Shares of Zoom Video Communications Inc. (NASDAQ: ZM) were down over 5% on Tuesday, a day after the company delivered an earnings report that failed to impress. While revenue and earnings for the fourth quarter of 2022 surpassed estimates, the guidance for the first quarter and full year of 2023 fell short of expectations. The stock has dropped 32% year to date and 19% over the past one month. Here are some noteworthy points from the report:
Total revenue for the fourth quarter of 2022 increased 21% year-over-year to $1.07 billion, exceeding the company’s own guidance and analysts’ projections of $1.05 billion. This growth was driven by strength in the enterprise business which continues to outpace the online business. Adjusted EPS rose 5% to $1.29, surpassing the company’s guidance and market expectations.
Strong customer base
Zoom ended the quarter with 2,725 customers contributing more than $100,000 in trailing 12 months revenue, reflecting a YoY growth of 66%. These customers represented 23% of revenue, up from 18% last year. At quarter-end, customers with more than 10 employees totaled around 509,800, up 9% YoY. These customers represented 67% of revenue, up from 63% last year.
The company is seeing strong demand for Zoom Phone, which added over 550,000 paid seats during the quarter. Most of this momentum is driven by large customers, as the number of customers with more than $100,000 in ARR grew 149% YoY and the number of customers with over 10,000 paid seats grew 122% YoY.
In Q4, the number of Enterprise customers totaled approx. 191,000, reflecting a growth of 35% YoY. Revenue from Enterprise customers increased 38% YoY and made up 50% of total revenue. Zoom expects revenue from Enterprise customers to contribute more to total revenue over time.
Zoom witnessed strong growth in both domestic and international markets during Q4. Revenue in the Americas grew 21% YoY while combined APAC and EMEA revenue grew 23% YoY. The company closed some of its largest deals in EMEA and APAC during the quarter, including a deal for Zoom Rooms on the back of demand for hybrid work. It has also partnered with Deutsche Telekom to develop solutions for the German market. Zoom sees significant opportunity for growth in international markets.
The outlook provided by Zoom for the first quarter and full year of 2023 turned out to be a disappointment as it fell below what analysts had been expecting. For Q1 2023, revenue is expected to range between $1.07-1.075 billion while adjusted EPS is estimated to be $0.86-0.88. Analysts had been predicting earnings of $1.04 per share on revenue of $1.1 billion.
For FY2023, revenue is projected to grow approx. 11% YoY to $4.53-4.55 billion while adjusted EPS is estimated to be $3.45-3.51. Analysts were looking at EPS of $4.41 on revenue of $4.71 billion.
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