-digit percentage growth into the new year. The cloud communications market remains hot And after its epic tumble from record highs, the stock is cheaper than it's ever been at 17 times trailing 12-month revenue and 40 times trailing 12-month free cash flow. Rapid expansion among its largest customer relationships - big enterprises spending six figures or more on an annualized basis - is fantastic news for the company's long-term prospects. Though its trajectory is slowing, Zoom is most certainly still in growth mode. Since Zoom doesn't provide specific metrics on customers with less than 10 employees and individual subscribers, it implies that Zoom's growth among its smallest user base has stalled out. Zoom said its net dollar expansion rate was 130% in Q3 among businesses with 10 or more employees, indicating the average client spent 30% more with Zoom than during the same period last autumn. The number of enterprises spending at least $100,000 per year with the video conferencing pioneer increased 94% year over year to 2,507, and customers with at least 10 employees grew 18% to 512,100. The proof is found in Zoom's customer metrics. The Q4 forecast does represent 19% growth over the fourth quarter last year (impressive considering the company grew sales 369% in Q4 last year), but Zoom is losing some steam as many people start to return to the office for work and individual users spend more in-person time with family and friends compared to 2020. Management's outlook for the fourth quarter calls for revenue of $1.051 billion to $1.053 billion, implying flat sequential revenue growth over Q3. Why has the stock continued to tank following such solid news? It all has to do with momentum. Free cash flow was down 3% from a year ago to $375 million (due to limited spending last summer and autumn due to the pandemic), but still represented a very healthy 36% free cash flow profit margin. Zoom said revenue grew 35% year over year to $1.05 billion during the third quarter of fiscal 2022 (the three months ended Oct. A disconnect between share price and reality?
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