5 Interesting Learnings From Zoom at $4B in ARR

So the last time we caught up with Zoom on the 5 Interesting Learnings series, it had just IPO’d.  Boy, a lot had changed.  Especially Covid.  It wasn’t that long ago folks thought Zoom might IPO at a $4 Billion valuation.  Now, just a few years later, it’s doing that much in ARR.  Whoa.  Double whoa.

And Zoom has seen growth in SaaS like we’ve never seen before.  A stunning 369% growth from a $188m quarter a year ago … to an $882m quarter just now!!   That’s essentially going from $1B ARR to $4B ARR in 1 year.

Ok, so most of us aren’t like Zoom and never will be.  Still, there’s a lot all of us can learn.  Let’s take a look at 5 Interesting Learnings:
#1.  Zoom’s second big product, Phone, is important.  In 2 years, they’ve added 10,800 Phone customers and 1m total paying Phone seats, including 18 enterprise customers with over 10,000 seats.  Just about everyone needs a second core product after $1B ARR.  Phone is Zoom’s second core product.  It’s also a reminder that even great partnerships evolve over time.  Zoom and RingCentral used to be close and sell the other’s product.  Now, each competes much more directly.
#2.  Zoom has gone both more enterprise — and less enterprise!!  Enterprise is up a stunning 158%.  This is super interesting.  On the one hand, Zoom added 1,000 more $100k+ ACV customers in the past 12 months — simply incredible growth of 156%:
#3.  But … SMBs have grown even faster!!  SMBs grew almost 5x in 1 year!!  So, the share of customers from Very Small Businesses — 10 or fewer employees — actually exploded from 20% to 37%:
#4. NRR steady at 130% — for 11th straight quarter.  This is a great challenge to the thinking that high NRR can’t scale, or will oscillate.  Zoom’s has stayed at 130% almost irrespective of the customer mix:
#5: Slow to go international until recently — but now a force.  Just last year, Zoom only had 20% of its revenues outside the Americas.  Today, that’s 33% and going up.  That’s a huge change and closer to the patterns we see with the average SaaS company at scale.  A reminder there’s almost always more international revenue out there than you think.
And a few bonus learnings:
#6.  50% of customers pay or are invoiced monthly — and that’s up from 40% a year ago.  So while annual contracts are great in many cases, maybe don’t force it.  Zoom doesn’t.
#7.   Zoom is now generating almost $2B of cash a year — a stunning half its ARR.  Let that sink in for a minute.  Half of its $4B in ARR is going to free cash flow.
#8.  Zoom won more than the others.  Zoom clearly exploded after Covid.  But as we noted previously, it benefitted far more than WebEx and others.  So the “benefits” of Covid have not been spread equally:
#9.  Zoom is predicting 42% growth in fiscal 2022.  An incredible growth rate at $4B+ ARR, and one it’s likely to beat.  But also a prediction that says a lot of the Covid boost was real, and permanent.  But also moving to the rear window.
So just wow.  Is Zoom the GOAT?  Or Salesforce?  I think maybe … both.

Published on March 3, 2021

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