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Home » How Zoom Is Winning in the Enterprise While Managing Cloud Costs
Cloud Wars Horizon

How Zoom Is Winning in the Enterprise While Managing Cloud Costs

Tom SmithBy Tom SmithNovember 28, 2022Updated:April 13, 20233 Mins Read
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Zoom Q2 results
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Zoom Video Communications reported third-quarter results last week that exceeded earnings estimates and met revenue estimates, but the company lowered its Q4 guidance.

For the third consecutive quarter, the company said it continues to boost gross margins through effective management of its public cloud spend and increasing the number of its co-located data centers. The company also shared insight into industry sectors that are continuing to perform strongly, as well as overall demand for its products.

Zoom’s quarterly revenue of $1.1 billion was in line with estimates and the figure is a 5% year-over-year increase. Revenue was up 7% on a constant currency basis. A couple of highlights:

  • Revenue from enterprise customers was $614 million, up 20% year-over-year.
  • The number of customers contributing more than $100,000 in the trailing 12 months was up 31% year-over-year.
  • Remaining Performance Obligation, or RPO, totaled $3.2 billion, up 32% year-over-year; the company said it expects to recognize 59% of that $3.2 billion as revenue over the next 12 months.

The largest deals came from technology, media, and financial services customers, CEO Eric Yuan said, while also noting the company notched big wins in retail, transportation, and pharmaceuticals.

The adjusted, non-GAAP earnings per share of Zoom were $1.07 per share, a major beat vs. the 84 cents that analysts were expecting.

On the downside, the company lowered its full-year revenue outlook based on what is described as heightened scrutiny of deals by customers. The new outlook calls for fiscal year revenue of $4.375 billion, vs. the $4.4 billion analysts had expected.

“I think all of my peer CFOs now are looking at deals, and that’s just causing elongation in general,” CFO Kelly Steckelberg said. “They’re just taking longer to get done and potentially some of them pushing over quarters.”

Zoom reported a non-GAAP gross margin of 79.5%, up from 76% in Q3 of last year and 78.9% last quarter. “The sequential improvement was mainly due to optimizing usage across the public cloud and our increasing number of co-located data centers,” Steckelberg noted — and that result is consistent with the previous two quarters.

The company said it is continuing to invest in sales capacity and expanding its partner ecosystem: G&A expense grew 6% to $87 million or approximately 7.9% of total revenue.

CEO Yuan said the company remains committed to driving customer value through innovation, as evidenced by a series of new products announced at its November 8 customer conference. “We will continue to drive innovation, customer value, and platform expansion, balanced with an increasing emphasis on efficiency and profitability.”


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Tom Smith

Editor-in-Chief, Acceleration Economy
Cloud Wars Horizon Host

Areas of Expertise
  • Business Apps
  • Cloud
  • Digital Business

Tom Smith analyzes cloud companies, cloud technology, and cloud customer strategies for Acceleration Economy. He has analyzed and worked in the tech industry for more than 20 years.

  Contact Tom Smith ...

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