Zoom reports double-digit top and bottom line growth for Q3

However, an analyst has warned it needs to move beyond video conferencing or else revenue growth will shrink as employees return to offices

Zoom has reported strong double-digit growth across its top and bottom line in its third quarter fiscal year 2022 results.

Total revenues for the quarter reached $1.050bn, up 35 per cent year on year.

While GAAP operating income rose 51 per cent to $290m for the three months ended October 31.

"In Q3, total revenue grew 35 per cent year over year to $1.05bn, exceeding the high end of our guidance of $1.02bn," said Zoom CFO, Kelly Steckelberg.

"The growth was primarily driven by strength in our direct and channel businesses, which grew at twice the rate of our online business, as well as improved churn in both online and direct segments.

"From a product perspective, we saw strong demand for Zoom Video Webinars, Zoom Rooms, and Zoom Phone. Zoom Phone had year over year revenue growth in the triple-digits and reached 30 customers with over 10k paid seats."

Critical growth drivers

Zoom highlighted acquiring new customers and expanding across existing customers as key revenue drivers.

At the end of the third quarter of fiscal year 2022, Zoom had 2,507 customers contributing more than $100,000 in trailing 12 months revenue, up 94 per cent from the same quarter last fiscal year.

The company also had 512,100 customers with more than ten employees, up 18 per cent from the same quarter last fiscal year.

It also saw a trailing 12-month net dollar expansion rate in customers with more than ten employees above 130 per cent for the fourteenth consecutive quarter.

"These trends suggest that our customers with more than ten employees are expanding their use of our platform and adding more products and seats, aligned with our go-to-market strategy," Steckelberg added.

However, principal analyst in the Thematic Research team at GlobalData, Laura Petrone, said the video conferencing giant reported a "lower-than-expected" increase in the number of large customers, which she claims is raising doubts about the company's future in the highly competitive collaboration tools market.

Zoom needs to redefine its place in a hybrid working environment

Petrone added that Zoom currently finds itself at a critical point, with its video conferencing tools playing a vital role in the hybrid working model that will dominate the future of work.

However, she warns its revenue growth will inevitably slow as the pandemic subsides and employees return to offices.

"Zoom is under increasing pressure to move beyond video conferencing and expand its communication platform," said Petrone.

"The company has made inroads into conference room hardware and developed a hardware as-a-service offering, but this might not be enough.

"Its failure to complete the planned acquisition of Five9 was a missed opportunity for Zoom to integrate contact centers into its portfolio."

Growing international presence

Both Zoom's domestic and international markets had strong growth during the quarter, it claims.

Revenue growth in the Americas reached 30 per cent year on year.

Meanwhile, its combined APAC and EMEA revenue grew 47 per cent to be approximately 33 per cent of revenue, up from 31 per cent a year ago.

However Zoom saw headwinds to its online business in EMEA, mainly related to summer seasonality.

Raised outlook

Zoom has raised its outlook for FY22 following its third quarter fiscal results.

The video platform giant explained the outlook is based on its current assessment of the business environment, as it assumes its direct and channel business will continue to grow, while the online business will be a headwind in the coming quarters as smaller customers and consumers adapt to the evolving environment.

For the full year of FY22, Zoom now expects revenue to be in the range of $4.079bn to $4.081bn, which would represent approximately 54 per cent year on year growth, up from its previous guidance of 51 per cent issued in August.

It also expects non-GAAP operating income to be in the range of approximately $1.598bn to $1.6bn which would represent 63 per cent year on year growth.