How Zoom Makes Money

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 GoTo. Zoom faces a long list of other rivals. They include bundled productivity solution providers with video functionality such as Alphabet Inc.'s (GOOGL) Google Workspace 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).

Zoom's Financials

Zoom announced in late February financial results for its 2022 fiscal year (FY), which ended Jan. 31, 2022. The company reported net income of $1.4 billion, up 104.6% compared to the previous year. Annual revenue grew 54.6% to $4.1 billion. Zoom said in its earnings press release that total revenue was driven by the acquisition of new customers and the expansion of its services across existing customers.

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.

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 65.8% to 2,725 in 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 $2.7 billion of revenue in FY 2022, rising 49.3% compared to the previous year. The region accounts for approximately 67% of companywide revenue.

Asia Pacific

The Asia Pacific region generated revenue of $564.1 million of revenue in FY 2022, up 69.5% compared to FY 2021. The region comprises approximately 14% of Zoom's total revenue.

Europe, Middle East, and Africa

Revenue from Europe, Middle East, and Africa rose 64.6% to $801.5 million in FY 2022. Those three regions account for a combined 20% of total revenue.

Zoom's Recent Developments

On Jan. 10, 2022, Zoom announced that it became the first video communications client to obtain Common Criteria certification, an international standard for the objective evaluation of an IT product that assures the product meets a set of pre-defined security requirements. It is recognized in more than 25 countries as a leading benchmark for IT product security certification. Zoom received Common Criteria Evaluation Assurance Level 2 (v3.1 rev. 5) from the German Federal Office for Information Security.