So Zoom is just that crazy outlier in SaaS.  Covid fueled it to insane growth like we’d never seen before, going from $1B ARR to ~$4B ARR … in one year.  Yes, one year.

But it wasn’t a gift.  As the world reopened, we didn’t need quite as much Zoom.  And the enterprise business, while starting to taking off, couldn’t overcome the gravity from so many small customers that didn’t need quite as much Zoom as they did during lockdown.

Fast forward to today it’s a different, more enterprise Zoom.  But one that is highly mature, growing 3% today, but with almost 40% operating margins.  And now at $4.6 Billion in ARR.  Not so much bigger than after the Covid boom, that warped time for Zoom.

Its $18 Billion market cap is impressive.  But take out the $7 Billion in cash on the balance sheet, and even Zoom, which we all live in every day … is trading at just 2.5x ARR net of cash today.  Yikes.

What a crazy story.

5 Interesting Learnings:

#1.  SMB Churn coming down, but still at SMB-Like Levels

Zoom for years defied what we knew about SMB churn.  It had 110%+ NRR from SMBs!  But in the end, today, at scale, their small customers churn at the same high rates as other “grab and go” SMB products.  Still, they’ve brought churn down from 3.6% to 3%, which is material.

#2.  Enterprise Growing Faster Than Consumer, But Only So Much Faster

Zoom’s gone more enterprise, but it’s only helped so much in absolute growth.  Enterprise revenue is up 5%, vs. total revenue up 3%.

#3.  101% NRR in Enterprise.  But Growth Still Tough There.

Zoom’s gone more enterprise, but while NRR is higher there at 101%, growth is still tough.  $100k+ customers are up 10%, but overall enterprise customers are up just 3%.

#4.  Americas Still Growing, But Rest of the World Isn’t.

Zoom is growing 4% in the Americas, but is seeing 0% growth in EMEA and -3% growth in APAC.

#5.  Wildly Efficient, With Almost 40% Non-GAAP Operating Margins and $7 Billion in Cash on Balance Sheet

Zoom’s has 39% operating margins, going up, which leads to massive free cash flow.  Today, they are generating $1.2B+ of cash a year and sitting on $7 Billion in cash in the bank.  Growth may be highly mature, but Zoom is generating massive cash at this state.

So that’s Zoom today.  It did almost everything right, including investing in a “second act” in voice and contact center.  It went more enterprise over time.  But the crazy growth of Covid in many ways ended up a bit of … a curse.  For now at least.


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