- Analysts estimate adjusted EPS of $1.06 vs. $1.22 in Q4 FY 2021.
- The number of customers contributing over $100,000 in 12-month trailing revenue is expected to rise YOY.
- Revenue is expected to rise but at a slower pace as the initial boost from the pandemic continues to fade.
Zoom Video Communications Inc. (ZM) saw its share price skyrocket during the COVID-19 pandemic as one of the many "stay at home" stocks. The rise of the work-from-home economy created soaring demand for Zoom's easy-to-use video conferencing service. But Zoom has seen a dramatic slowdown in its earnings and revenue growth in recent quarters as workers have begun to return to their offices amid expanding vaccine rollouts and falling virus cases. The company is also facing increasing competition from video communication platforms like Microsoft's Teams platform.
Investors will be watching to see if Zoom can reverse its slowing growth when the company reports earnings on Feb. 28, 2022 for Q4 FY 2022. The company's 2022 fiscal year ended Jan. 31, 2022. They will likely be disappointed. Analysts expect the company's adjusted earnings per share (EPS) to decline for the first time in more than three years as revenue growth continues to decelerate at a rapid pace.
Investors will also be watching the number of Zoom customers contributing over $100,000 in 12-month trailing (TTM) revenue. This key metric provides an indication of the number of larger enterprises utilizing Zoom's platform. These customers tend to represent stable, longer-term revenue streams than smaller customers. Analysts expect the number of customers contributing over $100,000 in revenue to expand at a robust pace YOY, but at a slower rate than previous quarters.
Shares of Zoom have underperformed the broader market over the past year. The stock has lagged since early March 2021. Around mid-May, the stock began to pick up momentum and significantly narrowed its performance gap with the market by early July. But it has been declining since early August, causing its underperformance gap to dramatically widen. Zoom's shares have provided a total return of -65.6% over the past year, well below the S&P 500's total return of 14.5%.
Zoom Earnings History
Zoom reported Q3 FY 2022 earnings results that beat analysts' expectations. Adjusted EPS rose 11.4% compared to the year-ago quarter, the slowest pace since the company reported a decline in the second quarter of FY 2019. Revenue grew 35.2% year over year (YOY), its slowest pace in at least 14 quarters. The company said that revenue growth was driven by the acquisition of new customers and the expansion of services across its existing customers.
In Q2 FY 2022, Zoom reported earnings and revenue that beat consensus estimates. Adjusted EPS rose 46.7% YOY, a dramatic deceleration from the YOY increase of 566.4% in the previous quarter. Revenue expanded 54.0% compared to the year-ago quarter, also slowing significantly from the previous quarter's pace. It was the first quarter during which Zoom recorded at least $1 billion in revenue. The company also added to its product offerings by launching an all-in-one digital events service called Zoom Events during the quarter.
Analysts expect a further slowing of Zoom's revenue in Q4 FY 2022 and a decline in its earnings. Adjusted EPS is forecast to fall 12.6% YOY, the first decline since Q2 FY 2019. Revenue is expected to slow to a pace of 19.4% YOY, continuing the deceleration trend that began in the first quarter of the year. For full-year FY 2022, analysts expect adjusted EPS to rise 45.0% as revenue increases 54.0%. It would be the slowest pace of growth for either metric in at least four years.
|Zoom Key Stats|
|Estimate for Q4 FY 2022||Q4 FY 2021||Q4 FY 2020|
|Adjusted Earnings Per Share ($)||1.06||1.22||0.15|
|Customers Contributing Over $100K in 12-Month Trailing Revenue||2,701||1,644||641|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be watching the number of customers contributing over $100,000 in revenue over the previous 12 months. The size of this customer group provides a measure of two key capabilities: Zoom's ability to scale its offerings to its users' needs, and the company's ability to attract larger organizations to its platform. Large customers are likely to be a more stable source of revenue compared to individuals or smaller organizations who may switch more frequently to other video conferencing services. Securing contracts with large enterprises will be especially important as the global economy continues to emerge from the worst effects of the pandemic and as many people begin returning to their company offices to work and students return to classrooms. It will also be important to secure those big-revenue-generating customers as competition with other video-communication platforms heats up.
Zoom customers contributing more than $100,000 in TTM revenue have grown significantly in just a few short years. By the end of FY 2019, the company had 344 such customers. That total has expanded to 2,507 as of the end of Q3 FY 2022, the three-month period ended Oct. 31, 2021. That's a more than sevenfold increase in a little under three years. While growth accelerated all the way through FY 2021 to the first quarter of FY 2022, it has since begun to decelerate. The number of large-contract customers rose 160.0% YOY in Q1 FY 2022, slowing to a pace of 130.6% YOY in the second quarter, and then to 94.5% YOY in the third quarter. Analysts expect growth to slow even further in Q4 FY 2022, forecasting the number of customers contributing more than $100,000 in TTM revenue to grow 64.3% YOY. That would be the slowest pace in at least 15 quarters.
The Wall Street Journal. "Zoom Has Some Tough Calls to Make."
Zoom Video Communications Inc. "Zoom to Release Financial Results for the Fourth Quarter and Full Fiscal Year 2022."
Visible Alpha. "Financial Data."
Zoom Video Communications Inc. "Zoom Reports Financial Results for the Third Quarter of Fiscal Year 2022."
Zoom Video Communications Inc. "CORRECTION - Zoom Reports Financial Results for the Second Quarter of Fiscal Year 2022."