What happened
Shares of Zoom Video Communications (ZM +2.77%) fell 11.6% in March, according to data provided by S&P Global Market Intelligence.
Including this decline, shares of the videoconferencing company have fallen 36.4% so far this year.
Image source: Getty images.
So what
Zoom reported strong growth for its fiscal year 2022 ended Jan 31. Revenue jumped by 54.6% year over year to $4.1 billion while operating income surged by 61.2% year over year to $1.06 billion. Net income more than doubled year over year from $671.5 million to $1.38 billion. Operating metrics were healthy as well -- the company continued to expand its customer base with a 66% year-over-year jump in the number of customers contributing more than $100,000 worth of trailing revenue. Its enterprise customer base also rose 35% year over year to hit 191,000 from 141,100 a year ago.
NASDAQ: ZM
Key Data Points
Investors, however, were spooked by Zoom's guidance for fiscal 2023. Total revenue is expected to come in at $4.54 billion, which represents a year-over-year increase of just 10.7% from fiscal year 2022's $4.1 billion. The company was a beneficiary of the strong demand for videoconferencing tools caused by the pandemic and had reported 326% year-over-year growth for fiscal year 2021. Fiscal year 2022's year-over-year growth at 54.6% still seemed decent after the sharp spike in the prior year, but 2023's guidance felt underwhelming and seemed to signal a drastic slowdown in revenue growth for Zoom.
Now what
Investors should not be surprised at Zoom's muted guidance. As the pandemic recedes and economies begin opening up, more people will naturally stream back to the office even as businesses adopt hybrid work as the new normal. Although the company may not capture new business as easily as it did in the past two years, it has enjoyed the benefit of onboarding a bunch of customers that should prove sticky as more people embrace the hybrid approach. Zoom also enjoyed a 130% net dollar expansion rate for its enterprise customers for the fourth quarter of fiscal 2022, a sign that companies should continue their spending even as life returns to normal.
The company has also been busy launching new features to its existing cloud service. Two months ago, Zoom announced the relaunch of its Contact Center, a solution that optimizes video and is integrated into users' Zoom software. Last month, it launched the Zoom Up Partner Program, which makes it easier for partners to grow their business alongside Zoom. Essentially, Zoom Up provides incentives and rewards to encourage its partners to expand their customer base and think of new use cases for the software.
