Zoom Video Communications Inc. (ZM) offers a video-first communications platform used by millions of people worldwide both for business and personal use. The platform connects people via video, phone, chat, and content sharing and can be integrated across a broad range of devices. Meetings on the platform can host as many as 1,000 participants while webinars can scale up to as many as 50,000. Zoom generates revenue by selling subscriptions.

The market in which Zoom operates includes legacy web-based meeting service providers such as Cisco Systems Inc.'s (CSCO) WebEx and LogMeIn Inc.'s GoToMeeting. Zoom faces a long list of other rivals. They include bundled productivity solution providers with video functionality such as Alphabet Inc.'s (GOOGL) Google G Suite and Microsoft Inc.'s (MSFT) Microsoft Teams. Other competitors are unified communications as a service (UCaaS) and legacy PBX providers such as 8x8 Inc. (EGHT), Avaya Holdings Corp. (AVYA), and RingCentral Inc. (RNG).

Key Takeaways

  • Zoom sells subscriptions to its video-first communications platform.
  • The vast majority of the company's customers are based in the Americas, but the Asia Pacific region is growing fast.
  • Zoom is focused on increasing the number of customers contributing more than $100,000 in revenue annually, providing the company with a more stable revenue stream by attracting larger organizations.
  • In July, the company agreed to acquire cloud contact center software provider Five9 for approximately $14.7 billion.

Zoom's Financials

Zoom announced in late August financial results for Q2 of its 2022 fiscal year (FY), the three-month period ended July 31, 2021. The company reported net income attributable to common stockholders of $316.9 million, up 70.6% compared to the year-ago quarter. Revenue grew 54.0% year over year (YOY) to $1.0 billion.

Use of Zoom's video-first communications platform skyrocketed during the pandemic as increasing numbers of people began working and studying from home and needed a reliable way to connect with co-workers or attend online lectures. The company said that the second quarter was its first ever to hit one billion dollars in revenue.

Zoom is especially focused on growing the number of customers contributing more than $100,000 in trailing 12-months (TTM) revenue. The size of this customer group is important for two key reasons: it illustrates Zoom's ability to scale its offerings to its users' needs and demonstrates the company's ability to attract larger organizations to its platform. The number of these customers rose 130.6% to 2,278 in Q2 FY 2022.

Zoom's Business Segments

Zoom operates as a single business segment. However, it does break down its revenue into three broad geographical regions: Americas; Asia Pacific; and Europe, Middle East, and Africa. The attribution of revenue to any given region depends on the billing address of the customer. Zoom does not break out the profits generated by each region. While the Americas is Zoom's biggest region by revenue, its Asia Pacific region is growing faster, and so is Zoom's Europe, Middle East, and Africa region.

Americas

The Americas generated $681.4 million of revenue in Q2 FY 2022, rising 50.0% compared to the year-ago quarter. The region accounts for approximately 67% of companywide revenue.

Asia Pacific

The Asia Pacific region generated revenue of $135.3 million of revenue in Q2 FY 2022, up 66.3% YOY. The region comprises approximately 13% of Zoom's total revenue.

Europe, Middle East, and Africa

Revenue from Europe, Middle East, and Africa rose 60.0% YOY to $204.8 million in Q2 FY 2022. Those three regions account for a combined 20% of total revenue.

Zoom's Recent Developments

Zoom announced in mid-July that it has agreed to acquire Five9 Inc. (FIVN), a provider of cloud contact center software, for approximately $14.7 billion. The company expects the acquisition to bolster its presence with enterprise customers as well as accelerate its long-term growth potential. The transaction is expected to close in the first half of calendar year 2022.