Zoom Earnings Blew My Mind; What Has Zoom Been Doing Right?
Zoom reviewed the adjusted EPS for the full year to $3.70 and $3.77 from the former estimate of $3.45 to $3.51.
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Precious Njoku is a Financial Writer with extensive knowledge about the stock market.
2022-05-28 11:15

Monday, May 23, was the day Zoom Video Communications Inc (NASDAQ: ZM) reported the much-expected Q1 2022 earnings. Many investors have been keen on this earnings call because it would determine whether they would call off Zoom as a company or if there was still hope.

Zoom beat expectations during the earnings call. It also used the opportunity to revise its full-year guidance. Revenue for Q1 2022 was $1.07 billion, meeting expectations of $1.07 billion. Adjusted earnings per share made many investors smile as it beat expectations by a round figure. Adjusted EPS was $1.03 per share, while the expectation was $0.87 per share. The company had 198,900 enterprise customers, and of these, the customers paying more than $100k in 12 months stood at 2,916, while the expectation was 2,958. Enterprise customers are now up 24% year-over-year. Zoom also reviewed the adjusted EPS for the full year to $3.70 and $3.77 from the former estimate of $3.45 to $3.51.
Zoom Earnings Blew My Mind; What Has Zoom Been Doing Right?
This report was crucial to Zoom because its earnings have fallen dramatically since the lifting of lockdowns. During the pandemic, the company's revenue growth exploded. In 2020, Q1 revenue growth rose 169% year over year, and then by Q4, it increased further to 369%. After that, growth began to cool significantly. In 2021 revenue increase for Q1 was 191%, 54% in Q2, fell drastically to 35% in Q3, and then 21% in Q4. Investors were beginning to turn their back on Zoom!

Looking at these good figures begs the question: what has Zoom been doing right?

What Contributed To Zoom’s Revival
During the pandemic, Zoom was primarily a video conferencing company. Today, it has a customer contact center business, the Zoom Contact Center, that involves video, SMS, voice, and chats within one platform. It's also integrated with an artificial intelligence system. The Zoom Contact Center business involves skills-based analytics, routing, and an enterprise dashboard.

Earlier this year, it rolled out IQ for Sales. IQ for Sales provides actionable insights to sales managers to help them identify opportunities, assess risks, and improve sales teams' performance. Zoom believes this app will make many enterprise customers continue using Zoom.

Zoom also has been investing continuously in its ecosystem. For example, it reported good results from the $100 million fund for app developers it launched in 2019. This fund has attracted many app developers to the Zoom ecosystem. Regular zoom users will notice that apps are now integrated into the Zoom video conferencing app. One could be on a video call and still be able to present a document or even post a poll for participants. These results were from the achievement of the fund.

Most of Zoom’s strategy has focused on its business customers. Apart from video conferencing, Zoom provides telemedicine solutions, delivers services for Uber with the integration of Zoom into the uber app, and is still empowering a hybrid workforce. Zoom said that one metric they are continuously monitoring and hope to improve is the annual growth in customers with $100,000 or more contracts. 2916 enterprise customers make up that figure.

Will The Present Success Be Long Lasting?
Shares of Zoom (NASDAQ: ZM) stock jumped by more than 18% after the earnings call as investors enthusiastically welcomed the newfound Zoom success story. But some are skeptical if the company can maintain its momentum.

Zoom video conferencing has many credible rivals like Microsoft Teams and Cisco. They could easily duplicate Zoom’s present success and chip away at its new returns. Also, Cisco already has a contact center business. Zoom’s contact center business is still in development. And if Zoom hopes to be the Ma Bell of phone calls through its Zoom Phone cloud product, it has to beat rivals like Avaya and RingCentral, who are longtimers in that business.

However, it's still too early to answer any questions about the short-term or long-term success of Zoom. Q2 earnings will shed more light on its success.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

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About the Author
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.

Analyst Ratings
Target Price$87.02
# of Analysts30
Last updated2022-12-19

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