CFO Kelly Steckelberg claimed Zoom was happy that people felt more comfortable when out and about traveling. She may well be sincere (Ed note: Really?) but investors seemed less enthusiastic.

After presenting what was still a very strong set of Q2 FY22 results, ended July 31, Zoom's share price fell by nearly 17% – the biggest dip in nine months.

Steckelberg, speaking on Zoom's Q2 earnings conference call (as transcribed by Seeking Alpha) noted a "slowdown in the online segment of the business," which comprises smaller-sized companies and consumers, and which typically pay their bills on a monthly basis.

Figure 1: Called out: Zoom's CFO might be bullish about the return to work – but investors seem less convinced as shares tanked after the earnings announcement.
(Source: Chris Montgomery on Unsplash)

Customers with ten or fewer employees represented around 36% of revenue during Q2, which was in line with Q2 FY21, but down from a high of 38% in Q3 last year.

Volatile customers

"As we discussed previously," explained Steckelberg, "this cohort, which comprises SMB and consumers, who typically purchase online, is more volatile." The CFO said she expected this segment to "continue to decline as a percentage of revenue as customers adjust to the evolving environment."

The "evolving environment", of course, means more people returning to work and becoming less reliant on Zoom to communicate with colleagues and customers.

"If you back all the way up to when we gave guidance at the beginning of the year, we had expected [the decline in the online segment] towards the end of the year, but it's just happened a little bit more quickly than we expected," said Steckelberg.

"And we, of course, feel good that people are out moving around the world, but it's certainly creating some headwinds … in the online segment of our business."

Revenue still growing (but not as fast)

Helped by continued growth in Zoom Phone and Zoom Rooms, Zoom managed to rack up $1.02 billion in revenue, which was up 54% compared with Q2 FY21 and above analysts' average estimate of $1.013 billion, according to Refinitiv data (as reported by Reuters). It's the first billion-dollar-revenue quarter for Zoom (and is expecting another one in Q3).

True, the growth rate was well off the pace set in the 12 months to July 31, 2020 – a blistering 355% – but that was from a much smaller base and when Zoom was first beginning to see the huge positive impact of the pandemic on its business.

Zoom Phone, launched in January 2019, reached two million seats (just in time for the earnings conference call). Steckelberg pointed out that it added 8 Zoom Phone customers with more than 10,000 seats in the first half of FY22, bringing the total number of customers of this size up to 26. She added that the number of customers spending more than $100,000 in ARR (annual recurring revenue) on Zoom Phone increased by 241%, year-on-year, to 371.

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Taking the Zoom portfolio as a whole the number of enterprise customers spending more than $1 million in ARR grew 77% year-on-year to 156. As of July 31, Zoom said it had just shy of 505,000 customers with more than ten employees, up 36% year-on-year, which represented 64% of revenue

GAAP income from operations in Q2 was $294.6 million, up from $188.1 million in the same quarter FY21.

Zoom is guiding Q3 revenue in the range of $1.015 billion to $1.02 billion, and between $4.005 billion and $4.015 billion for FY22.

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— Ken Wieland, contributing editor, special to Light Reading