Its enterprise business now generates more revenue than its consumer business
Zoom’s most recent earnings call painted a familiar picture: strong enterprise growth masked by the decline in its consumer business.
Indeed, its seven percent (YoY) revenue gains last quarter – which took its Q3 earnings to a total of $1.1BN – seems meager compared to its pandemic gains.
Yet, such a drop was always on the cards, as many people returned to their pre-pandemic lifestyles.
The trouble Zoom has is that this fall disguises the strides its enterprise business is making, thanks – in part – to its new Zoom Contact Center and Zoom IQ for Sales offerings.
As Kelly Steckelberg, Chief Financial Officer at Zoom, stated in an earnings call:
The growth in revenue was primarily driven by strength in our enterprise business, which grew 20 percent YoY and represented 56 percent of total revenue, up from 49 percent a year ago.
These statistics are particularly insightful as they show how Zoom’s enterprise business has now overtaken its consumer business in revenue.
Think back to the start of the Zoom Boom – less than three years ago – and those figures seem extraordinary, justifying Zoom’s intense focus on the enterprise.
It is a tricky time for many enterprise technology vendors, with many tech giants – including Microsoft and Google – taking a hit in their recent revenue growth.
After all, end-users are taking a more measured approach to business and prolonging buying cycles, bringing in more decision-makers to cast a closer eye over deals.
Yet, Zoom’s enterprise business is – to an extent – defying this trend.
Indeed, in Q2, its enterprise business grew by 27 percent. While it dropped to 20 percent this quarter, these figures – given economic uncertainty – offer encouragement.
Eric Yuan, CEO of Zoom, acknowledged this during the earnings call. He stated:
The continued strength of our enterprise growth is a testament to how the value proposition of our platform resonates with customers even in tougher economic environments.
Yuan also highlights how Zoom is gaining traction, with customers spending more than $100,000 annually as cause for positivity. Indeed, growth within this customer segment is up 31 percent YoY.
The pace of its innovation cycle – as evident in the latest Zoom Contact Center announcements – is a significant enabler of this and critical to its mission to become a platform business.
Speaking to CX Today in September, Zeus Kerravala, Founder and Principal Analyst at ZK Research, discussed the rise of Zoom’s enterprise business. He stated:
We will reach the point where the growth in its enterprise business starts to outpace the decline in the consumer business by quite a bit. Then, you’ll start to see that hockey stick growth curve again for Zoom.
Yet, alongside its native innovation, Zoom seems committed to building a platform to which other vendors can add value. Doing so is crucial to achieving its enterprise goals.
Indeed, these goals are lofty, with Steckelberg recently reaffirming Zoom’s mission to reach annual revenues of $10BN.
Only Microsoft, Salesforce, Oracle, and SAP have reached this goal, with platform a critical enabler.
Of course, Zoom has a long way to go. But it announced several high-profile partnerships during its recent Zoomtopia event, which may aid its mission.
Perhaps the most notable is its link-up with ServiceNow, similar to Zoom in its high brand loyalty. Indeed, in Q3, ServiceNow recorded a remarkable 99 percent customer renewal rate.
Together, they released three new solutions: Zoom Contact Center for ServiceNow, ServiceNow Employee Center for Zoom, and Ticket Collaboration with Zoom Team Chat.
The latter strengthens Zoom’s combined CCaaS and UCaaS proposition, enabling swarming capabilities and allowing the business to benefit from the convergence of the technologies.
Such a trend, alongside the growth of its platform and partner program, may just enable the hockey stick revenue growth curve in the coming years, which Kerravala alluded to.
And, who knows, a second Zoom Boom is perhaps on its way.