Zoom Q3 FY2022 Earnings Preview: Key Insights and What to Expect

Zoom's performance is closely tied to customers generating over $100K in trailing 12-month revenue.

Important Highlights

• Analysts predict adjusted EPS of $1.09, up from $0.99 in Q3 FY2021.
• The count of customers contributing more than $100,000 annually is expected to grow year-over-year (YOY), though at a moderated pace compared to previous quarters.
• Revenue growth is forecasted to continue but at a decelerating rate following last year’s surge driven by the COVID-19 pandemic.

Zoom Video Communications Inc. (ZM) experienced unprecedented profit and revenue growth during the COVID-19 crisis, as remote work and online learning drove demand for its user-friendly video conferencing platform. However, with widespread vaccine distribution and a gradual return to office environments, Zoom’s rapid expansion is moderating.

Investors will closely monitor how these shifts impact Zoom’s growth when the company releases its Q3 FY2022 earnings on November 22, 2021. The fiscal year 2021 ended on January 31, 2021, placing the company currently in FY2022. Analysts anticipate a rise in both adjusted EPS and revenue, albeit at a slower pace than the previous year.

Another critical metric is the number of Zoom customers generating over $100,000 in trailing 12-month revenue. This figure reflects Zoom’s success in attracting and retaining large enterprise clients, who typically provide more stable and long-term revenue streams compared to smaller customers. While this customer base is expected to grow robustly YOY, the rate will likely decelerate relative to recent quarters.

Over the past year, Zoom’s stock has underperformed the broader market. After a significant surge in 2020, the stock declined throughout late 2020 and the following 12 months, despite periodic rebounds. The decline intensified starting in early August, widening the performance gap with the S&P 500. Consequently, Zoom’s shares have delivered a total return of -39.3%, contrasting with the S&P 500’s 31.2% gain over the same period.

Zoom’s Earnings Track Record

In Q2 FY2022, Zoom surpassed analysts’ expectations with adjusted EPS growth of 46.7% year-over-year—the slowest since Q2 FY2019. Revenue increased 54.0% YOY, marking the slowest pace since at least Q1 FY2019. Notably, this quarter marked Zoom’s first to exceed $1 billion in revenue. The company also expanded its offerings by launching Zoom Events, an integrated digital events platform.

During Q1 FY2022, Zoom’s adjusted EPS surged 566.4% YOY, though this was a slowdown compared to the final three quarters of FY2021. Revenue grew 191.4% YOY, also at a decelerated pace. The strong results were driven by ongoing remote work and learning trends accelerated by the pandemic.

Looking ahead to Q3 FY2022, analysts forecast further deceleration with adjusted EPS expected to rise 10.2% YOY—the slowest growth since a decline in Q2 FY2019. Revenue growth is projected at 31.3% YOY, the slowest in at least 15 quarters. For the full FY2022, adjusted EPS and revenue are expected to grow 44.0% and 51.6%, respectively, marking the slowest growth in four years.

Source: Visible Alpha

Critical Growth Indicator

Investors will focus on the number of customers generating over $100,000 in trailing 12-month revenue. This metric gauges Zoom’s ability to scale and attract large organizations, which typically provide more predictable and stable revenue streams than smaller clients. Securing large enterprise contracts is crucial as the economy recovers and employees gradually return to offices.

Zoom’s large customer base has expanded dramatically—from just 184 customers exceeding $100K in TTM revenue in Q1 FY2019 to 2,278 by the end of Q2 FY2022, representing a more than twelvefold increase. Growth accelerated through FY2021 and into Q1 FY2022 with a 160.0% YOY increase, the fastest in over 13 quarters. Growth slowed to 130.6% YOY in Q2 FY2022, and analysts anticipate further deceleration to 84.6% YOY in Q3 FY2022. The final quarter is expected to see a 57.4% YOY increase, the slowest pace in at least four years.

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