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Zoom beats guidance and raises outlook as big spend customers drive growth

Derek du Preez Profile picture for user ddpreez May 21, 2024
Summary:
Collaboration platform Zoom is in the midst of an AI push, as it integrates new tools across its product-line.

Image of someone on a video conferencing call
(Image by mohamed Hassan from Pixabay )

Shortly off the back of Zoom’s recent Workplace announcement, which aims to consolidate the collaboration vendor’s solutions into a single platform, this week the company announced its Q1 2025 earnings - beating previous guidance and raising outlook for the year ahead. Once a darling of the pandemic, during which time its share price soared to dizzying heights as employees were forced to work from home, Zoom has since been on a mission to prove that digital collaboration is here to stay in the Vaccine Economy. 

The latest results from Zoom suggest that its consolidated collaboration strategy, with AI integrated across its platform, is resonating with customers - particularly those in the enterprise. Whilst its share price is still down on the COVID-19 years, customers signing larger deals are driving growth and indicate a deepening penetration in companies’ digital work strategies. 

According to Zoom CEO Eric Yuan, the company should no longer be perceived as a video conferencing tool: 

Our rapid innovation over the years has taken us far beyond video conferencing. Every step of the way has been guided by our mission to solve customer problems and enable greater productivity. 

In the process, we have very deliberately created a communication and collaboration powerhouse with AI infused natively across the platform.

The key figures for Q1 2025 include: 

  • Total revenue of $1.141 billion, up 3.2% year over year. 
  • Enterprise revenue was $665.7 million, up 5.3% year over year
  • Online revenue was $475.5 million, flat year over year
  • GAAP net income from operations was $216.3 million, compared with $15.4 million for the same period last year
  • Some 3,883 customers are now contributing more than $100,000 in trailing 12 months revenue, up approximately 8.5% from the same quarter last fiscal year
  • There are now approximately 191,000 Zoom Enterprise customers 

During the analyst call this week, Zoom CFO Kelly Steckelberg is optimistic about the year ahead: 

We are pleased to raise our top-line and profitability outlook for the full year of FY’25. We now expect revenue to be in the range of $4.61 billion to $4.62 billion, which represents approximately 2% year-over-year growth. 

Platform highlights

As mentioned above, Zoom recently announced its Workplace product, which Yuan describes as an “AI-powered collaboration platform” that’s intended to “streamline communications, improve productivity, increase employee engagement, and optimize in-person time”. 

Zoom Workplace exists within the Zoom ‘app’ and includes capabilities such as multi-speaker view, document collaboration, AI-powered portrait lighting, and will soon include features such as  ‘Ask AI Companion’, which will work across the platform 

Yuan adds that one of the core facets of Zoom Workplace is to optimize in-person time, so that organizations can embrace flexible work. Pointing to customer stories, Yuan says: 

Leading financial services and legal firms such as Capital One and Cooley use Zoom Rooms to support their globally dispersed hybrid workforce, and others like Flex and BAYADA Home Health Care have expanded from Zoom Rooms to Workspace Reservation in order to optimize in-office time. 

Zoom Workplace is also designed to increase employee engagement through the integration of Workvivo into our platform. In Q1, we landed a major telecom customer on Workvivo, who bought approximately 100,000 seats, and Workvivo was named Meta’s only preferred migration partner for its customers as it retires Workplace from Meta. Our success in employee experience represents an important beachhead for us in upselling customers on the full suite.

And Yuan is also keen to highlight that Zoom Workplace doesn’t exist in isolation, but works alongside other popular collaboration tools and enterprise systems: 

We have launched all key social channels, including Facebook Messenger, Whatsapp and Gmail; and have enabled direct transfers between contact center agents and other departments via Zoom Phone, helping to further bridge the employee and customer experiences. As a result of how far the product has come, we have seen strong growth in the number of deals where we have beat or displaced a Gartner top four CCaaS player.

My take

There was uncertainty regarding whether or not Zoom could live up to the hype it experienced during the COVID-19 lockdowns, when it became the go-to tool for people to engage. However, the future looks promising as Yuan and the team at Zoom have doubled down on their enterprise capabilities. For years digital collaboration tools in organizations have been sub-par and there was a desperate need for something to be usable and integrate with a wider portfolio of applications. Zoom’s obviously got tough competition from the likes of Microsoft and Google, with their respective collaboration tools, but the early indicators suggest a strong path ahead. 

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