Zoom Could Post First Loss Since Pandemic as Demand Dries Up

Cost-cutting measures likely came too late to save the company from net loss last quarter

The moon sets behind the Zoom Video Communications headquarters on May 23, 2022 in San Jose, California.

Justin Sullivan / Getty Images

Key Takeaways

  • Zoom will likely say fourth quarter FY 2023 adjusted EPS was -$0.11 vs. $1.60 in the prior-year quarter.
  • Zoom's revenue probably climbed 2.6% to $1.1 billion.
  • Zoom's net income has dwindled in recent quarters as demand for video conferencing services for offices and schools has dried up.
  • The company announced earlier this month it would eliminate 1,300 employees, about 15% of its workforce.

Zoom Video Communications Inc. (ZM), the video conferencing provider ubiquitous during the early stages of the pandemic, likely recorded its first quarterly loss in four years as the return to offices picked up steam.

Analyst estimates compiled by Visible Alpha show Zoom reporting a loss of $24.4 million in the last three months of 2022, a sharp reversal from net income of nearly half a billion dollars just a year earlier. Adjusted earnings per share (EPS) could swing to -$0.11 from $1.60 despite revenue increasing 2.6% to $1.1 billion. Zoom reports results for its final quarter of FY 2023 after markets close on Feb. 27.

Zoom was one of the major success stories of the pandemic, tripling its employee headcount in two years as companies, academic institutions, and individuals turned to video conferencing solutions during lockdowns.

The company's number of customers with more than 10 employees tripled in the first three months of 2020. Net income surged to over $490 million a quarter from $15 million over the first two years of the pandemic. Zoom's quarterly revenue grew over 350% in three consecutive quarters at the height of the pandemic.

However, a return to in-person work and school prompted a reversal. New York City offices reached an average daily occupancy rate of 52% in late January. The share of office employees working remotely full-time dropped to 10% last month from 16% in September.

Zoom reported single-digit revenue growth in each of the last two quarters. Analysts expect that figure to drop further to 2.6% in the most recent quarter.

Zoom, like other tech companies, has responded to slow revenue growth with cost-cutting measures. The company said in early February that it would reduce its employee count by about 15%, or 1,300 positions. CEO Eric Yuan, citing the "uncertainty of the global economy," also told employees he would take a 98% cut to his $300,000 salary and forgo his annual bonus.

Zoom shares have fallen 42% in the last year, compared with an 11% drop for the S&P 500 Information Technology Index.

One-Year Total Return for S&P 500 Information Technology Index and Zoom
Source: TradingView.
Zoom Key Stats
  Estimate for Q4 FY 2023 Actual for Q4 FY 2022 Actual for Q4 FY 2021
Adjusted Earnings Per Share ($) -0.11 1.60 0.87
Revenue ($B) 1.1 1.1 0.9
$100K+ Customers 3,527 2,725 1,644

Source: Visible Alpha

The Key Metric: $100K+ Customers

Zoom says it focuses on customers contributing more than $100,000 in annual revenue as a measure of its effectiveness in scaling its offerings and attracting large enterprise clients. Such customers are particularly valued as a relatively reliable source of steady revenue.

Zoom is expected to grow its $100K+ customer base to over 3,500, an improvement of more than 29% year-over-year. These customers will likely contribute $347.6 million in revenue, over a third of total revenue for the quarter.

Article Sources
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  1. Visible Alpha. "Financial Data."

  2. Washington Post. "The great mismatch: Remote jobs are in demand, but positions are drying up."

  3. Zoom Video Communications Inc. "Zoom Fourth Quarter Fiscal Year 2023 Earnings Webinar."

  4. Wall Street Journal. "Zoom to Lay Off 15% of Staff, CEO Slashes Salary."

  5. Partnership for New York City. "Partnership survey finds increasing number of Manhattan office workers are back in the workplace; 82% of office employers plan to maintain or expand their New York City footprint."

  6. Zoom Blog. "A Message from Eric Yuan, CEO of Zoom."

  7. Zoom. "Form 10-Q for Quarterly Period Ending July 31, 2022," Page 28.

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